Program Business Expands Beyond Traditional Lines
By Phil Zinkewicz
As property-casualty insurance companies continue to search for ways to operate more efficiently and to attract more premium dollars, the program approach to satisfying non-traditional exposures appears to be taking hold. We have all seen the programs that address more traditional lines such as accountants' liability and legal liability. But now there appears to be a desire on the part of insurance company markets to establish programs for very specific industries heretofore only written on an individual basis in the surplus lines market.
Moreover, in the opinion of experts in the program administration field, independent insurance agents can reap significant benefits by following the program approach. Two brokerage firms, Swett & Crawford and its sister firm Sherwood Insurance Services, subsidiaries of AON Group, both have set their sights on program business and are welcoming retail agents to take advantage of their largesse.
"We have several programs in our book of business," says Lori Hunter, Los Angeles branch manager and senior vice president for Swett & Crawford. "Much of the time, the business comes to us from retail agents who see an opportunity to satisfy the needs of a new market, and we're there to assist the agent in setting up a program. Or, sometimes an agent is writing a lot of a particular type of exposure but with several markets. We can find a market willing to write the business on a program basis, making the operation more efficient for the agent and getting a better deal for his or her clients."
Hunter says that is exactly what happened when a retail agent approached Swett & Crawford saying that he had clients in the auto parts manufacturing industry with like characteristics. "We put together a program, obtained a market and were able to negotiate better rates than the agent was getting with multiple markets," says Hunter. "The auto parts manufacturers made products for the auto racing industry-fire seats, special seat belts, etc. We do a good deal of program business that way."
Swett and Crawford was also able to put together a program for aerobic dance instructors and indoor mountain climbing, "that caught the attention of the American Mountaineers Association and they asked us to put together a program for their members. We're looking at that right now," says Hunter.
The point is that one way to approach programs is to be industry specific, according to Hunter. "Pizza restaurants with delivery exposures is one example," she says.
Another way to put together a program, says Hunter, is by product. For example, Swett & Crawford has a program for high valued homeowners with earthquake exposure and another for employment practices liability. "We believe we are assisting the smaller independent retail agent because, in today's competitive market, it's difficult for the smaller producer to be the 'jack-of-all-trades' as in the past. If a retail agent has an idea for a program or wants to join one of our existing programs, we will meet with the agent and provide the risk management services needed for the agent and the client," says Hunter.
Debra Ochs, vice president and manager of program development for Sherwood, says her job is to develop affinity groups and design programs for the company. "We had one agent who came to us because he was writing airport liability and we put together a program for airport liability as well as property," says Ochs. "We also have a private schools pro-gram and a program for the fashion industry. We can be of invaluable assistance to the agent in terms of underwriting, marketing and claims handling as well as risk management and loss control," she says.
Both Hunter and Ochs maintain that program business is definitely the wave of the future. "It should be remembered that buyers of insurance today are much more sophisticated than they were years ago," says Hunter. "They want to get the best deal possible and, if they don't, there are a lot of alternatives to traditional insurance out there. That's why companies are moving towards programs. It provides a way of offering the client the best rate and the best terms and conditions."
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