Hand in hand: by helping independent agencies to grow, insurers may attract much of the agents' business and thereby grow themselves.

St. Paul Travelers offers independent agents a special advertising campaign that they can shape to their needs. Safeco realizes that independent agencies operate differently and customizes its interaction to fit their business models. As some major insurers close branch offices to move to urban areas, Hartford Financial Services has opened more than a dozen local branches to be closer to its agents.

All these moves are intended to help independent agents generate more revenue. While the means may differ, the end is the same: by aiding independent agencies to grow, insurers may attract much of the agents' business and thereby grow themselves.

This is particularly critical now, said Bill Norman, assistant vice president of agency relationship management at Safeco. "For the last couple years, growth hasn't been top of mind simply because the assumption was that if you've got the right product at the right price and in the right place, you'll just grow organically," be said. "There's momentum in that direction, but we anticipate that the industry is going to be facing challenges to growth in coming months."

Carriers will have to address the conflict between downward pressure on pricing and the bottom-line need to generate profit, Norman noted. "And to the degree that there is pricing discipline to hold the line on profitability, growth is going to be a challenge," he said.

A Model Approach

Seattle-based Safeco has anticipated this period, and Norman thinks the company is positioned to deliver the tools and insight to its independent agents to achieve growth while maintaining an acceptable level of profitability.

For one thing, Safeco has an understanding of the various business models that its independent agents use. "We're able to focus on these agencies according to their business model and provide point of sale tools that are specifically designed to respond to their dynamics," Norman said. Two examples: the classic field model, which still dominates the landscape, and the large agency model built around sales professionals who are highly trained with a commercial focus.

Safeco builds working relationships with many agencies on a virtual basis through its National Sales Center, created in January 2004. "These agencies have immediate access to people with specific sales training, are able to communicate with them by telephone and e-mail, and get resources from them," Norman said.

The approach has been so successful that, even when agencies have grown at a rate that would justify assigning an on-site Safeco sales professional to them, many opt to continue working with their remote or inside sales professional. Rather than impose one kind of approach for every kind of agency, Safeco tries to respond to them in ways that will help them think strategically. "The bottom line for us is that by adapting ourselves to respond to our agents' business model choices, it positions our people to make a difference for them every day," Norman said.

The company also has continued to improve its technology with Safeco Now, a common platform that allows independent agencies, no matter what their model, to do business with the company across a number of lines. The carrier also sells auto insurance over the Web, either through Safeco.com or through agents' own Web sites, which can link to Safeco.com. Unlike some competitors, every Safeco online sale is then assigned to an agent. The company is making about 1,000 auto sales a month, and expects to hit 5,000 a month by the end of 2005.

"If the consumer comes through the agent's site, the agent receives our full 17% new/10% renewal commission," said spokesman Eric Trott. "The sales that come directly through Safeco.com are assigned to agents. Those policies have a 4% new/4% renewal commission, because they came in at basically no sales or service cost to them. Agents who cross-sell the policy get full commission on all the cross-sold policies."

A Local Presence

At Hartford, strategy for agency growth is decidedly different, built around local market presence with the goal of putting more Hartford people in front of agents. Since 2001, the company has opened or expanded 16 offices across the country to be closer to agent concentrations and has plans to launch two more branch offices this year.

"Agents are thirsty for company people who are close to them," said Brian Griffith, vice president of sales and marketing at Hartford's property casualty operations. "We've seen a lot of national companies retreat into the larger cities like Dallas, Chicago and New York, but over the last few years, we have actually taken the opposite approach and put more offices closer to our customers."

The agents enjoy the personal relationships with Hartford representatives, and want an insurance company to be part of their area to understand what their local needs are, Griffith said. The branch offices are charged with that, as well as understanding the agents who write that business and matching company capabilities with opportunities in the area, he added.

From these offices, Hartford staffers go out to the agents, discuss the company's products and services, and propose a one, two or three-year strategic plan for growing Hartford with the agency. Hartford's ultimate goal is to be among the top three companies that each of its independent agents chooses to deal with, Griffith said. "By understanding the opportunity in their marketplace, and understanding the way that that agent operates, we can match different areas of our franchise to help the agent," he said.

