Courting the agents: property/casualty insurers are using technology and education to persuade independent agents to represent them.

Key Points

* Amid rising competition, property/casualty insurers are developing programs and approaches to win shelf space for their products with independent agents.

* Chubb has established an entire unit dedicated to instructing agents.

* Hartford designates business technology solution managers to assist agents in local markets.

* Safeco has moved from a software-based system to a browser-based system that allows agents access to all its products on a single platform.

Traditionally, property/casualty insurers have tried to lure independent agents to their sides by providing outstanding products, coverage, policy and claims service. But as the level of competition has risen more than a notch, carriers have been jockeying for shelf space in independent agencies by developing unique programs, be they technological or instructional.

Insurers are finding out these days that a sure-fire way to win over the nation's estimated 40,000 independent agents is to make their lives easier.

"What's really critical in the industry is being able to provide agents with 'ease of doing business'--a term that's been out in the marketplace forever," said Ken Fries, assistant vice president, e-business and technology department, at Hartford Financial Services. "It's the elusive thing we've all been chasing."

But Hartford now feels it's able to d/liver on that promise through technology, Fries said. The company views technology as "a critical enabler" of its partnership with its agencies, he said.

"We understand the independent agency system and we understand agents need flexibility," Fries said. "They all have different work flows and different ways of operating their business, which is why they are independent." Hartford's technology will allow them that flexibility, he added. "We want to make sure that the technology that we develop in combination with our products and services, gets them to that overall ease of doing business."

Hartford Designates Managers

Hartford uses business technology solution managers to provide technology assistance in local markets. These managers give the company a read on how Hartford's technologies are performing vs. the competition. "We also get feedback directly from the BTSMs, from the agents and the brokers, that tells us what they want to see next, what's working well, what could be improved," Fries said. "And it gives us an indication of where the industry is going as a whole in terms of technology. We always want to be ahead of the curve."

Fries said that Hartford is the only carrier to staff this kind of position and has dedicated resources set up in its regional offices across the country. Hartford feels it's a major player in both proprietary, or company-specific systems, and nonproprietary, the world of agency management system vendors, Fries said. "What we want to do, whether it's a proprietary or nonproprietary environment, is make sure that we're providing work flows that are conducive to the way the agents want to do business--and most importantly, not interrupting the way they do business," he said.

Agents can choose to use a company's proprietary system or work directly out of their agency management system to electronically submit business to their partner carriers, Fries said. "We want to be able to do business with that agent or broker however they choose to do business with us," he said. "So if they choose proprietary, great, we're there for them, we have the technology. If they choose the agency management system, great, we're actively playing in that space, providing them technology to get the business in the door." The agent working directly in his or her agency management system can interact directly into Hartford's systems, which provide them with real-time information. There are no gaps in timing, information and data, Fries said.

Hartford's Electronic Business Center allows agents to go in and do everything from quoting new business to servicing and managing their business, anytime they want. Nationwide, 57,000 agency employees--customer-service representatives, producers and principals--have signed up for the center.

Because each agent and broker is different, Hartford offers a suite of technology tools so an agent can choose what tools he or she wants to use to do business with the company. "That way we kind of customize the technology to fit an agent's work flow and demand," Fries said. Business technology solution managers visit the agents' offices to bring them up to speed on all the company's technology offerings, he said.

For Hartford, staying ahead of the pack means always looking for the next innovation to help its agents, he said. "The challenge is making sure you understand, based on what your business model is, how you can take technology and put it to use as a competitive advantage and offer your partners--independent agents and brokers-the tools they need to be more profitable," Fries said.

Safeco Multiplies Contact Points

At Safeco Corp., the strategy to woo independent agents is pretty straightforward, said Mike LaRocco, president and chief operating officer of Safeco Personal Insurance. "Within the P/C industry, we're going to distribute and offer the products that agents most often sell--anything from small commercial, and home and auto, supported with specialty products like boat, motorcycles, recreational vehicles and umbrella policies," he said.

Underpinning this strategy is Safeco Now, a newly rolled out tool that the company thinks is unique to the industry. This is a single, browser-based platform that allows agents to sell any of Safeco's small commercial suite of products and any of its personal lines products. "The platform is very easy to use and the beauty of it is, it's the same for all of our products--you can have all that on one platform," LaRocco said. This can aid agents in cross-selling and training, as well as boost their efficiency, he added.

Anytime agents can boost efficiency, it lowers their costs, LaRocco said. "And anytime you lower their costs, you're increasing their compensation because compensation really is the revenue they take in minus what it costs to deal with an individual carrier," he said.

The company so far has all of its small commercial products, its home and auto new business and its surety products on the platform.

