HANOVER'S SPECIALTY LINES STRATEGY, THE

Rough Notes, Mar 2007 by Zinkewicz, Phil

Just five years ago, The Hanover Insurance Group, based in Worcester, Massachusetts, made perhaps the most important decision in its 150-plus-year history. In 2002, Hanover decided to focus on the profitable growth of its property/casualty insurance business and discontinue entirely the retail sale of life insurance products.

To carry out this new strategy, The Hanover's board of directors named Frederick H. Eppinger president and chief executive officer in August 2003. Eppinger's goal was clear-to build a world-class super-regional property/casualty company.

Today Hanover ranks among the top 35 property/casualty insurers in the United States and employs more than 4,000 people across the country. It is considered a leading provider of insurance for individuals, families and businesses. It is a regional company, to be sure. But The Hanover also boasts its "Best of Both" philosophy, which is the ability to provide people, product and service capabilities on a par with the best national companies while offering the local market presence, knowledge and responsiveness of the best regional companies.

Eppinger established an immediate set of priorities: to sustain a strong financial position; to establish a world-class professional staff committed to providing the best possible service; to create a strong culture of execution; to further strengthen and develop long-term, mutually beneficial partnerships with "winning" agents; to offer competitive product solutions; and to provide dedicated, responsive service through cost-effective operating models.

Eppinger's personal attention to attracting top talent enabled the company to tap experienced industry leaders like Marita Zuraitis, former president and chief executive officer of St. Paul Travelers' Commercial Lines Division, who was appointed president of The Hanover's property and casualty companies. Under Eppinger and Zuraitis, the company's strategy has been to provide a "total solution" for the customers of their agent partners, thereby helping agents profitably increase their business.

Building specialty strength

With its personal and commercial lines businesses solidly in place, The Hanover undertook a multi-year effort to build its specialty business, so it could help agents meet the needs of their small and mid-sized commercial clients through one carrier. To carry out its specialty lines strategy, the company assembled one of the industry's strongest teams, according to Alan Crater, president of The Hanover's specialty lines business. Crater came to The Hanover from the St. Paul Companies, where he was president of the Northeast region and was responsible for agency management, distribution of specialty and commercial products, commercial lines operations and overall business development. He joined The Hanover in 2004 as regional president for New York and New Jersey.

Overall, Crater is responsible for The Hanover's marine, bond, umbrella, third-party administration and niche market products. Crater's approach to managing these areas is to surround himself with specialists. Sophia Phillips is vice president of the Marine Division. She joined The Hanover in 2004 with responsibility for building a marine business that capitalizes on specialty market opportunities while delivering enhanced franchise value to the business as a whole. Richard M. Van Steenburgh, a 27-year veteran of The Hanover, is vice president of bond business. Diana O'Brian, regional vice president, is responsible for The Hanover's institutional specialty niche market business, including educational and religious institutions. Scott Gaffher is president of Citizen's Management, Inc., which provides loss control, claims services and excess workers compensation to self-insurers, and John Lyons is assistant vice president for commercial lines umbrella.

Crater emphasizes that at the core of The Hanover's success is the independent agent. "We wake up every day asking ourselves how to find better ways to serve our agents and their customers," says Crater. "We engaged in a multi-year effort to enhance our specialty capabilities. The goal: to provide a total account solution for our partner agents."

He continues, "Our distinct specialty distribution strategy allows us to offer specialty products to three types of winning agents. There are the small to mid-sized agents who place a significant amount of specialty business with us and view specialty as part of our total accounts solution for commercial lines. And there are our franchise agents, who write a complete portfolio of personal lines and commercial lines and sometimes need access to specialty products. And, finally, there are our specialty agents. We're probably the only regional carrier out there that has the desire to satisfy the needs of all of these agents."

Commenting on The Hanover's marine insurance strategy, Phillips says, "Our goal is to provide our agent partners with a resource that makes sense for the type and volume of marine business they write-whether they write a lot of marine business or simply need access to products once in a while. Our broad array of marine programs includes niche opportunities such as moving and storage, jewelers, furriers and transportation-related exposures. Our marina and boat dealers program is underwritten by two MGUs that work with agents to provide the depth of expertise needed to successfully write these classes of business. We have employed some of the top marine specialists in the country who provide customized marine solutions for agents who place significant amounts of business. At the same time, agents who only occasionally see inland or ocean marine exposures can access the same high degree of experience and service through our Marine Underwriting Advantage Unit."