By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®
It's been about a year since Boston-based Liberty Mutual retired the venerable Wausau insurance brand and decided to sell its wares to the middle market strictly through agents and brokers.
Liberty Mutual's Middle Market operation now has about 5 percent of market share in the space and has experienced growth in new business beyond workers' comp, such as general liability, property, umbrella, commercial auto and crime, among other lines. This comes in a middle market estimated at $45 billion total (and defined by Liberty as businesses that have $150,000 to $1.5 million in total cost of risk across primary lines). And it's been profitable business, Liberty executives said.
As Mark A. Butler, chief operating officer of the middle market operation, detailed, the unit has also more than doubled the number of its appointed agents and brokers, to between 1,400 and 1,500. About 40 percent of new business in the last six months of 2009 came from freshly appointed agents, he reported to Risk & Insurance®.
Brokers and more importantly clients appear to have given the thumbs-up to the new arrangement. In April, Greenwich Associates named Liberty Mutual as a top national carrier in the middle market for client service and coverage, and an internal survey of 1,200 agents done by Liberty suggested that respondents expect to grow their business most with Liberty Mutual versus other carriers they work with, Butler said.
"We're pleased at the progress," he said, talking about the middle market unit he oversees.
Liberty Mutual reported 2009 net income of $1.02 billion, down 8.1 percent compared with 2008, but net written premium in 2009 increased to $28.25 billion, up 11 percent over the previous year.
ITS HUNCH ON
Part of the satisfaction has to come from the fact that the hunch Liberty had about the middle market had been proven correct. Before 2009, Liberty Mutual had two ways to get insurance to its middle market clients. It sold direct through its Business Markets division, or sold through its subsidiary Wausau through a distribution channel of trusted agents. But Liberty Mutual realized that only about 5 percent of middle market commercial accounts go direct for their insurance.
The success over the past year also reinforces their notion that demand in the middle market is pent up, said Bob Thomas, vice president of marketing for middle market.
Of course, continuing to tap that demand (and increasing market share) will not be without a few obstacles. For starters, Butler admitted, the marketplace perceives Liberty as primarily a workers' comp carrier. In late 2009, however, Liberty Mutual released Package Solutions, a new product geared toward nearly a dozen industry customizations. Through this and other ways, the middle market unit is trying to diversify its book. At the start of 2009, it wrote 70 percent workers' comp, according to Butler, and now 50 percent of new business is non-workers' comp.
Another obstacle relates to the agent/broker relationship. Previously, Wausau agents might have viewed direct-selling Liberty Mutual as competition. The new arrangement removes these "friction points," Butler said, but now the middle market operation must make sure that its appointed agents and brokers know that it won't work with just anyone.
Liberty only will work with partners that understand its "value proposition"--insurance as more a service than a commodity--and that it's an insurer that is not going to be everything to everybody. Liberty folks will tell you they look to lower the cost of risk for policyholders, and that there is a difference between price and cost.
For newly appointed agents and brokers, Thomas said, there might have been a feeling out period over the last year--with some agents even perhaps testing how far they could push boundaries. But now partners know what to come to Liberty with and what not to, Thomas said.
Last but definitely not least, Liberty Mutual--and any other insurer out there--faces a still-tough economy.
Butler said they are handling that with "disciplined growth."
"Now is not the time to go crazy with growth," Butler said.
May 6, 2010
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