While endorsements for personal lines are already on the platform, endorsements for commercial lines likely will be added in early 2005. "So it's not just selling new products, but you can service your current products all on the same platform--that is so valuable to agents," LaRocco said.

Safeco sells only through independent distributors, who number about 7,500. "We don't do direct response, we don't sell through direct response sponsored groups, or have 800 numbers; we have one single distribution channel, and that's the agent," he said. "We believe that when your distribution strategy is focused 100% on independent agents, when we can look an agent in the eye and honestly say 'we're not competing against you,' and when every one of our technology dollars goes into putting together a system that supports independent agents, that's a pretty powerful message."

Making a technological advance such as this--moving from a software-based system to a browser-based system--always raises concerns about achieving a smooth transition, LaRocco said. "But the feedback has been overwhelmingly positive--agents say it's more stable, it's faster, it's more intuitive," he said. "And you know the reason it's been successful? Because the agents designed it." Safeco brought in agents and customer service representatives to develop the platform that they would be using, LaRocco said.

The company prepared agents for the advent of Safeco Now through a major e-mail campaign, regular briefings in its agents magazine, and training materials supplied by its sales professionals. But then, Safeco is a company that prides itself on thorough communication with distributors. Every quarter, Mike McGavick, Safeco's chief executive officer; Dale Lauer, president and chief operating officer of Safeco Business Insurance; and LaRocco conduct an agency conference call to fill in agents on the latest company developments.

"Mike, Dale and I do maybe a five-to 10-minute overview of the previous quarter, and then we open it up. There's nothing scripted; we take whatever question is on their minds from across the country, and then we just deal with it," LaRocco said.

In addition to the quarterly teleconferences, Safeco runs agency councils at the state, regional and national levels. These have been extraordinarily effective, LaRocco said. "I can cite numerous examples of the help they have given us in terms of feedback, product changes and technological advances. As a matter of fact, they have been so successful that we're now also developing customer service representative councils, because some of the issues that the CSRs have on the front line, so to speak, may be slightly different from the challenges that the agents bring to us."

For the past two years, McGavick, Lauer and LaRocco have gone on what they call their "road show," a cross-country trip that takes them to as many as 20 cities to meet with as many as 3,000 agents in the period of a few weeks. "We let them know where we think the company is going, what our strategy is, then most importantly, answer their questions and listen to their feedback," LaRocco said. He can't think of many other companies that try so hard to keep their agents in the loop. "When you take into account the agent advisory council, the quarterly teleconference and the annual agent tour, we're really out there," he said.

Every time they meet with agents, they give out their e-mail addresses. "Our e-mails come directly to us. They're not filtered in any way, and so they have direct access to me or Mike or Dale on an e-mail basis," LaRocco said. "We don't know of any other company that makes their leadership quite so available. And we love it. It's always been interesting to me that you can't be successful in this business or any business unless you listen to your customers and partners, and they are both."

LaRocco said he averages 12 agent e-mails a week, but right after a conference call or a road show, the number can climb to 40 a day. "It's great because it's how we learn what they're thinking about," he said.

Chubb Embraces Education

For Chubb Group, one way to solidify its relationship with independent agents is through education. Chubb has established an entire unit dedicated to offering educational opportunities to its agents, said Elizabeth McDaid, agency education manager. "We offer a whole array of programs, everything from executive education for the agency principals down to training brand new producers who are just coming into the industry," she said. "Any of the seminars that we offer would assist in building the bond between Chubb and the agent, knocking down the barriers and removing any of the misspeak so that we make ourselves easier to do business with."

In particular, there are several programs that Chubb focuses on:

* A Chubb Products School where the company brings in its product specialists and invites its agents to join them. "We also bring a sales specialist into the mix, and we talk about the product and how to sell it. We give them all the tools we can think of to assist them in offering the Chubb product as the solution to their client needs," McDaid said. They discuss the markets and clients best suited for each product and how to highlight the features that differentiate the Chubb product.

The product specialist also addresses technology systems that Chubb has that would make it easy for the agents to either fill out an application online or access the information, she said.

* The Chubb Agency Business School teams an agent and the Chubb manager he or she works with at a week-long seminar. "Prior to the seminar, they fill out a form that describes what the relationship looks like at this point in time and where both of them see opportunities that they would like to explore," McDaid said. "Then they come into the seminar and they go through a simulation. The simulation has the team running an agency and an insurance company. The two are interdependent, so as they work on the computer and they input certain strategies, they see what they do to the carrier, how that impacts the agency and vice versa."

As a result, the pair sees how they mesh as a working team, where they impact each other and where there are points of friction. "It's an amazing eye-opener for the participants," she said.