The insurer says the results have been so good that it has continued opening new offices. Three branch offices have grown so much business in the past few years that they have incubated into full regional offices with more staff, giving the company 18 regional and 10 branch offices. The Philadelphia office, for example, opened as a branch in 2003, then grew 30%, more than 15 local sales and underwriting positions were added, and new business sales increased by 67%. This branch was made a regional in October 2004.

Instead of having several segment-specialized regional vice presidents, Hartford has consolidated leadership into one head of office, "one ambassador that the agent can deal with, one central point of contact, and that's lessened the confusion that the agents have about bow they can access us," Griffith said.

Acquisition Strategy

On a smaller scale, Plymouth Rock Assurance Corp., Boston, a regional automobile insurer, takes another tack. Despite its size, the company still has an active strategy for helping independent agents grow their businesses: guiding them through the process of acquiring other agencies.

"When our field staff uncovers what may be an acquisition opportunity, we'll bring the buyer and the seller together," said Mark Sweeney, vice president. Plymouth Rock also will put the financial arrangements together for the transaction, he said.

Unlike some other insurers who may appoint an agency on every street corner, Plymouth Rock chooses to be represented by a limited number of agencies. "We have our franchise value," Sweeney said, "and we hope these agencies consider themselves in a special club." The company works with 225 agencies in Connecticut and Massachusetts.

A Personal Touch

St. Paul Travelers also wants to make independent agents working with the company feel that they are distinctive. Since most consumers, when asked the name of their insurance company, will answer with their agent's name, the carrier's approach has been to offer independent agents its version of an effective advertising campaign, packaging it so that agents can leverage it with their own brand and name in their local market, said Joe Lacher, executive vice president of St. Paul Travelers and chief executive officer of Travelers Personal Lines.

The carrier is offering this advertising program, called "Helping Agents Grow," to its network of 7,500 independent agents selling personal lines. "What we've done is to build a set of advertising materials that we can co-brand with agents," Lather said. "It can be a compelling power to bring our brand, coverage, service and effectiveness into that agent's environment and help them drive customers into their office. It really creates a powerful set of messages for us to do together."

Agents can choose from a suite of template ads for print, radio and television that they can personalize with their logo and contact information. The message in the ads: independent agents are looking out for consumers' interests. The company launched the campaign in the first quarter of 2005.

"Travelers also has established a customer service center that offers a variety of services to help agents increase sales, revenue and customer satisfaction in personal lines and small commercial business. For example, the carrier will open and close a customer call to the center by acknowledging the name of the agency "as if" we were part of the back office for that agency," Lacher said. "We don't say, 'Thanks for calling Travelers.' We say, 'Thanks for calling the Johnson Agency.'"

Lacher cites this as one of the biggest ways the company can give power back to agents. "Agents interface with customers daily--they sell and service," he said. "Through our size and scale, we have the ability to do that in many cases with a greater level of efficiency than you could in a local agent's office. We provide that scale and that back office to the agent, but do it in a way that's branded with the agent's name."

Learn More

American Family Mutual Insurance Co.

A.M. Best Company # 02022

Distribution: Exclusive agents

Hartford Financial Services Group Inc.

A.M. Best Company # 18217 (Hartford Insurance Pool)

Distribution: Independent agents

Plymouth Rock Assurance Corp.

A.M. Best Company # 01831

Distribution: Independent agents

Safeco Insurance Cos.

A.M. Best Company # 00078

Distribution: Independent agents

St. Paul Travelers Companies Inc.

A.M. Best Company # 58470

Distribution: Independent agents

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

Key Points

* Safeco builds working relationships with agencies on a virtual basis through its National Sales Center.

* Since 2001, Hartford has opened or expanded 16 offices to be closer to agent concentrations.

* St. Paul Travelers provides agents with ads for print, radio and television that they can personalize with their logo and contact information.