Serving the underserved: Tuscarora-Wayne Mutual Insurance Co.'s small size allows for tighter coordination and a more personal touch. (Market Competition: The Big Picture).

While the company might be small in size, Tuscarora-Wayne Mutual Insurance Co. has chosen a big mission--to "serve the underserved."

The company, which was conceived in the early 1870s during a thunderstorm, writes what Jay Chadwick, president and chief executive officer, says is "the business that many of the large, national carriers don't want." As the company aggressively cultivates the financial-services market for emerging opportunities overlooked by national providers, it also patiently remains positioned to seize favorable ones, he added.

The company generally writes business of about $5,000 in premium and takes on risks, such as semi- or unprotected business and older properties, that other carriers typically don't underwrite. "We tailor deductibles and endorsements and try to build policies to serve customers' needs," said Chadwick, who's been with the company since 1985.

For example, while many carriers have ceased writing Protection Class 9 properties such as small restaurant businesses, Tuscarora-Wayne is able to find a home for such risks and enjoys success in these markets, said Todd Salsman, vice president and chief underwriting officer.

Located in the rolling hills of northeastern Pennsylvania, Tuscarora-Wayne leverages the state's market, including a small population in Ohio. In addition, size hasn't kept the company, with its 41 employees, from maintaining its status in the industry. While Tuscarora-Wayne is the smallest company rated A+ (Superior) by A.M. Best Co., it has staked out its position alongside the larger players.

Over the past 130 years, the company has grown from a single-line insurer to the broader portfolio of business it writes today. The idea for the company originated with two farmers, taking shelter in a barn during a thunderstorm, who concluded that they should be the insurers of their own farms. In 1874, after the farmers raised $50,000 and obtained a charter for Farmers Mutual Fire Insurance Company of Tuscarora, the insurer was born.

The small carrier, now a product of mergers involving eight mutual companies, today owns a holding company and a stock insurance company, writing a variety of property and casualty insurance in personal, commercial and agricultural lines of business. In addition, Tuscarora-Wayne underwrites five specialty areas, part of what the company calls its FFANS program, including forest products, food services, agricultural, neighborhood and specialty risk. In 2002, the company wrote more than $21 million in premium.

Its somewhat unusual approach to providing personalized, full-spectrum service by its underwriters has contributed to the company's success. Each of its underwriters typically handles about six agencies and is responsible for all aspects of the relationship, including underwriting all lines and handling all claims, accounting and marketing activities. "It's everything from cradle to grave," Chadwick said. The result? A more personalized relationship among agents and underwriters, marked by easy access. "Underwriters have personal knowledge of the agents, and agents have personal knowledge of the insureds and their risks," he said.

Personal Touch

One way Tuscarora-Wayne makes access easier is through the absence of voice mail among underwriters. Agents can pick up the phone and speak directly with their underwriters, without worrying about being transferred to another party or waiting for a return call. "We've stayed consistent with that strategy and worked with agents, who appreciate the consistent underwriting appetite we have and the personalized service they receive," said Chadwick. The company's average three-day turnaround of service is an added value.

"As a small company, we enjoy tighter coordination, and customers have easier access to decision-making," said Chadwick. It's not unusual for some of its more than 80 agencies to visit the company's headquarters in Wyalusing, Pa. In addition, he said the tight-knit relationship among the company's six-member management team consisting of the chief executive officer, chief underwriting officer, chief information officer, chief financial officer, chief claims officer and chief personnel officer, helps to drive the company's success.

Customer satisfaction and service also aren't compromised by the company's size. "Disciplined underwriting is one of Tuscarora-Wayne's strengths, which facilitates its ability to provide quality service and good customer retention," said Maurice Thomas, an A.M. Best Co. analyst.

On the other hand, size has some limitations, including the company's limited supply of internal resources. "As a small company, you only have so much infrastructure and probably don't enjoy all the resources that a large company may have," said Chadwick. He also said the company doesn't have the bench strength of a larger carrier.

However, the availability of shared industry resources has played a significant role in the company's operation. Tuscarora-Wayne relies on various industry-related bureaus for rates, rules and forms, in addition to industry associations for legislative, regulatory and educational resources.

Strong Ties

While the company competes against most carriers across the industry, the presence of larger insurers on its turf is of little concern. "We try not to compete with large companies, but when they enter our marketplace, it's usually only for a short period of time," said Salsman. The company's long-term relationships with its producers make it a major player in terms of appetite, service and personalized relationships, he added.

Maintaining personalized service has also kept the door closed to online direct sales. "Instead, we rely on our agents to know and recommend their clients to our underwriters," said Martin Burns, vice president and chief information officer, adding that the company feels a direct, online sales approach wouldn't match its current business model.

While economic, political and social factors have had only minor effects on the company's niche market, current market conditions remain its biggest challenge. "We sit in this niche, and as the market softens and big companies look for business, they'll begin to come down into our market," said Chadwick, "But as soon as Wall Street calls for a better return on equity and it's not about premium, the larger players will pull out of our market."

The company has maintained a stronghold throughout the current hard market cycle. "Our powder was dry before the hard market," said Salsman. "Managing our book to try to balance new business, while still maintaining adequate rates and coverages and attempting to get fair and reasonable rate increases, helps us manage the business-to-growth levels we feel make sense," he said. In fact, the hard market is increasing demand for companies such as Tuscarora-Wayne, he said. However, the company has only added six agencies in the past two years, despite a spike in call volume.

The company also plans to explore other markets in which to expand its distribution. Preparation for market changes and diversification of its portfolio are contributing to this decision. "We will begin an initiative this summer to select which states we want to move into and how quickly we want to move into them" said Salsman.

Looking to the future, Chadwick said he was optimistic that Tuscarora-Wayne would remain a competitive player. He said there are four basic elements needed to run any successful business--people, technology, capital and executable ideas. "We will bring in people to look at our technology and capital structure and how we position ourselves in the industry," he said. "However, we need to continue to change our business model to address many of the scenarios happening around us."

One such change came in 2000 when the company formed a downstream stock holding company-- Tuscarora-Wayne Group Inc.--to assist the mutual company and its producers in potential opportunities for growth. In 2002, the company formed Tuscarora-Wayne Insurance Co., a wholly owned, stock property and casualty subsidiary, which reinsures 40% of Tuscarora-Wayne Mutual's business.

The company is exploring other opportunities, including access to capital markets, greater geographic diversification and alternative distribution channels.

RELATED ARTICLE: Tuscarora-Wayne Mutual Insurance Co.

* Headquarters: Wyalusing, Pa.

* President and Chief Executive Officer: Jay Chadwick

* Products: Personal, commercial and agricultural lines, including forestry, food service, agriculture, neighborhood risk and specialty risk products

* Licensed: Pennsylvania and Ohio

* Incorporation: Sept. 7, 1874, as Farmers Mutual Fire Insurance Company of Tuscarora by a special act of the General Assembly of Pennsylvania

* Financials (2002): Net premiums

Written--$18.2 million; direct premiums

Written--$21 million; pretax operating

Income--$1.8 million

* Principal Reinsurer: American Reinsurance Co.

* Web site: www.twmic.com