best of both worlds, The
Staunchly independent Allied Insurance and captive giant Nationwide might seem like strange bedfellows-but their merger is turning out to be a match made in heaven
What do you get when you combine a stalwart Midwestern independent agency insurer with a top gun in the exclusive agent ranks?
Plenty! Since their historic merger in 1998, Allied Insurance and Nationwide Insurance have been playing off each other’s strengths to create a distribution powerhouse of formidable force. Allied’s solid network of independent producers, backed by Nationwide’s Fortune 100 financial might, is enjoying a wealth of new opportunities while the company consistently outperforms the industry on every relevant measure.
Every marriage begins with a courtship. Why did Nationwide come calling on Allied-and why did Allied open the door?
“Nationwide is committed to a multi-channel distribution model, and we met their needs on two counts,” responds Steve Rasmussen, Allied’s president and chief operating officer. “First, we’re a stable, successful independent agency company; and second, we’re strong in the Midwest and Western markets where Nationwide wanted to establish a larger presence.”
Given the hundreds of American agency system carriers in the country, why did Nationwide set its sights on Allied Insurance? “They looked at the entire independent agency system, and they were impressed with our track record and history,” says Jim Hagenbucher, Allied’s marketing vice president. During the prolonged soft market that sent many competitors reeling, “We achieved profitable growth throughout the 1980s and ’90s.” For 2000, Allied’s combined ratio was an enviable 97.9%, compared with Best’s estimated 110.3% for the industry as a whole. Allied posted premium growth of 7.1% for the year against Best’s industry estimate of 5.0%.
“Nationwide’s whole marketing strategy is based on customer choice: independent agent, captive agent, affinity group, Internet,” Rasmussen explains. “In each of these categories, Nationwide is committed to offering customers the best of breed. We were the best independent agency company they looked at.”
What did agents think?
Few people would be surprised if Allied’s independent agents, on learning of the company’s merger with a titan from the enemy camp of exclusive agency insurers, assumed they were being cut out of the distribution loop.
Like so many elements of the Allied-Nationwide story, the agents’ actual response defies conventional wisdom. “The reaction from our agency force was positive,” Hagenbucher says. “In their eyes, we couldn’t have picked a better partner in terms of stability and financial strength. The merger has given our agents the opportunity to be represented on a national level.” Not only have agency appointments not declined since the merger, he notes they’ve actually increased, as has premium growth.
Echoing Hagenbucher’s assessment, Kim Austen, senior vice president of product management, says: “Agents have found this combination very beneficial. They’d seen good mergers and bad mergers. We told them, `This is an opportunity for you to grow.’ From our standpoint, it’s a partnership for growth. This is definitely a positive marriage.”
A key to the success of the marriage, Hagenbucher points out, is that from the start, Allied was given responsibility for managing Nationwide’s entire independent agency distribution system. “The same agency management team is in place, and Allied operates autonomously,” he says. “Other than brand, there have been no significant changes in our operating philosophy; we’ve stayed the course!
Rasmussen points to another advantage of the merger for agents: “If you write as much personal lines business as we do (of Allied’s $1.4 billion written premium for 2000, 65% was personal lines), the ability to have a large database is key It lets us do things we couldn’t have done alone. Our agents can see how economies of scale increase our power.”
Then and now
Allied Insurance began as Allied Mutual Automobile Association in 1929. Allied Mutual merged into Nationwide Mutual in 1998. Rated A+ (Superior) by Best’s, it operates in 23 western and Midwestern states, and competes with Nationwide in four “overlap” states. Allied is represented by some 3,100 independent agencies. Regional offices are located in West Des Moines, Iowa; Lincoln, Nebraska; Denver; and Santa Rosa, California; the company also maintains a significant presence in Sacramento, California. Decisionmaking authority for marketing, underwriting, and claims is vested in regional vice presidents.
Property/casualty insurers in the Allied organization are AMCO Insurance Company, Depositors Insurance Company, Allied Property and Casualty Insurance Company, and Allied Group Insurance Marketing Company. Also operating under the Allied Insurance umbrella is Nationwide’s independent agency system, including Nationwide Insurance Company of America (NICOA), formerly known as TIG/Countrywide, in Battle Creek, Michigan. In 1999, CalFarm Insurance of Sacramento, California, joined the Nationwide system and was integrated into Allied Insurance.
