Up-close customer contact leads to personalized products. Just ask Jamie Maguire, who understands the nonprofit sector as well as he knows insurance. And as a result, Meals on Wheels, soup kitchens, mental health facilities and a gamut of do-good organizations turn to Philadelphia Insurance Cos. for policy packages that make sense for social services.
“We started small and began to underwrite a few of these businesses,” says Maguire, president and CEO of Philadelphia Consolidated Holding Corp. The company is a property and casualty insurance underwriting organization with assets in excess of $2 billion and 1,000 employees in 36 offices across the United States whose holdings include Philadelphia Insurance Cos. “Gradually, the book has grown and we have built a brand in this niche.”
Nonprofit policies aren’t the only market niche Philadelphia Insurance targets. Health and fitness clubs, condominium associations, private schools and a growing number of small accounting firms and consultants populates the company’s client list. And the more Philadelphia Insurance learns about its niche customers, the better it can tailor policies and prices for these markets, Maguire says.
In the competitive insurance industry, these “ins” are important.
“With interest rates going up, that is generally a sign that there will be more competition,” Maguire says, adding that high rates provoke some insurance companies to write policies with break-even profit goals.
Certainly, pricing presents a challenge for insurance industry players. But Maguire refuses to shimmy around this obstacle. Straight talk wins business, and underwriting with profit goal of 85 percent to 90 percent stimulates company growth at Philadelphia Insurance.
“We want to maintain high integrity and do business above the board and in a manner that will lay a solid foundation for future growth,” he says.
Smart Business spoke with Maguire about how he cultivates a company culture centered on employees who give their time, talent and treasure.
Describe your company culture.
It’s an evolutionary process to stay in touch with employees and what they want from a holistic standpoint and match those with the demands of the business.
We are goal-oriented with a family feel. We are very focused on continual improvement, so it’s a Type A personality culture, but we also have a sense of balancing our personal and professional lives. We work hard, but then we play hard.
We have a number of benefits that help employees balance their professional lives and demands in the workplace. We offer flex time and we pay for half of health club memberships. We match 75 percent on our 401(k) plan and we provide educational support, reimbursing employees for the cost of tests and books for education and professional designations. We are a real believer in continuing the education process, even after you are out of school.
How does this culture bleed into the greater community?
We believe in giving our time, our talent and our treasure. We feel an obligation to give back to the community, and we are involved with national and local charities.
In a competitive industry, how does Philadelphia Consolidated Insurance differentiate itself from competition?
Because we started as a private company, we didn’t want to underwrite to break even. We wanted an underwriting profit that would supplement the investment income. Second, we wanted to understand the lines of business that we get into well and demonstrate that through an underwriting profit.
Most insurance companies don’t make money on the underwriting side of the business. They break even and make money on investments from premiums. Our company is different. Our income comes from two sources — the underwriting side and the investments side of the house.
We underwrite with a profit of 85 to 90 percent combined ratio and, in addition, we have investments income from stocks and bonds.
What are the advantages of focusing on certain industry niches and providing them custom products?
We have a discreet group of niches that we target — 20 to 30 industries — and we offer package policies to them. When you limit yourself to certain markets, you become experts in the exposures, issues and risks those markets face.
And as we continue to become more and more familiar with the niches that we’ve targeted, we develop coverage enhancements that differentiate our products from our competitors’ products
We have found over the years that package policies for nonprofit social service entities are very profitable, and we have built a brand for ourselves in that particular niche. In our nonprofit director and officer’s liability policy, which covers the board of nonprofits that we sell in conjunction with our packaged products, we have donation insurance. That offers a substantial limit to the nonprofit — up to $25,000 — as a financial guarantee in the event that a donor who makes a pledge cannot fulfill that pledge by reason of bankruptcy.
That is a unique coverage that our competitors don’t offer. It gives our agents something to talk about other than price.
How does this help you increase insurance product sales to these target markets?
We try to decommoditize the insurance product by having different coverage enhancements with low limits. In today’s environment, agents and brokers are challenged to disclose their commission and what they are getting paid. We put the onus on the agents and brokers to adequately disclose the coverage differences among their proposals.
Say you get 20 percent commission from one carrier and 10 percent for another, and you are trying to get me to go with the carrier that pays you 20 percent. We want policyholders to take a look at what each policy offers.
Because the commission rate is on the table, policyholders will know more about coverage differences, which will help us in the long term. As a result of that disclosure and our philosophy to decommoditize the product, we will be the beneficiary of a lot more business.
What are the challenges that insurance companies face, and how will you maintain profitability in coming years?
The biggest demand in this industry now is adequate pricing. As you continue to grow and you have to produce numbers for Wall Street and meet analysts’ expectations, one of the hardest things to do is continue to underwrite profitably and to generate an underwriting combined ratio in the 85 to 90 percent range. This is more difficult the bigger you are.
A challenge in 2005 will be to continue to select the best risks that provide underwriting profit. The best areas for us will be in the social services nonprofit and the professional services arenas. We underwrite professional liability policies for all types of consultants — from management to marketing — and I think that sector will present a lot of opportunity for growth.
Also, we target accountants — small accounting firms with fewer than 10 employees. That is an area in which we feel we have a solid policy. We have a lot of coverage differentiation and we target specifically that niche of accounting firms, whereas other insurance companies target all types of accounting firms, from the top three to smaller ones.
They don’t have a concentrated effort.
Will technology assist growth or change the way you bring insurance products to the market?
We have a subsidiary company in Florida called Liberty American that does homeowner, mobile homes and flood insurance. One hundred percent of business that the subsidiary sells is over the Internet.
If you were an agent or broker, you could quote, issue, bill and bind a policy for someone you have on the phone through the Liberty American Web site. It is a pretty slick system, and pretty quick.
We are trying to spread this system outside of personal lines and into our other products. It won’t work for package policies because they are too involved from a rating standpoint, but for simpler professional l
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bility products like policies for management consultants, customers could fill in six to seven variables and get a quote form.
Another direction we are exploring and hope to complete this year is a customer service billing inquiry site, where agents can go on the site and view any business bills and commission statements. This system would allow them to get updates on business in the queue waiting to be quoted. An interactive customer service site like this would be most useful for our commercial lines producers.
What are the keys to implementing these systems?
We are fanatical about having defined processes in our business. It’s wonderful to focus on the end results and the 15- to 20-percent annual growth, but we are more focused on having defined processes for our key business functions. The first step is to establish those processes, the second step is to set standards for those processes, and then you want to track performance against those standards.
We have processes in the underwriting and marketing areas where we hold employees accountable for executing on those demands. We measure their results against the standards we expect.
For example, our marketing sales representatives are expected to make a certain number of cold calls to agents and brokers. In underwriting, we expect employees to quote a certain number of accounts each week. It is by focusing on and implementing these processes that we are able to be successful.
But paralleling our growth and production is recruiting and developing the best talent. To the extent that we can recruit and develop the best people in the industry, that will help fuel our continued success.
How to reach: Philadelphia Consolidated Holding Corp., www.phly.com
