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By CYRIL TUOHY, managing editor of Risk & Insurance®

In August, Gary Thompson, executive vice president & chief underwriting officer of commercial markets for The Hartford Financial Services Group Inc., spoke with Risk & Insurance® Managing Editor Cyril Tuohy about the company's strategy to cross-sell into the middle market. The following is an excerpt from the discussion.

A: The shift in focus is directly attributable to our CEO Liam McGee. He recognized that we had an iconic brand and an established company. He said, "Let's do a strategic review. Let's take stock of what's underneath The Hartford brand."

We realized that we have a large and growing customer base, a unique distribution partnership with agents and a breadth of products we can offer. So the long and the short of it is that there has been a change to the customer-focused strategy, to capitalize on those strengths in a very focused way.

Q: Last spring, CEO Liam McGee talked about sharpening the company's approach to commercial insurance sold in the middle market. How is the company expected to approach this market?

A: Our approach to this segment and these owners is to focus on the needs of the midsize account end buyer and the agents/brokers who represent them. It's about understanding the industry sectors in which they participate, the complexities and the associated risk transfer with that. It's about understanding the regulatory environment and the litigious climates in which they operate.

It's also about post-sale services, which, in the way we think of them, are a key part of the product. Buyers want someone that understands their business, their needs and what they're up against--all of the business pressures they face. The needs of the middle market buyer have changed a lot during the 34 years I've been here. Increasingly, it's about providing focused answers to those needs. It's about ever-increasing product depth and breadth. Today's buyers are less willing to accept a general answer.

The needs of today's middle market buyer are similar to the needs of jumbo accounts 10 years ago.

Q. What strategies necessary to approach the middle market are different than those used to approach the large market?

A: Similarities to the large market are that distribution is often the same, and the products used are the same or similar; the services are similar but delivered differently. Pricing techniques and the self-insured retention and deductibles are different, and the degree of customization is different as well.

The needs of the middle market and large account buyers are more similar than different, and the fact that we serve both sectors is very important--there is learning and leverage. A national account is similar to the middle market but larger, they have more employees, more locations, additional exposures and a lot more service needs that require in-depth customization in claims handling, loss control, risk management information systems (RMIS). The middle market account does have many of the same needs, particularly the larger midsize accounts with $250,000 in premium or more. A differentiator is the ability to deliver those post-sales services in a consistent way.

4. How does the agent/broker distribution channel approach selling products into the middle market?

A: Within the channel, agency brokers are often the same firm and sometimes the same people. Brokers have very different specializations and capabilities. They vary widely in their approaches, from size of the firm, to size of accounts. Our point of view is that successful carriers adapt to meet the clients' needs. Our customer focus enables The Hartford to adapt even more so to those needs. We think about the things that could be roadblocks or stoppers, and weigh those against the demand. Increasingly everything is the outgrowth of very focused research.

Q. What reception has your new BOP Growing Spectrum and Productivity Advantage been getting from the marketplace, and what does the reception tell you about the demand or where the marketplace is going?

A: Growing Spectrum is a big one for us, and it's been successful to date and has given us new momentum in the small business space. Our new business writings are higher than what we've historically had. We have high hopes for it. There are a lot of new data and analytics variables, and we've been able to price accounts with greater precision, which improves our competitiveness in the marketplace.

Spectrum created demand at the time when we first launched it. We have north of 1 million small business policyholders, so it's a huge base for us and growing. The old product didn't have the flexibility that this one has. If you're a small business owner, insurance typically isn't the first thing on your mind. This product allows business owners to feel comfortable that they have a good policy with broad coverage.

Q. How have those product introductions evolved and changed to meet the needs of a changing market over the past 25 or 30 years?

A: At The Hartford, the definition of a "product" is very different today than it had been in the past. In the old context, the product was typically thought to be the coverage form, and that continues to be a foundational element of how we think of products. Today, we think of product as being the totality of the delivery. We think about the coverage form--the terms and conditions are very important--but also increasingly important are the service deliverables: loss control, claims, RMIS, billing.

A lot of the change is technology enabled: the 24/7 communication, online access to data, the ability to do predictive modeling, benchmarking. So much has changed in the last 10 or 12 years, and quite frankly it's better because along with data comes transparency.

Q. There are big changes coming to the nation's healthcare system. How are The Hartford's benefits products being sold to the middle market? Are they being bundled with property/casualty products?

A: Benefits products are being sold in the middle market via agent/broker channel. Middle market buyers are interested in benefits and services that are priced competitively, add value to their benefits portfolio and are easy to administer. We're seeing more of the trend in the midsize space where they are looking to outsource some of the administrative functions, such as payroll, enrollment and family medical leave, to those who have the capabilities and expertise. While those products have not traditionally been bundled with property/casualty products, we believe The Hartford is in a unique position to change that.

October 15, 2010

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