Traditional insurance on a Vermont scale

Vermont Business Magazine, Mar 01, 2004 by Kelley, Kevin

Insurance companies based in Vermont aren't only a rare breed. With one exception, they're small-scale operations that could also become an endangered breed due to growing competition from price-cutting national firms.

If Vermont's home-grown property and casualty insurers were to disappear, the multi-billion-dollar US industry would feel little, if any, impact. But the state in which they all have operated for at least the past 90 years would measure their passing in more than sentimental terms.

The eight companies belonging to the Vermont Domestic Property and Casualty Insurance Companies Association contribute significantly to the state's economy. According to the association, its member firms employ 360 Vermonters and maintain a combined payroll of nearly $23 million. The domestics, as these Vermont-based insurers are known, write homeowner, property, automobile and commercial policies for 167,000 state residents who pay a total of $130 million in premiums. In turn, the companies pay out $65 million in claims.

"By Vermont standards, these are major corporations," says Steve Boardman, president of the Hickok & Boardman insurance agency in Burlington.

The National Life Group, also based in Vermont but not a member of the domestics' association, ranks as a major corporation by any standard. The 150-year-old Montpelier firm holds $11.7 billion in assets and provides coverage to a quarter-million Americans. National Life has 900 employees and a payroll in excess of $50 million.

This outlier among insurance companies headquartered in Vermont now deals as much in financial services as in its traditional life-insurance products. The company achieved record results for its sales of annuities in 2003, according to National Life spokesman Brian Vachon. And sales of its mutual funds grew by 38 percent last year.

Despite its nationwide scope, the company accounts for only a 6.5 percent share of life insurance policies held by Vermonters. But that's enough to put National Life in second place in this category, behind Metropolitan Life which has an 8.4 percent market share in Vermont.

The property and casualty domestics claim even smaller shares of the Vermont market for all lines of business in their field.

The Montpelier-based Vermont Mutual Group, which consists of three companies, ranks highest among the domestics - in seventh place overall with a 3.8 percent market share. The Cooperative Insurance Companies, headquartered in Middlebury, stands 11th on this list with a 3.5 percent share. And the third main domestic, Montpelier-based Union Mutual, ranks 17th with a 2.2 percent share. Topping the chart of property and casualty companies doing business in Vermont are Liberty Mutual and Allstate, which account, respectively, for 7 percent and 4.5 percent of the market, according to figures for 2002 compiled by the state's Insurance Division.

Within the realm of Vermont homeowners' insurance, however, the three leading domestics rank first, second and third. Vermont Mutual, founded in 1828, claims 14.6 percent of this market, followed by Cooperative with 11 percent and Union Mutual with 7.6 percent. Cooperative, established in 1915 by Cornwall businessman and Lieutenant Governor Abram Foote, writes about 80' percent of Vermont farmstead policies.

"It certainly helps that there's a buyVermont culture in this state," says company president Jim Sullivan.

Because of its strong and longstanding identification with farmers' insurance, Cooperative is well known in Addison and Franklin counties as a Vermontbased firm, Sullivan says. East of the Green Mountains, however, there is less recognition of Cooperative as a Vermont institution, Sullivan acknowledges.

Union Mutual, organized in 1874, is probably not regarded by many Vermonters as an in-state entity, says company president Doug Wacek, who also heads the association of domestics. Union Mutual has 110,000 policyholders, but a sizable share of them likely identify their sales agent as their insurer rather than the company that actually writes the policies and pays the claims, Wacek notes.

Boardman agrees that most Vermonters think of their agent as their insurer. As vice-president of the Vermont Insurance Agents Association, Boardman speaks with authority on this topic. His group consists of 117 independent property and casualty agencies around the state that write policies on behalf of both national and Vermont-based insurance firms. Hickok & Boardman is a member of the association, as is Smith Bell & Thompson and other agencies whose names are familiar to many Vermonters.

The independent agents are the dominant players in Vermont's insurance market. They together accounted for $507 million of the $675 million in property and casualty premiums paid by Vermonters in 2000.

Although members of the Montpelier-based association of independent agents have strong roots in communities around the state, they do not necessarily favor home-team insurers such as Vermont Mutual or Union Mutual. "Whatever insurance company has the best coverage at the best price and most closely fits the needs of the buyer is the company that will earn the business," Boardman says. And by those criteria, the domestics do rate as "some of our leading carriers," he adds.