Safety Insurance--A success story

By John Ashenhurst

Ultimately it's not technology that makes a difference but a carrier's management team and culture, and that's much more difficult to come by than technology.

34rn11 Virtually all carriers now have Web sites. Some use them to sell in parallel with their agents. Some provide self-service to their policyholders. A fair number provide some sort of online self-service to their agents. What makes a carrier Web strategy successful?

One way to understand is to look at success stories. Safety Insurance, headquartered in Boston, is a clear case. The carrier has grown rapidly, has gained market share, is profitable, and has a loyal agency following. Surely there's something to learn here.

Safety uses the Internet in two important ways. First, it provides its agents entry into its Agents Virtual Community, an Internet portal with access to both Safety and other agency business partners (glass repair shops, car rental agencies, etc.). Second, Safety has created a consumer/customer information Web site that agents can "imbed" in their sites to provide out-facing services (the use of technology to provide self-service to insureds). We'll look at these and other technology offers below.

Safety sells insurance in Massachusetts only, though its influence already extends beyond the borders of the Bay State. For agents outside Massachusetts, Safety can provide a yardstick against which to measure the technology efforts of their carriers. For carriers, Safety can serve as a case study showing how to develop and implement successful business and Internet strategies. Safety has demonstrated for all to see that being smart about the Internet doesn't require enormous resources. Even smaller carriers with vision and will can compete with the behemoths.

Safety's technology offerings represent something important that could benefit independent agents and their carriers all across the company. And it's based on clear, unambiguous thinking about the company's partnership with its agents. While many carriers suffer flat or negative premium growth coupled with weak profits or even losses, Safety has enjoyed consistent double-digit growth, going from $295 million premium in 1996 to $432 million in 2000. And it's done that while significantly improving premium per employee (now $845,238 with 510 employees) as well as improving market share to 9.5%, making it the third largest personal auto carrier in Massachusetts. The carrier works with more than 600 agents and enjoys a high level of loyalty from them.

The agent as sales and service source

When the World Wide Web became visible in the mid-'90s, some entrepreneurs and some carriers imagined selling insurance direct through the Internet. The dot-coms never lived up to their billing and many have disappeared but numerous carriers persist in a dual channel sales strategy; they sell direct through the Internet as well as through independent agents. In some cases, the Internet-source sales are turned over to agents; but even so, agents are likely to feel a bit uneasy about being in competition with one of their carriers. Will the carrier eventually drop its agents in favor of Internet sales? Are consumers likely to be confused by the ambiguity of two sales channels? Is the carrier trying to build its brand at the expense of its agents?

I've visited with Dan Loranger, Safety's CIO and vice president of MIS, and Bob Duggan, assistant vice president of MIS, several times recently. They emphasize that Safety has been clear from the beginning about supporting its agents. It wants them front and center in sales and service activities. The agent supports the customer and Safety supports the agent. Over the last five years, Safety has used technology to increasingly allow agents to directly control sales and service activities. We'll look at details of the progression, but first some background.


The late Richard Simches, a former independent agent, founded Safety Insurance in 1979. Initially, the carrier sold personal auto policies but over the years expanded into homeowners, personal umbrella, commercial auto, businessowners, and commercial umbrella. Over the last year, Safety has sought a buyer that could use the carrier's technology and business strategy to expand into other markets. In a move that augurs well for the carrier, it turns out that the buyer will be an internal management group led by President & CEO David Brussard, suggesting that the culture, genius, and direction of the carrier won't be compromised as it moves into the future.

Perhaps because an independent agent founded the company, Safety has been open to developments that increase rather than decrease agency participation and control of insurance sales and service transactions. CIO Dan Loranger, with the full support of Brussard, has been single-minded about moving the carrier from a traditional brick-and-mortar orientation to becoming more of a virtual carrier with agents providing the brick-and-mortar connection to the customer. His thought was that technology available to the carrier and its staff should be moved into the agents' offices, giving them direct control of transactions rather than simply as an entry point into internal carrier processes.

