Agency Checklists has over its existence published a number of articles relating to happenings involving Vermont Mutual Insurance Group. The articles have described persons and events that made Agency Checklists interested in learning more about a company that has been around the insurance industry for almost 190 years.
When Agency Checklists asked about learning more, the President of Vermont Mutual, Dan Bridge, and Vermont Mutual’s Executive Vice President and Chief Operating Officer, Mark McDonnell took time out of their busy schedules to tell us about the company and its focus on the independent agency system. In the interview, just first names appear for convenience.
Thank you for taking the time to talk to us about Vermont Mutual
(Dan) We are always happy to talk about why Vermont Mutual is such a great company.
Could you tell our readers a little about the history of The Vermont Mutual Group?
(Dan) Sure. Vermont Mutual has been around the insurance industry a long time, since 1828 to be exact. We are the oldest insurer in Vermont and one of the 10 oldest mutuals in the United States and actually just sent out an announcement about the results from our 190th annual meeting. Obviously, our company is domesticated in Vermont, but we do write business throughout the Northeast. While we have generally concentrated on the Northeast, that’s not to say our history doesn’t include venturing up and down the East Coast a bit, but in the last 25 or 30 years we have focused on being a Northeast writer of personal and small commercial business.
(Mark)We joke around here that we were writing property insurance when Abe Lincoln was a teenager.
And in Massachusetts?
(Dan) With regards to Massachusetts, we entered the Massachusetts marketplace in 1927 as a property writer and Vermont Mutual entered the personal auto market in 2008 as a result of the Managed Competition changes at that time.
What are your own personal histories with Vermont Mutual?
(Dan) I have been with the organization 9 years now, but it feels more like two or three. I joined the organization as part of a succession plan. The top two leaders at the time I joined, Tom Tierney and Bill Catto, would ultimately be retiring from the company within 18 months of each other and while that was still years away at that time, there was a need to have a succession plan in place.
My connection to Vermont Mutual started around the time of Managed Competition in Massachusetts. Vermont Mutual was contemplating entering the private passenger auto market and I happened to be available to do some consulting for them. So I consulted with Vermont Mutual about product, pricing, technology and the market place around Mass. auto to get them into the Mass. auto business.
After that I left the consulting role, because I was not really a consultant by trade. I went to work for another insurance company, but about eight months into that tenure, the leadership at Vermont Mutual called and we started discussing me coming back into the organization with an eye on being CEO. It was a great opportunity for me to have worked with, and obtained a good feel for the organization in a consulting role, then be able to come back in and go at it full-time. In the course of doing that, I brought in Mark approximately 3 years ago. Mark and I had crossed paths at another carrier, but I’ll let him talk about his background
(Mark) Sure, I’ve been here a little over three years, and as Dan said, we had the top two leaders retiring within 18 months of each other. I had the luxury of coming in about a
year or so before the second of those two past leaders, Bill Catto, retired. The ability to learn about the organization and gradually take on more responsibility before moving into the COO role was very beneficial to me. Tom and Bill had the foresight to recognize the value of a structured succession plan and we all benefited from that foresight…and continue to benefit from it.
(Dan) The reason why Mark and I are here is really the recognition that our business is constantly changing, and the pace of change over the last decade has been even greater. We bring experiences to Vermont Mutual from a couple other companies. A lot of employees that have been here a long time possess great institutional and technical knowledge of Vermont Mutual, but risk losing the viewpoint of what’s happening outside the walls of Vermont Mutual. So, we were able to bring in some outside industry experience that we have started to implement here.
What has been your biggest challenge or success since joining Vermont Mutual?
(Dan) We use the term “modernization” quite a bit around here, and that can extend from replacing legacy insurance systems, which would be a big technology change, all the way through to employee benefits … even what the work environment looks like. So, if I were to point to one general idea, I would say the greatest opportunity has been around modernization and merging that with our existing culture so they complement each other.
Some of those things, the history and culture, really define us and make us great, but there are things that are a bit dated and we have been able to tackle some of those things…We joke that while we’re 190 years old, we’re just trying not to act that way.
(Mark) I’ll just add briefly that probably the most satisfying thing is seeing the progress the entire Vermont Mutual team has made. Both Dan and I having worked at different companies provided us the opportunity to see a lot of things… you see a lot of good, and you see a lot of not so good, and you have to take that good with the bad. It’s just a fact, it doesn’t make those companies right or wrong, or good or bad.
Coming here, however, we have the luxury to sort through those things that we thought were good and those things that we thought were not so good, and put the best of those in place, and it really, really is rewarding to see those things in action, and see the reaction of the staff to some of those changes. So, I won’t speak for both of us, but I think I probably can, when I say that could be the most satisfying experience that I have had in a 30 year career in the industry.