During the week that they spend together in the seminar, the agent and the manager also develop what Chuhb calls a "Spark Plan," which is based on opportunities that they both see in areas where business could be developed. Business advisers from both the agency side and from Chubb review the plan and make sure it can be implemented. Then the insurer tracks the plan for the next 18 months.

The simulation was custom-designed for Chubb by a professor from Northwestern University. "As far as I know, we're the only company that brings the agent and the manager together to work as a team--and the feedback that we've gotten from it is unbelievable," McDaid said. She regularly receives e-mails from participants who confess that they hadn't really wanted to spend a week that way, but now can't believe that they did business without knowing this information.

* The Chubb Producer Development School, offered for the first time this year to 39 participants, is designed to help independent agents bring new talent into the business. "Our agents want to hire people who are new to the industry, but they need assistance in training them," McDaid said.

In response, Chubb developed a four phase instructional program that begins with two months of online course work to learn insurance coverage, then two weeks in the classroom learning more about coverage as well as sales skills taught through case studies and role playing.

"We bring actual agents in to do the training," McDaid said. "We expose them to all of the aspects of being an agent, from the risk management process through ethics. And then they go back to their agencies. For the next year, every other week, we do a series of Webcasts that inform the agents about products, sales, time management and presentation skills." In addition, a Webcast series run in conjunction with General Re will teach the fundamentals of insurance finance so the new agents receive a solid economic grounding in insurance.

The final phase comes a year later when the agents are brought back to the classroom and are taught about the Chubb products that the company believes are the best ones for new producers to introduce to their customers. This determination is based on agent experience and the type of customer that a new producer might be working with, McDaid said.

"We expect a lot from those producers, and we expect a lot from the agencies that send them," she said. "We've made a huge commitment to them and so have their agencies. Our goal is to help the agents to train these new producers so they then can become part of our sales force. We believe that also will build a strong bond with Chubb--when Chubb is the carrier who first provided your training, we tend to have a special place in their hearts." Currently, Chubb has 8,000 appointed agents.

* The insurer also offers special programs, in conjunction with the Wharton School, that focus on agency principals to help them develop strategic planning initiatives. Over the course of a week, these agents are exposed to different business models and critical thinking strategies. Chubb helps them to look at their agencies and picture where they want them to be 10 years down the road, McDaid said.

"Our goal is to help agencies grow and perpetuate," she said. "We are supporting the independent agents; we want to see them continue to succeed because we believe our success is tightly linked with theirs."

Learn More

Chubb Group of Insurance Cos. A.M. Best Company # 00012 Distribution: Independent agents

Hartford Financial Services Group Inc. A.M. Best Company # 18217 Distribution: Independent agents, brokers, financial institutions, alliances and associations

Safeco Corp. A.M. Best Company # 00078 Distribution: Independent agents

For ratings and other financial strength information about these companies, visit www.ambest.com.

Finding the Force

Guardian Life Insurance Company of America doesn't have to sell agents on its products. The company, the fourth-largest mutual life insurance company in the United States, has its own 2,800 financial representatives who sell only Guardian products.

"Many of our associates are here to begin with because of the strength of our whole life product line," said Emily Viner, director of agency, leadership and practice development. "I'd say 99% own the product. It's not that we do anything special other than obviously support them, educate them, train them, make sure the products are up to date and make sure we're being innovative as far as adding new products."

But finding enough qualified people to work as Guardian financial representatives is another thing. For Guardian, like the rest of the life industry, recruiting can be challenging. "The trend in recruiting is that there are just not enough representatives for the amount of people that need to be insured," Viner said.

Guardian has been luckier than some. Over the past seven years, the company has seen a big increase in the size of its field force, from 2,100 advisers to 2,900. "This is a good jump in base force," Viner said.

For that, she credits Guardian's support of its general agents--the people who directly recruit the representatives--by providing them with training, tools, ideas and "constant motivation." Six years ago, only four out of 100 agencies were recruiting 12 or more representatives. Now, more than 50 agencies are recruiting in that range, Viner said. "We have organizations in our system that have 120, 130 or 140 financial representatives," she said.

In turn, Viner credits Guardian's general agents for helping to boost the company's four-year retention rate to 31%, way above the industry average of 11%. "They are on the line, they are on the hook, and they are not going to hire someone who they don't believe can be successful," she said.

A large majority of Guardian's producers come into the company by way of existing associates, she said. "If you're happy, you're making money, you believe in what you're doing--you want to bring other people in," Viner said. "So this backing of our field force--helping our general agents to recruit--has really been key for us." In the past two years, Guardian has been running about $8,000 to $10,000 more per agent in terms of productivity or premium than its peer companies, she said.

The company has a solid partnership with its field force, Viner said. General agents will call top executives with questions. And the field advisory board, a group of general agents elected by their peers, has a very strong voice, Viner said.