When Safety completed its Y2K remediation process in 1996 (surely a sign of a well-managed organization), Loranger proposed that the carrier use technology to provide its agents with everything they needed to write and service business. By putting the right information and tools in the hands of its agents, the carrier could reduce its internal customer service and processing load. It could grow without adding staff. With a certain amount of courage, the carrier was willing to bet that by making itself significantly easier to do business with, it could win more and better business from its agents.

Safety didn't go directly to the Internet to provide services to its agents. In the mid-'90s neither agents nor the larger world was quite ready to make significant use of the Internet. On the other hand, Loranger wanted to provide agents with everything they needed at the point of sale to support once-and-done processing. He believed that if agents were able to sell and service Safety policies for the most part without intervention of Safety employees, both sides would be better off. So the first step was to extend access to the Safety mainframe out to agents, not just to do inquiry and data entry but to complete new business, endorsement, and renewal processing.

PowerDesk, the first phase of the rollout, provided agents with policy, billing, and claims information. They could then answer customer questions directly, without having to call Safety service staff. Power Express, the second phase of the mainframe extension service, offered new business and endorsement transaction processing. Safety has added three other "Power" applications: Power Quote (homeowners and commercial auto), Power House (homeowner inquiry), and Power Pay (agency commission direct deposit).

PowerDesk and Power Express required continuous, high-speed connections from the agencies to the Safety data center. Safety partnered with Verizon (Bell Atlantic) to install and maintain the frame relay network needed to carry the traffic. As it became evident that high-speed Internet connections would become important to agents in general and for Safety's plans specifically, Safety used the network to provide its agents with high-speed Internet access as well. Safety foots the entire bill for the communication network even though agents can use it for non-Safety activity, including access to other carriers' Web sites.

Safety provides a number of free services to its agents that go far beyond what most carriers think it makes sense to provide. Safety provides its agents with technical support--not just for Safety proprietary systems but for other generic and specific software and technology. Safety believes that it will be successful only to the extent its agents are successful. Many of its agents cannot afford to hire technology staff or consultants so Safety provides those services.

Many carriers would balk at subsidizing agency activity that patronizes competing carriers. From Loranger's point of view, the issue is what's good for the independent agent generally. Clearly the agents need to work with other carriers. Rather than leave its agents to their own devices or to try to nickel-and-dime them for foreign carrier related expenses, Safety assumes that if its agents are more successful the carrier will be more successful.

By providing superior technology and by creating a strong relationship, Safety believes that it will get the volume and quality of business it's looking for from its agents. Other carriers have pursued similar strategies over the years, especially by subsidizing agency management systems in the '80s. For the most part, the bargain of free technology for premium volume wasn't successful. What's different about Safety? Why do they think they can succeed where others have failed?

Perhaps it's because Safety is actually using technology to re-engineer the insurance process, making the agent the center of the sales and service transaction. That allows the carrier to significantly reduce its costs, something carriers in the '80s found hard to do by sponsoring management systems. They wanted to buy premium volume commitment, a strategy that didn't necessarily result in reduced expenses or the acquisition of more, high-quality business.

With PowerDesk and Power Express implemented and the Internet gaining use, Safety turned to Web applications. The first, a secured portal called Agents Virtual Community (AVC), provides links to resources, industry information, the registry of motor vehicles, auto repair shops, glass repair shops, restoration services companies, electronic vehicle registration services, car rental agencies, and other members of the larger world of trading partners that agents and their customers deal with on a regular basis. Safety recognizes that its agents' worlds are considerably bigger than the carriers agents deal with. The portal is secured with digital certificates. Thus an agent does not need to remember a user ID and password to gain access.

Besides the connections with information and business services cited above, AVC hosts three additional elements--policy upload, carrier specific edits, and transaction review. In the first case, agents can export policy data from their management or rating systems to carrier-specific software--without re-keying. In the second, uploaded data passes through a Smart Edits stage that screens data and allows correction before it flows into the carrier system. Finally Safety's CRM e-View allows agencies to review daily activity online so they can easily determine the status of relevant insurance transactions. Safety also does download into agency management systems so that information entered into the Safety system doesn't have to be re-keyed into the agency's management system.

