Small business niches differentiate Penn National Insurance

Rough Notes, Oct 2003 by Pillsbury, Dennis H

Insurer's appetite is defined and supported with tools for agents

Nearly every agent knows the frustration of submitting to an insurance company an app for a piece of business the insurer claims to want, only to have the company reject the submission. It is an occurrence that is being repeated more often these days as we remain in the midst of a hard market. Clearly, the insurance company that succeeds in reducing the number of such frustrating events will be a step ahead of the competition in the eyes of independent agents. With that in mind, Penn National Insurance, Harrisburg, Pennsylvania, worked with MarketStance^sup SM^ to more accurately define segments in the small business arena that it wanted to write.

"As a company, what we were trying to accomplish was to develop a more focused approach to the type of business we go after," says David Simmons, vice president, field operations for Penn National Insurance. "We're primarily a commercial lines company with that segment accounting for 71% of our $521 million in premium volume. Eighty-two percent of the commercial lines business comes from small businesses (1 to 20 employees and revenues of less than $15 million). Of course, there are a wide variety of small businesses and we wanted to identify those classes that offered the greatest opportunity for profit."

The MarketStance commercial insurance database product categorizes such key information as exposure data, growth and employment information by business classification, size and geographical location. Penn National Insurance was able to look at small business segments on a county basis to determine, for example, how many retail accounts there were in Frederick County, Maryland, or how many wholesale accounts were in Cumberland County. Using the number of potential accounts as the initial cut, Penn National Insurance then cut the list down to those segments that met its underwriting appetite. The insurer wanted to be able to use a BOP or artisan contractors policy as the central coverage in the small business package.

"One of our objectives was to identify classes where underwriting authority could be granted to our Express Agents (about 30% of its agency plant) so they could quote, price and bind accounts within certain parameters," Annie Matincheck, senior business analyst, points out. "We've also rolled out automated rating and demographic information to our territory managers who can use that information to show agents the numbers of potential accounts within classes. We also were seeking to diversify. We are known for our large concentration of construction business; however, we have the ability to write much more." Overall, some 244 small business segments (based on SIC Codes) were identified.

The information gleaned from the MarketStance database was captured in a handy resource guide that was provided to agents and CSRs to make it easy for them to see the businesses that Penn National Insurance wants to target.

The project was first launched in Pennsylvania in October 2002 and has since expanded to the other eight states where Penn National Insurance operates-Alabama, Delaware, Maryland, New Jersey, North Carolina, South Carolina, Tennessee and Virginia.

Although the program has not been in effect long enough to truly determine the level of success, preliminary results already are encouraging. "Approximately 34% of the submissions coming in meet the criteria set forth in the resource guide," Annie reports. "In a survey we conducted in January of 2002, about 29% to 30% of submissions qualified. That may not seem like much, but a four to five point swing in such a short period of time certainly indicates that the program is working." She adds that, in addition to the increase in submissions, "the hit ratios have also increased, indicating that the training we've provided to our agents also has paid off for both our agents and Penn National Insurance." The territory managers provide education forPenn National Insurance agents on the targeted classes. In addition, Penn National Insurance also provides marketing and promotional materials its agents can use to approach businesses in those classes.

Tom Hoover, commercial lines marketing manager with the Gooder Agency, Inc., in Ligonier, Pennsylvania, says the program "has hit our market almost perfectly. We're in a growth mode and have been surprised at what Penn National Insurance has been able to handle, including beauty shops, optometrists, artisan contractors and so on. We've gotten a hit on about everything we've given them."

Tom continues: "We've been with Penn National Insurance about a year-and-a-half and didn't do a lot with them until this program came out. Once we got introduced to the program and their Internet rating service, we've really been able to increase our business with them."

Those are words that Penn National Insurance is pleased to hear. "We want to become the carrier of choice for our target segments," Dave Simmons says. "We're a regional carrier that writes business in nine states and focuses on small and medium-sized businesses with low to moderate hazard components. And, these days, more and more companies are going after that same market. We realized we needed to do something to differentiate ourselves from the competition by making it easier for agents to do business with us."