Standing out from the crowd
As everyone knows, the term “merger” often is a euphemism for “takeover.” The company being merged into a larger organization frequently is stripped of everything but its name-and sometimes loses even that. That’s definitely not been the case in Allied’s merger with Nationwide, and Allied remains firmly committed to its core values.
“Allied has been and always will be positioning itself as a long-term player in delivering quality personal and commercial lines products and services to independent agents,” Rasmussen declares. “Through consistency, we achieve steady revenue growth over time; that’s what good agencies look for.” In fact, consistency drives Allied’s overall operating philosophy In addition to offering competitive products, Rasmussen says, “We strive to be skilled underwriters, conscientious claims handlers, and leaders in automation technologies that will keep agents’ costs down. Our value proposition is to be sure all the advantages of cost reductions go to our customers and agency partners.”
“Power tools” for agents
Allied’s roots as a Midwestern mutual underlie its strong commitment to support its agency force in operating economically and efficiently. To that end, the insurer employs an impressive arsenal of hightech solutions for agents and their clients. The AIDCO program, which aims to streamline personal lines production, was designed in the mid– 1980s “by agents, for agents,” Hagenbucher explains. Participating agents agree to place all their standard personal lines business with Allied; in exchange they receive customized marketing support and an unmatched profit sharing program. By the end of last year, 525 agents representing 35.1% of Allied’s personal lines written premium were participating in AIDCO.
Allied also offers a number of tools to assist agents and customers.
Agents can take advantage of a state of the art service center that provides customer access via phone 70 hours per week. “We position ourselves as an extension of the agency,” Hagenbucher says. “The Service Center frees our agents to do what they do best: sell.”
The Allied Agent Center is an Internet-based communication tool that helps agents on a daily basis to conduct business with the company, Everything the agent needs-policy information, the ability to submit new business and even order promotional items-is all in one place and is always current. In addition, agents who use comparative raters can easily bridge to Allied’s Agent Center.
A new customer Web site, myAlliedPolicy.com, can be linked to an agent’s Web page so customers can view their policy and billing history on line, as well as learn how to file a claim.
Policyholders also may access this secured site directly. Another Net-based tool, eQuoteSelect, is designed to work with an agency’s Web site to deliver automated local quoting for auto and homeowners prospects. Agents also can take advantage of SiteBuilder, a Web site development service.
Another way in which Allied supports agents is in its strong commitment to policyholder service. Each insured carries a Premier Service card with a toll-free number to call in the event of a loss. Claims assistance is available anywhere in the United States, 24 hours a day. “We get there fast,” Hagenbucher says.
Meeting market challenges
No insurer, however well connected, is immune to the vagaries of the market, and the management team of Allied Insurance has a clear view of the challenges they face.
“We’ve been extremely successful as a decentralized organization,” Rasmussen comments. “Our regional vice presidents are very close to the market, the agent, and the customer. As we get larger, we’re challenged to maintain that closeness. It costs more, but it’s what we must do to maintain our status as best of breed.” Hagenbucher concurs. “Our five regional offices listen closely to the market,” he says. “Well always maintain our close relationship with agents; it’s our key to success in the marketplace.”
Adds Austen: “Market challenges are local; our regional structure gives us the flexibility to do things differently in each market, whether it’s a small rural or a large metropolitan area. It’s good to be better than our competitors; sometimes it’s better to be different. We offer our agents out-of-the-box solutions that set them apart from the competition.”
Those solutions, Rasmussen emphasizes, are based on an ongoing commitment to controlling and reducing expenses-but not to the detriment of agents. “We must continue to get Allied’s cost structure down, but not on the backs of independent agents,” he says. “It would do us no good to break our agency force. We want to get costs out of the whole system.”
Since Allied’s merger with Nationwide, Hagenbucher says, “We’ve had the best of both worlds: unquestioned financial strength combined with responsive local decision making.”
In a market that’s changing at the speed of light, it doesn’t get any better than that.
For more information:
701 5th Ave.
Des Moines, IA 50391
Phone: (800) 532-1436
Web site: www.allied insurance.com
Copyright Rough Notes Co., Inc. Aug 2001
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