Division's new name--AIG Agency Auto--
reflects reliance on the independent agent
By Phil Zinkewicz
AIG Agency Auto
AIG Agency Auto is "one hundred percent dependent
on independent agents as its distribution system."
--Robert M. Sandler
EVP and Senior Casualty Actuary and Senior Claims Officer
American International Group
In March 2003, AIG Specialty Auto changed its name to AIG Agency Auto. The name change is significant because, according to Robert M. Sandler, executive vice president of American International Group and senior casualty actuary and senior claims officer, "it reflects our company's unqualified commitment to the independent agency system."
AIG is not usually thought of as an agency company. It is an international insurer, primarily involved in global mega risks, underwritten through the large alphabet brokers. In that regard, AIG has developed a reputation as an industry innovator. But Sandler wants to get the message out that AIG Agency Auto is "one hundred percent dependent on independent agents as its distribution system."
"It's a tough market out there for agents these days," says Sandler. "The automobile insurance scene is a patchwork quilt of rules and regulations and, depending upon the state you operate in, the market may be extremely competitive or it may be a hard market. Agents are facing tough challenges, and we are determined to help agents meet those challenges and to assist agents in growing and prospering. We currently have about 10,000 agents and we're looking for more. Also, we've broadened the products we have traditionally offered."
Coverages that AIG Agency Auto offers include liability up to $100,000/$300,000/$100,000 and combined single limit up to $100,000, medical payments from $500 to $25,000, uninsured and underinsured motorist coverage, physical damage coverage with split deductibles available from $100 to $1,000, towing and labor coverage, rental reimbursement up to $1,200, free additional equipment coverage of $1,000, loan/lease payoff coverage, non-owner coverage, and business use.
"In addition to highly competitive rates," says Sandler, "we offer savings opportunities, including: multi-car, senior accident prevention course, defensive driver, airbag/ABS, homeowner, and paid-in-full. We also offer options to suit the assorted budget requirements of our agents' clients. Policyholders can choose between monthly or full-term payment, depending on their financial needs."
Sandler says that agents can benefit from AIG Auto's "leading edge" technology to deliver products. "Our easy-to-use Windows-based rating software, Dynamic Rating System (DRS), allows agents to quote risks, upload applications, view our interactive underwriting guidelines, and print ID cards and rating schedules."
The company also offers a Web site, which Sandler says is intended to provide multiple tools to help agencies increase efficiency. "Some of the features include 24-hour access to policy information, payment upload, the ability to process online endorsements, view commission statements and in-force policies, and more."
AIG Agency Auto operates out of three service centers--Atlanta (head office), Pittsburgh and Phoenix. The company is currently licensed to operate in 32 states, but that number, says Sandler, will increase as appropriate.
In terms of pricing, Sandler says that the company uses insurance "scoring" to determine premium levels, a practice which has generated considerable controversy in recent years. Insurance scoring is the use of information from the insured's credit report to predict how often an applicant is likely to have claims.
Says Sandler: "Studies have consistently shown that insurance scores are highly accurate predictors of future losses. Using insurance scores in the pricing process enables us to provide the lowest possible rate for our customers. Statistically, most people benefit from insurance scoring. With insurance scoring, every person pays a fair premium, according to his or her potential for loss. However," Sandler adds, "the insurance score is only one of many considerations that we use to develop a premium. Other factors include age, accident and violation history."
Sandler emphasizes that the insurance score will not prevent the company from providing an insurance quote and will not be used to cancel, deny or nonrenew a policy. Also, privacy need not be an issue. "Our software system automatically obtains a customer's insurance score, in seconds, to calculate the insurance rate. However, neither the agent nor the AIG Agency Auto representative has access to a customer's insurance score or credit report."
Despite some criticism that has been aimed at insurance scoring of late, Sandler insists that scoring is not discriminatory. "Insurance scoring provides a fair underwriting tool that gives no consideration to race, age, income and location," says Sandler. "Scoring facilitates consistent and objective underwriting, thereby allowing us to offer competitive pricing to a broader range of consumers."
AIG Agency Auto does not only write auto insurance. It has a broad range of coverages for motorcycles, for example; and it has contracted with National Flood Services, Inc., to offer its agents the opportunity of getting into the flood insurance market, "profitably." Says Sandler: "Flood insurance is an underserved market in the U.S. with $7 billion in written premium potential. Premiums average $472 per policy--affordable for an agency's personal and commercial lines customers, yet large enough to generate respectable commission income for the agency. Since only one of four buildings/homes in special flood hazard areas (SFHAs) is currently insured, the opportunities for growth are considerable. Even in low-risk zones, the SFHA has determined that, over the life of a 30-year loan, the chance for a flood claim is 25 times higher than a fire claim. Agents should educate their customers on the value of flood insurance, and we want to help them do just that."
Sandler says that AIG Agency Auto is so committed to the agency system that the company is bent on signing up more agencies. Asked what qualifications the company is looking for, besides the agency's errors and omissions coverage, Sandler says that AIG Agency Auto is looking for agents who "have a mindset for growing their market share in the auto insurance business."
Says Sandler: "We're looking for a reasonable commitment from an agency. We're not interested in one percent players. In other words, we want to make sure an agent is offering a share of his or her business that makes sense for us. We are truly interested in partnering with independent agents," he says. *
For more information:
AIG Agency Auto
Web site: www.aig4auto.com