(Dan) And at the same time looking at our financial results and saying, “We are one of the best in terms of premium growth and profitability and recognized by our staff as one of the best places to work in Vermont. That’s a pretty special combination.”
Speaking of employees, there are more than a few employees who have worked a long time for Vermont Mutual correct? I believe there is a club for them?
(Dan) Yes, there is the 25-Year Club. This year we celebrated some of our employees who have even been with the company for 35 and 40 years, which is really unique in this day and age, and something we value. I also love the fact that we have millennials coming in. We have a new crop of interns starting in a couple weeks and we just love to see the mix between what they have to offer and the institutional knowledge of our existing staff. They feed off each other.
How is Vermont Mutual doing?
(Mark) 2016 was one of the best years for Vermont Mutual. We finished last year with approximately $435 million in written premium and record new business. We also had a very good year from a profitability standpoint with an 89.3% combined ratio, which is a little better than our 5 and 10 year average has been, so on the whole, the company is in the midst of a very good run over the last decade plus and the early part of 2017 has extended that very positive run.
How is Vermont doing in Massachusetts?
(Dan) We have had good success in Massachusetts. Massachusetts is our biggest state when we look at our geographic footprint. Currently 54% of the premium we have in our portfolio is in Massachusetts.
That’s not surprising because that’s where the greatest concentration of people are and where their homes, autos and businesses are located. Our company continues to moderately grow that market each year and it’s profitable growth. The one asterisk I would put on that, however, is to note that we did enter the auto market in 2008. We went from $0 to $45 million in premium since then, so obviously that accounts for a fair amount of the growth that we have seen in Massachusetts, but with that said, our growth has not been exclusive to auto. Our homeowner and commercial growth has also been very good, and most importantly, while Massachusetts is a good growth state for us, it has been profitable growth.
Where do you see Vermont Mutual heading in Massachusetts? Are you focusing on growth or do you have any other specific initiatives?
(Mark) We really have no new product launches of any sort planned, or interestingly enough, no new distribution growth strategies. We have a great group of agents that we partner with, which I should mention is the only way we distribute our products and the only way we have ever distributed them. Our marketing representatives don’t have new appointment goals. We are very comfortable with the agency partners we work with right now.
We do, however, have a very strong focus on modernization. That would be product modernization, the way in which we do business, the tools we put in agents’ hands, so as opposed to some companies that may expend efforts on a growth strategy and prospecting and onboarding new agents, we tend to load up our resources on how can we do more with the partners we have, writing the products we have. Ultimately, we do this because when you look at market share, there is just so much opportunity in the seven states where we are now, Massachusetts included.(pullquote)We joke around here that we were writing property insurance when Abe Lincoln was a teenager – Mark McDonnell, Executive Vice President & COO(/pullquote)
I don’t know if they are uniquely different, but we do have a number of pretty attractive broadening endorsements on our products that I think create some opportunities for differentiation, especially for the agents who really go out of their way to sell coverage over price. Fortunately for us, a lot of these types of agents are the ones that represent us.
Where I think we also get the differentiation is the fact that we have focused on certain lines of business like habitational business, which I wouldn’t necessarily call a niche, but it is a class that sometimes gives some carriers pause, or just property in general, while we lead with and focus on that.
(Dan) The habitation is a good example, in that it isn’t a general play, certainly. But again, I wouldn’t say it’s a niche, but we have been doing it for so long that scale and expertise in anything is a good thing, and ours on the commercial side would be in the habitation class.
What are the seven states Vermont Mutual is in?
(Dan) All the New England states, so starting south… Connecticut, Rhode Island, Massachusetts, New Hampshire, Maine, Vermont, and Upstate New York. It is important to note, however, that when you look at our products, we don’t sell auto in Connecticut, Rhode Island, or New York. We write auto in the three northern states and Massachusetts.
Do you see any differences between the Massachusetts market and the market in other states that you operate in?
(Dan) Generally not, but there are certainly some unique differences. Obviously, the auto market has been different historically in Massachusetts, and even with managed competition you still seeing some unique differences in Massachusetts than you would see elsewhere. Insurance scoring is a good example. It’s prohibited in Massachusetts, but not so elsewhere.
So, that certainly plays into the marketplace being different, but, you know, I would say as we distribute only through agents, from our perspective, the agencies have a lot of choices to offer their clients and Massachusetts is no different in that respect. We need to be able to compete effectively with a broad market in order to get good shelf space in those agencies, and compete from both a product and a price standpoint.
(Mark) In answer to that question, as well as something Dan mentioned earlier, it’s just the opportunity that exists in Massachusetts that makes it unique for us… people, properties, and vehicles. The population of Vermont is approximately 630,000, which is also the population of Boston, give or take. So, while Vermont is critically important to us a
nd always will be, if you choose to write in the Northeast, Massachusetts really holds a lot of opportunity.
How many independent agents are you presently contracted with in Massachusetts?
