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Liberty Mutual Addresses PIA National Board of Directors

Recently, Peerless Insurance President Mike Christiansen and I had the honor of addressing the mid-year meeting of the National Association of Professional Insurance Agents...
May 7, 2009

Scott Goodby, Executive Vice President, Liberty Mutual Agency Markets, President, Regional Companies GroupBy Scott Goodby
Executive Vice President, Liberty Mutual Agency Markets,
President, Regional Companies Group

Recently, Peerless Insurance President Mike Christiansen and I had the honor of addressing the mid-year meeting of the National Association of Professional Insurance Agents (PIA National) in Arlington, Virginia, at the invitation of PIA National President Ken Auerbach and your CEO Len Brevik. It was a pleasure to share the good news about Liberty Mutual with the leadership of an association that successfully represents so many independent agents across the country.

Liberty Mutual fervently believes in independent insurance agents. Our Agency Markets business unit has exclusively distributed insurance through independent agents since 1997. Liberty was the only carrier to defend against allegations in Connecticut, New York, and Illinois that our commission arrangements were unlawful. While others paid heavy fines, we stood by the commission agreements we have with our agents. We thank PIA for its strong support for our company's principled stand on this important issue.

Liberty also furthered its commitment to the agent channel this winter by announcing the new Middle Market, which now sells commercial lines exclusively through agents to mid-sized businesses. In fact, in 15 years, we've moved from a company that sold 100% direct to one in 2009 that sells 70% of its business through independent agents and brokers.

Now the 5th largest property and casualty insurer in the U.S., Liberty Mutual had a very solid 2008. Revenue grew by 11% to $28.9 billion, and we produced $1.1 billion in net income. Revenues for the Agency Markets business unit grew from $5.6 billion in 2007 to $8.2 billion last year and direct written premium grew 46% to over $7.5 billion with acquisitions and organic growth.

With the acquisition of Safeco completed last September, Agency Markets became the nation's third largest insurance provider through independent agents for personal lines and the fifth largest for commercial lines. Our combined surety operation, Liberty Mutual Surety, is now the second largest in the country.

Prior to the acquisition, Agency Markets' regional companies, despite a full western presence, were more commercial lines dominant and weighted in the east. Safeco was more personal lines dominant and weighted more heavily in the west. Moving to a new organizational structure provides both commercial and personal lines greater scale and presence. To that end, Safeco will now offers personal lines within the eight regional companies existing territories, and the regional companies will offer commercial lines for small to mid-sized business.

The Agency Markets companies are known for their strong and proven regional management approach that provides for local decision-making by staff with territory ownership and deep local market knowledge. These are key elements to building and growing strong relationships with our agents. As we move forward, we are increasing our agent connectivity in both commercial and personal lines. Approximately 300 Territory Managers work closely with about 75 newly-created Agency Specialists to improve service to our agents. Regionally-based senior management, marketing, underwriting, and claims staff also increase familiarity and consistency, and both Safeco and the regional companies have moved to a dedicated underwriter approach for each appointed agency.

We work with agencies that focus on selling value and service. For them to differentiate in the marketplace with this sales strategy, we have to be able to give them the tools and services to demonstrate to customers that difference. With each acquisition, we create an improved organization that blends the best of both organizations to deliver higher levels of talent and service, better technology and innovation, and better product management and operational efficiency.

Technology is a big part of the equation. We've begun the process of enhancing our commercial lines system in order to move to a single platform and point of entry for all policies. It will yield a number of key advantages for agents, including more flexible pricing, faster speed to market, and better coverages. We've already migrated Agency Markets personal lines business in 26 states to Safeco's highly-regarded Quote & Issue platform with the remainder to be on boarded before year's end.

Much work remains, but the first six months have been quite successful. Independent agents have been, and will continue to be, a central focus in our decision-making and the foundation for our mutual long-term success. Again, thank you for the opportunity to address the PIA National Board of Directors directly, as well as PIA members through this communication. We look forward to continuing to work closely on issues of mutual concern and through our participation in the PIA Partnership.

Liberty Mutual Agency Markets regional companies and Safeco Insurance operate in the following eight territories: America First Insurance - Central Region, Colorado Casualty - Mountain Region, Golden Eagle Insurance - California, Indiana Insurance - Midwest Region, Liberty Northwest - Northwest Region, Montgomery Insurance - Southeast Region, Ohio Casualty - Mid-Atlantic Region, and Peerless Insurance - Northeast Region.

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