BEST OF BOTH WORLDS, THE

Rough Notes, Mar 2007 by Boone, Elisabeth

Liberty Mutual's Agency Markets unit teams big-company power with regional focus

Why do so many independent agents like doing business vith regional carriers?

Because, as a group, they're responsive, stable, and knowledgeable about the markets they serve. In lean years as well as fat years, regional insurers do their utmost to accommodate the agents who rely on them, strengthening the bonds of mutual trust and respect.

What if you could marry these desirable traits of regional insurers with the market clout and financial stability of a major national carrier that's a household name?

That's exactly what happened in 1999 when the Liberty Mutual Group, a leading direct writer and the sixth largest property/casualty insurer in the United States, decided to expand its market reach by creating a distribution channel for the independent agency system. In that year, the insurer launched what was then known as Regional Agency Markets (RAM), which consisted of seven regional carriers plus two specialty companies. (See "National Power, Local Markets" in the September 2004 issue of Rough Notes.) RAM joined Liberty Mutual's other strategic business units: Personal Markets, Commercial Markets, and Liberty International. By year-end 2004, RAM had grown to the point where it contributed almost 20% of Liberty Mutual's total revenue of nearly $20 billion.

From good to better

The launch of Regional Agency Markets clearly established Liberty Mutual as a key player in the independent agency system that was able to offer agents the products of well-known, locally branded regional carriers. Pleased with the success of the new business unit, Liberty Mutual's management saw a way to expand the scope of RAM to make it an even more attractive and profitable operation.

The new approach was the brainchild of Edmund (Ted) Kelly, Liberty Mutual's chairman, president, and chief executive officer, and Gary Gregg, a Liberty Mutual veteran who had been serving as executive vice president and manager of the Commercial Market strategic business unit.

"Ted, Roger Jean (the former president of RAM) and I agreed that it was time to align all of our businesses that deal with independent agents into one group," Gregg explains. "That included Regional Agency Markets plus Employers Insurance of Wausau and Liberty Mutual Surety." Gregg was appointed president of the new unit, which is called Liberty Mutual Agency Markets, when Roger Jean retired in 2005.

"My career is in a sense a microcosm of our growth and success here at Liberty Mutual," Gregg observes. "I started out running an insurance division in the early 1990s and then took over what was then called the business market, which was our commercial mid-market direct sales operation. In 1998 I assumed responsibility for Liberty Mutual Surety, which Liberty had purchased from CIGNA in 1994. That was my first exposure to independent agents and brokers.

"I led the acquisition of Wausau in 1999," Gregg continues. "Wausau sells commercial insurance in the middle market through independent agents and brokers, and it has a captive-agent facility as well. In buying Wausau, our strategic thrust was to strengthen our presence in the middle market and to get distribution in the independent agent channel for larger accounts."

After the acquisition of Wausau, Liberty Mutual brought together under Gregg"s leadership all of its commercial lines operations: the direct middle market business that Gregg had run previously; Liberty Mutual Surety; Wausau; Liberty Mutual Property; and its group disability and national accounts operations. Gregg ran the new strategic business unit, called Commercial Markets, until mid-2005 when he was named president of Liberty Mutual Agency Markets.

Growing and changing

Today the eight regional companies of Liberty Mutual Agency Markets collectively operate in all 50 states (see map on page 48), focusing on personal lines and small to mid-sized commercial accounts. Agency Market's regional carriers are represented by some 3,500 appointed agencies nationwide which have access to sell the products and services offered by Wausau, Liberty Mutual Surety, and Summit, a Florida-based workers compensation specialty provider.

As part of the unification of operations, a decision was made to bring in Liberty Northwest, which had been a separately managed multi-line property/casualty insurer serving the five-state territory of Alaska, Oregon, Washington, Idaho, and Montana. "Because Liberty Northwest was an independently managed company, that left a blank spot on the map for us," Gregg explains. "It's now part of our regional company mix, and it's an important and growing part of our operation.

"The reason we changed the name from Regional Agency Markets to Agency Markets is that we now have the base of eight regional companies plus the national capability of Wausau for larger accounts in the middle market and the surety facility, as well as our specialty workers compensation provider, Summit," Gregg notes.

"What hasn't changed is that our regional companies, which are the backbone of our operation, continue to focus on small and mid-market commercial," Gregg comments. "Accounts of less than $15,000 in premium are considered small commercial, and our midcommercial range is $15,000 to $150,000. Wausau is active in the $150,000 to $2.5 million market; it has a national footprint and service capability and can handle multi-location and multi-state risks. Its underwriting, loss prevention, and claims service are organized for those larger accounts," Gregg says. "The regional companies are focused like a laser on independent agents and their customers on the personal and small to mid-commercial side."