(Mark) We have about 190 or so primary agency relationships that translates to approximately 400 locations, which is a pretty good representation across the state. I guess the thing I would add to that, and this is part of our distributions strategy, is we want these to be meaningful relationships. We want to be relevant to each other. We don’t necessarily want to be on every corner. When you begin to appoint agents by the dozens, you tend to lose that connection and that partnership relationship is something we want to carry into our distribution strategy.
(Dan) We like the partners we have. We want to do just a little bit more with them every year. Which is not to say if there arises an opportunity that can be win-win, where we can have a meaningful relationship with a new agent and their clients, that we wouldn’t pursue an appointment. We absolutely will. But rarely, if ever, will we appoint an agent and grow one auto policy or one homeowner policy at a time because it takes a while in that scenario to become meaningful to each other.
Where do you see the American independent agency system going over the next five to 10 years?
(Mark) Well, I think we are fortunate in the Northeast, and in Massachusetts, in that the independent agency channel here enjoys some of the highest market shares in the U.S., so hats off for what they have been able to accomplish. Having said that, we know they are feeling pressure and that isn’t going to let up anytime soon. All the Insurtech investment is trying to disrupt that run for the agent, so we have to continue to work hard to support them, arm them with products, arm them with technology, which is why we focus on things like our agent portal, and more recently, our customer portal. This allows their customers to enjoy some of the same access that they would get with the larger national carriers and new entrants to the market who are heavily relying on technology to support their customer relationships. In short, they will face pressure, but at the end of the day, in a lot of cases, especially for us as a property writer, that customer is insuring their biggest asset. For many it’s like buying a car, you might start your shopping online, but inevitably you end up at a dealer and we are counting on that continuing with the agent.
(Dan) I am not naïve to think that the channel is not under attack or has been for decades. Progressive and GEICO are newer to Massachusetts, but certainly outside of Massachusetts, during the last 15 or 20 years they have really made great gains.
We maintain, and I really believe this, not because I am a CEO of an insurance company that distributes exclusively through independent agents, but the best solution in terms of an insurance purchase involves choices and consultation, and independent agents provide that. They provide a combination of carrier choice, product choice, coverage choice, and conversation around what is the most appropriate insurance protection for that individual. I just do not believe you get all that online or by calling and asking to consult about a Massachusetts exposure if you have to call an 800 number that lands you someplace other than Massachusetts.
Is there anything else that you can think of that sets Vermont Mutual apart from other local, regional, and national insurers?
(Mark) The tag line that we use is “Stable, Predictable, Competent Partner”, but it’s more than just words on our website and in our marketing material. We really try to telegraph our intent, our strategy, our actions to our agents, and we have found over the years that above all things, they value consistency of the partnership. If you think about the independent agent channel, they are in many cases reacting to the whims of probably six to eight core carriers, but then pick a number… many more other carriers that hold less prominent spots in their office, but whom they maintain a relationship with and need to keep track of.
So if we can be someone that they don’t have to expend a lot of effort trying to figure out what is the next big initiative around the corner, that holds a lot of value…that’s our approach, and I guess the question that comes next is, “Well, how has it worked for you?” And I would put our results over the last decade or more up against anyone else in our business. We have been recognized by the Ward Group as one of the top 50 insurance companies in the U.S. now for eight years in a row and that involves the evaluation by Ward Group of approximately 3,000 carriers, A. M. Best assigns us a rating of A+ and in Vermont we are one of the best places to work, so not only do we execute well on the insurance side, we seem to be doing the things that result in our employees thinking it is a great place to come to work and that translates into great service to our agents and their clients.
(Dan) I probably should not even add to that, but, to put it in perspective, if you think about the agents as the connection to the policyholder or the customer, the thing we found over time is what they like least is disruption. Whether it is an underwriting change, or a big rate disruption like a premium increase, that change causes the agent a lot of work to have to either continue to advise and consult through a rate change or an underwriting change, or remarket that business elsewhere, often for a lower rate. So more work for less money for the agent. The value the agents place on stability, predictability, obviously competence, and Mark emphasized this one… partnership, is why we focus on those things. We place a premium on partnership. We don’t call agents “agents,” we call them partners, and we consult with them as we are making changes to have them understand, or have us understand, what their needs are, because we recognize that as our sales force, they are our connection to the customer.
But, what if there is an agent, after hearing this interview or reading this interview, was interested in pursuing an application to be appointed by Vermont Mutual, who would they contact?
(Dan) One of our local marketing representatives in Massachusetts would be a good choice. I also think an agent who are interested in us could start out on our website and contact us through that channel and then we will put a marketing representative in touch with them. However, we generally don’t get a lot of traffic like that because I think our rational distribution strategy is already pretty well-known out there.
Thank you again for the interview.
(Dan and Mark) You’re welcome and thanks for your interest in Vermont Mutual.