AVC provides additional services as well, including a contact manager, instant messenger, personal calendar, carrier news and e-mail, agency e-mail, and high-speed Internet access. The carrier uses ACORD AL3 standards for upload and download transactions and ACORD XML for endorsement processing. AVC SEMCI (with Smart Edits) functions something like IVANS' WebSEMCI, providing a Web-based editing step for upload transactions. AVC SEMCI can accept input from Applied Systems and AMS management systems as well as Boston Software, a Massachusetts rating vendor.

Recognizing that agents need to provide self-service out to their customers (out-facing services), Safety has developed a service called InsureAnswer. InsureAnswer can be included into and branded as part of an agency's Web site though it actually resides on a Safety Web site. InsureAnswer is intended to allow insureds to have access to policy and other information and to request changes. As agencies increasingly seek to provide 24x7 customer service, InsureAnswer can provide an element. InsureAnswer was awarded ACORD's XML Early Adopter Award this spring.

InsureAnswer allows insureds to inquire about billing status and amount due. It also provides a detailed claims inquiry with appraisal and payment information. Future enhancements will include bill payment and electronic appraisal delivery as well as policy inquiry and simple endorsements. All of these applications are built using ACORD XML standards; thus if another carrier were so inclined, it could deliver the same information to the agency's Web site using InsureAnswer.

Since some agents struggle with Web site building and hosting, Safety has just begun to provide those services as well through a service based on Web site and page templates called AVC Snap. Safety also provides a help desk, network set-up and telecommunications support, and software training (on Safety as well as generic software)--all free of charge to Safety agents.

What's the payoff?

Safety took a road less traveled, but the gamble is apparently paying off for the carrier and its agents. The carrier has enjoyed 51% premium growth in two years, raised premium per employee 38%, reduced carrier-side customer service activity by 90,000 calls in two years, and in some months handles as much as 90% of new business through AVC, up from 3% in 1996.

Clearly AVC would be most useful to agents were it to provide connections not only to Safety but the other carriers an agent uses. At least on the surface such an arrangement could be useful to competing carriers. Safety has already established and supports a high-speed network and a digital certificates-based security system so that each agency computer can be identified and verified automatically. Since Safety has already created the kind of infrastructure carriers are looking for--in 600 agencies--it could make sense for other carriers to join the program.

From an idealized point of view, Safety doesn't and can't supply a complete solution for its agencies. AVC as implemented today isn't a complete multi-carrier offering. Agencies must go to other carrier Web sites or use upload or other processes to deal with other carriers. Safety's Smart Edits upload is proprietary, not following the two perhaps more commonly pursued solutions, IVANS/Applied Transformation Station (an evolution of WARP) and IVANS WebSEMCI. That means agents have one more thing to learn. On the other hand, not all carriers are keen on paying the IVANS tariff and on being one step removed from control of the upload edits technology.

From a more realistic point of view, Safety is right on target. It's providing its agents with what they need and can use right now. Safety isn't waiting for a perfect multi-carrier solution but will undoubtedly cooperate with it when and if it appears.

Is the Safety approach scalable? Could other carriers implement it successfully? Would it work for a regional or national carrier? Some carriers would claim that Massachusetts is a special case with personal auto so thoroughly regimented that carriers simply can't compete on price or product as they would elsewhere. On the other hand, homeowners, commercial auto, and the other lines that Safety writes are less restricted and more typical of other states--and Safety competes successfully.

My guess is that many carriers would be put off by the central premise of Safety's approach, namely helping agencies with their technology for free in the hope that those agents will do well by Safety. Other carriers would consider that a poor bet and not relevant to their marketing or business strategy. But Safety must be doing something very right since its results far exceed those of the greater part of the carrier community. In any case, I find it a pleasure to talk to a carrier that is forward thinking, unequivocally committed to its agents, practical yet willing to take a chance, and good at affordable implementation. Ultimately it's not technology that makes a difference but a carrier's management team and culture, and that's much more difficult to come by than technology.

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The author

John Ashenhurst is editor of Sounding Line, a monthly newsletter covering insurance and the Internet. His company, Sound Internet Strategy, provides consulting, Web site evaluation, and seminar services to independent agents and their trading partners. He can be reached at or (978) 318-1944.