FMI tells PIANJ: "We sell through independent agents—period"

PIANJ traveled to Sussex County in the beautiful northwest corner of the state for its latest company interview, featuring FMI. Leafy Branchville remains bucolic, with deer and even bear sometimes sighted in FMI's parking lot. Nevertheless, combined, nearly 2,000 people work at FMI headquarters plus the nearby corporate headquarters of Selective Insurance, dominating the local employment scene.

From its start in 1879, originally as an assessment mutual, FMI (also known as Franklin Mutual Group) consists of three insurers: Franklin Mutual Insurance Co.; FMI Insurance Co.; and Fidelity Mohawk Insurance Co. Most recently, FMI agreed to assume a significant book of New Jersey business through an agreement with Quincy Mutual Fire Insurance Co. Construction is underway to expand FMI's building before the snow flies ("that's where our heat is"), signaling the company's readiness to handle the Quincy book and more.

FMI's President James P. Ayers, CPCU, and Gary J. Capone, CPCU, ARM, vice president of field services, sat down with PIANJ past President Paul Monacelli, CIC, CPIA, and PIANJ Director Kacy Campion Renna, CIC. FMI Chairman George Guptill also stopped by to greet his PIANJ friends. Enjoying its rich tradition, FMI regaled its visitors with tales from the early days, when FMI's history entwined with Selective's in a village where the growing companies had to find suitable housing for young employees they recruited.

Getting down to business, PIANJ discussed the Quincy book transfer, FMI's impressive new advertising campaign and the company's behind-the-scenes readiness, should a catastrophe strike Branchville or anywhere in its market area. FMI writes only in the Garden State.

Taking on Quincy policies, agents

On June 1, 2009, Quincy Mutual told agents it would cease writing in the state and announced an agreement with FMI to provide replacement coverage. FMI offers coverage to Quincy's commercial-lines customers (other than auto), effective for policies expiring on and after Oct. 1, 2009. Personal lines offers begin Jan. 1, 2010, for homeowners and March 1, 2010, for dwelling fire. As PIANJ visited, commercial offers had just started going out.

"This is our third acquisition as a replacement carrier," Ayers explained, "so we have a successful track record to go on." Earlier, FMI took on books from Highlands and Great American. Ayers said FMI will make offers to all Quincy customers: "We expect a high percent of retention," he added. "We expect to be pretty close on premium."

In response to PIANJ's questions, FMI detailed the procedures it follows with regard to agent and policyholder notices, applicability of Quincy business to FMI profit-sharing calculations and coverage issues.

"Agency letterhead can be used to create agents' letters that will go on the top of our outgoing offer packets," Capone noted. "We can either accept shipments of agents' pre-printed letterhead or create notices incorporating letterhead artwork our agents send us electronically. This ties the agent into the offer right away—it's someone the client knows."

"You're wearing white hats," Renna responded. New to FMI as a result of the Quincy deal, Renna said she is pleased all policyholders are included under the withdrawal/replacement agreement the companies worked out with the Department of Banking and Insurance.

In all, the Quincy book covered by the agreement amounts to around $30 million in premium, split about evenly between personal and commercial. FMI said many agents already represented both companies. It picked up about 30 new agents accepting full FMI agency contracts, plus a handful taking limited brokerage agreements. The deal furthers FMI's desire to write more large commercial property accounts, Capone said.

Asked to forecast market conditions for the upcoming year, Ayers told PIANJ he expects the market to remain the same. "Too many people are too hungry," he explained, adding that Jan. 1 reinsurance treaties and the tropical storm situation will be watched closely. "Due to the Quincy acquisition, we'll talk to all our reinsurers this fall," Ayers said. "Everyone's wondering, will catastrophe reinsurance go up? We have to have competition in the reinsurance sector."

Funds in claimants' hands quickly

Talk of catastrophes turned to the detailed plans FMI has in place to stay operational and speed money to claimants, should disaster strike. The company had just signed an agreement with a vendor providing a pre-paid card designed specifically for the payment of insurance claims. To get funds in claimants' hands for living expenses and emergency repairs, the company will activate the cards, which then can be used like any credit card to purchase goods and services.

FMI also told PIANJ about plans to ensure enough adjusters are in the field, agents and claimants know how to find them, and the company itself will have emergency workstations and power sources. PIANJ noted the difficulty of capturing clients' e-mail addresses, not only for service and marketing, but as one way to communicate with clients who may have scattered due to an approaching storm.

Agents need policy, payment access

PIANJ thanked FMI for participating in the June 2009 ACORD Regional Carrier Program and discussed agent-company technology issues. "Access to what the policy looks like in Real Time is important to agents," Renna said, "but we also like current .pdf versions to e-mail and document our files."

Both agents stressed the utility of access to companies' up-to-date billing information. "Even better, give agents a client tool to put on their Web site, so customers can get answers to payment questions on their own," Renna suggested.

Monacelli noted his agency turns to company service centers, in part due to the volume of billing-related questions. "In the first week, one service center got 467 billing inquiries from our clients—it opened their eyes to how poor their billing procedures were," he reported.

With respect to premium comparison solutions, "it's not about apples-to-apples. It's about getting on the spreadsheet to be sold," Renna said.

"Our agency sees increased production figures whenever a company goes on a comparative rating system," Monacelli said. "In the case of companies like FMI with such a superior homeowners product, producers need a story to tell. Agents and CSRs need to see a clear summary of how your product compares to the standard HO-3. FMI enjoys a special opportunity for mid-value homes where enhanced coverage options aren't so prevalent as they are for the luxury homeowner."

"Insurance for the way you live."

PIANJ got a look at FMI's new ad campaign. Based on the theme, "Insurance for the way you live," the campaign rolled out in March 2009. Its component messages center on some company strengths such as policyholders' central role in the mutual company organization and FMI's automatic coverage for live-in "significant others." ("That way, agents don't have to ask intrusive questions," Monacelli observed.) PIANJ also was treated to a preview of stills from an upcoming Cable TV spot, set to air this fall.

All FMI's advertising directs responses to the "agent locator" at the company Web site, Capone emphasized. "We sell through independent agents, period: Nothing else. We can tell each agent how many hits our ads generate for his or her location," he added.

"That is a huge value partnership for us," Renna said. She and Monacelli proceeded to suggest various possibilities of leveraging the FMI campaign in cooperative ventures with its agents. They agreed that including live-in partners as insureds is a selling point to many seniors as well as young people, and can head off certain liability claims involving accidents in the home.

Kudos to PIA's legislative program

Capone ended the meeting by praising PIANJ's effectiveness in Trenton. "What you do legislatively helps the whole industry," he said.

Staff members representing PIANJ at the FMI meeting included Business Issues Director James E. Pittz and Senior Research Analyst Ellen D. Kiehl, Ph.D.—Kiehl