ACE Private Risk Services rolling out affinity groups, new agent access

PIANJ leaders recently traveled to Madison, N.J., to visit the headquarters of ACE Private Risk Services, the high-net-worth personal-lines business of the ACE Group. Talk centered on this operation's status and plans after acquiring the personal-lines business of long-time agency-system carrier Atlantic Mutual in early 2008. Speaking with PIANJ on behalf of the carrier: John Paolini, senior vice president and chief operating officer; Kevin Scammell, vice president field sales and marketing; and Lori Pakrul, New Jersey territory manager.

PIANJ found the company in the midst of rapid expansion, yet wary of avoiding the pitfalls this mode can bring. "We have a clear vision and want to build it correctly," Paolini explained. "We need to deliver world-class products and services, while delivering profitable growth to our shareholders."

Together with the book ACE acquired, ACE's Recreational Marine division formed ACE Private Risk Services. The business now provides homeowners, automobile, umbrella liability, fine art and collections, and watercraft coverage for high-net-worth individuals and families.

The acquisition provided ACE with an existing infrastructure and network of strong relationships with many independent agents. But the operation has rapidly moved beyond this footprint. "In early 2008, we operated in about 15 states. By growing our team internally and externally, we now can provide coverage and service in all 50 states," Paolini said.

The "vision" Paolini refers to is that of a niche market for the high-end client, providing comprehensive coverage on a package basis and offering personal risk management as an integral part of its appeal. He acknowledged that some challenges include:

• aligning the company's goals and strengths with the business plans of distribution partners; and
• wise allocation of the considerable fresh capacity placed at the disposal of ACE Private Risk Services' underwriters, thanks to the financial strength offered by the ACE Group.

"We're chasing two primary goals: growth and profitability," Paolini said. "Much of our new business today comes from our agency force moving their qualified existing clients to us. The challenge now is to attract more clients that are new, both to the agent and us. We're trying to create strategies that align with the strategies of our business partners."

To Paolini, that means identifying and going forward with agents whose own business model includes individualized personal risk management: "How to get our potential customers focused on the value of their insurance program based on a good understanding of their elevated exposure to risk, which is inherent in their position and lifestyle? How do we promote this approach when so much marketing currently centers on the lowest price instead of best value? How do we find and partner with agents whose orientation is similar to ours?"

PIANJ Vice President Anthony Bavaro, CIC, CRM, pointed out the synergy between the advisory value added by the independent agent, as seen by ACE, and the strengths identified and reinforced by PIANJ's "Take Back Personal Lines" marketing program—available to all PIANJ members. "Our message is that too much is at stake not to have a personal advisor on these important financial issues," Bavaro said.

Two core initiatives

ACE Private Risk Services targets a niche clientele, defined as "affluent" accounts (personal-lines premiums of at least $5,000 and/or homes with replacement cost of $750,000 and up) and "high-net-worth" accounts (personal-lines premiums of $25,000 or higher). Scammell detailed for PIANJ two strategies ACE has devised to help attract more of these customers:

• affinity group marketing; and
• appointing and training agents.

Both initiatives are designed to serve the goal of attracting and supporting insurance producers whose business orientation matches ACE's emphasis on risk management in the personal-lines area, Scammell explained.

Group marketing

For the affinity-group marketing program, ACE envisions partnering with agents who already concentrate on employee benefits, and who could leverage their existing human resource contacts and relationships with key employers. The idea is to offer a personal-lines program geared to the company's executives and other highly compensated employees, including an affinity group discount of 5 percent. "Our territory managers would love to hear from PIA members who are benefits-oriented," Paolini said.

Currently, the company estimates that between $6 and $7 billion in personal-lines volume is sold annually through affinity groups. "It's a huge market," Paolini said. "If a company or association is going to open up a program for its employees to buy that way, its management should have a similar opportunity as well."

PIANJ suggested that actual success for this model would require agents skilled in making the individual, face-to-face sale, once the company's affinity group structure is in place. "It takes a professional agent—that's our bread and butter," remarked PIANJ Vice President Keith Savino, CPIA.

"Yes, we believe it must be an independent agent that's oriented toward personal-lines risk management," Paolini responded. "Currently, even affluent executives may have inferior insurance products, due to the commodity mindset in the personal-lines market." Questioned further about qualifications for this opportunity, Paolini said the carrier would look at agreements providing the potential for as few as five individual clients or $25,000 in volume by the end of the first year.

"New agents" program

Paolini said the company recognizes that some agencies currently may not warrant a full appointment. Due to their client profile and/or location, they may have a limited number of accounts qualifying for the ACE Private Risk Services niche.

In such cases, a carrier might provide independent agent access through wholesalers, MGAs, clusters or other aggregators—but ACE's whole-account, package-policy business model is not always congenial to these parties, who generally already have other established specialty markets.

"So, our new agents program uses a 50-state licensee that ACE Group originally set up for the excess-line market," Paolini explained. "We now use this for some newly-appointed agents. We're working with about 100 agents on this basis, asking for a $50,000 premium commitment to provide continued access to our program." The cost to the agent is three points.

Building it right

PIANJ empathized with ACE's concerns about managing this phase of its growth judiciously. "In the high-net-worth niche, companies tend to be good at nurturing their existing agents but poor at appointing new ones," Savino observed. "Mid-market companies tend to do better: They train agency staff on their automation and products. If newly appointed agents don't get the benefit of good training, they'll tend to revert back to their familiar carriers."

"That's right," agreed Paolini. "We need to show agents how to get the best out of ACE Private Risk Services—the best quote, the best underwriting, general support and claims service. If they don't receive that, we haven't trained them well. We need to take the time with each key person, explaining how to sell the package product, because we're not a monoline provider."

"We want to be the most client-centric company out there with respect to both our agents and our policyholders," Paolini emphasized. "So, we take great interest in participating in surveys and agent feedback, like the information in the PIANJ Company Performance Survey."

On this front, Paolini shared plans for an upcoming technology upgrade using XML standards, scheduled for early 2011. According to Savino, who is PIA's representative to ACORD, "Atlantic Mutual was well ahead of its time in providing online quote-to-issue for a true package policy with a single premium bill," Savino said. "But what was once cutting-edge technology inevitably becomes outdated. So this is excellent news for your agents."

The conversation with ACE Private Risk Services is the latest in a series of discussions by PIANJ with carriers serving its members' business needs. PIANJ especially engages companies undergoing marked changes in their business model and marketing plans. In addition to Vice Presidents Anthony Bavaro and Keith Savino, PIANJ was represented by Bruce Blum, a member of the Business Issues Committee.—Kiehl