In recent years, Guardian has instituted a number of programs to develop its field force and boost its productivity. They include:

* A three-to-five-year program to help life agencies transform themselves into marketing firms. "There are two sides to this--one is to get general agents to think like chief marketing officers and really get involved in understanding who their current clients are, picking target markets, developing a board of advisers, a resource network and a consortium to become the preeminent firm in that community," Viner said. For example, one of their markets might be the construction industry, so these agents would run seminars and workshops about the construction industry that have nothing to do with financial services, she said. "They become the go-to for anything that has to do with concerns that the construction industry might have," Viner said.

The other component is team selling: Guardian has formed 62 teams within agencies that are far out-producing individual agents, she said.

* A high-end leadership program designed to grow managers to succeed the estimated 30% of Guardian's general agents who will be retiring by 2010.

* Agents facing retirement also are being encouraged to pair with junior associates who are recent college graduates. The arrangement relieves the client burden for the veteran agents and helps the newer ones ramp up faster and see their premiums and commissions rise more quickly. "The retention is higher just because they are not left on their own," Viner said.

* A mentoring program that pairs longtime general agents with new ones. Five general agents are paid as consultants to work with groups of three to seven new agents. "They meet with them, they have monthly conference calls, they assess what they need, and they transfer their knowledge on recruiting, developing the agency, and the financial piece," Viner said.

Independent Agents Look for Market Stability in Insurers

As an independent agent looking for a long-term relationship with a carrier, Ed Higgins would put market stability--not compensation--at the very top of his shopping list.

"If a company is competitively priced today, they may be so competitively priced that they can't maintain that price because of market pressure or loss experience," said Higgins, a principal in Thousand Islands Agency, Clayton, N.Y. "It does very little good for me as an agent to have a highly competitive price that I know will jump significantly in a couple years because the company has mismanaged their thought process about the pricing."

That situation never has happened to Higgins, an independent agent for 30 years, but he knows of other agents who have experienced it. In those cases, the agent may have written a fair amount of business with an insurance company, only to lose it or have to move it a few years later because of instability in the carrier's underwriting and pricing, Higgins said.

This often happens when a company comes into a state such as New York, and for the first two or three years does not have to take on the residual market charges, he said. "When the residual market charges catch up with them, then they've got the same cost factors that their competitors had, and they need to change the price to break even," he said.

The next factors that appeal to Higgins are the consistency and quality of a carrier's underwriting. Having a good working relationship with an insurer is very valuable to an agent, and that relationship often is forged through dealing with well-trained underwriters who understand risk assumption, Higgins said.

"They know the right answer, and you get it the first time," he said. "The importance of that is it ultimately produces stability, because if you consistently choose what you will write and what you won't write, you will bear out the result that your actuaries predicted." Companies that consistently write the exception, however, will find themselves ultimately paying the price, he said.

He'd rank competitive pricing next. While this is an important factor in how agents size up insurance companies, Higgins does not believe that it is the prime driver for agents in placing business.

Then comes ease of doing business with a carrier. "Increasingly, ease of doing business is becoming a technology-focused issue," said Higgins, whose book of business is roughly 60% personal lines and 40% commercial, with some self-insured health-care plans. "I want companies to provide me more and more real-time access to information at their company, and I want access to real-time processing, so I can start the transaction in my agency management system, finish it there and have a real-time transaction completed with a company."

A few models designed to provide real-time interface between agents and carriers are operating, but don't work with their guidance systems to provide true real-time transactions, Higgins said. "From the agents' standpoint, the transaction is finished, but the company actually has to now process it on their legacy system in the background, and then send the download the next day," Higgins said. "That's good because it's progress, but a real-time transaction activity and ease of doing business by technological advances is a really big issue for agents." Higgins is chairman of the technology committee of the Independent Insurance Agents & Brokers of New York.

Having ready access to a company's executive team is also important to Higgins because it gives him a "good read" on the insurer's stability and its strategic plan. The strategic model, in fact, can give agents advance notice of just where the company is headed. "I was at a meeting last week when a nationally recognized company executive said his company didn't have any vision," he said. "Certainly, if you were writing for that company, you should go home and ask yourself why."

Higgins puts agent compensation near the very bottom of his list. Companies should have realistic minimum premiums that qualify for profit sharing, and the companies should recognize profitability, he said. "If the relationship is going to work long term, the reality is that I must make the company a profit," he said. "The other piece is that the company needs to reward me for that profitability, and if there is no reward for the profitability, there's no incentive."

Ultimately, it's easy to see how the profit-sharing piece, the consistency of underwriting and the stability of the company all start to come together, Higgins said. "If I'm writing consistently profitable business, the company's going to make a profit, and the company will be stable in the marketplace."