BREAKING THE RULES

Focused yet fun loving, ACUITY delivers the goods while bucking the trends

By Elisabeth Boone, CPCU

Like the family pictured in this Norman Rockwell classic, ACUITY’s CEO Ben Salzmann is thankful for his company’s success on many fronts.

The words “insurance” and “fun” aren’t commonly uttered in the same sentence ... and the reason is simple: To most people on the planet, insurance is decidedly not fun. Important, necessary, reassuring … but hardly fun.

At ACUITY, however, everyone from the CEO on down is bucking the conventional wisdom, breaking records, accumulating awards—and having a blast in the process. Thanks to a robust corporate culture, stringent underwriting, savvy investing practices, and strong ties to agents, ACUITY has transformed itself from a modest hometown mutual to a performance powerhouse and after 80 years is still based in the friendly confines of Sheboygan, Wisconsin.

The company known today as ACUITY opened for business in 1925 as Mutual Automobile Insurance Company of the Town of Herman. Subsequently renamed Mutual Auto Insurance Company of Wisconsin and then Heritage Mutual Insurance Company, ACUITY now operates in 12 states, writing a wide range of commercial business as well as personal lines. Written premium is projected to reach $700 million by year’s end, and assets currently stand at over $1.3 billion. The company is justifiably proud of its A+ rating from A.M. Best, and employees have settled comfortably into a gleaming new addition to ACUITY’s home office complex. The expansion cost $45 million, which was paid in full before completion with just three months of cash flow from operations.

Guiding ACUITY on its dynamic journey is the steady hand of Ben Salzmann, president and chief executive officer, who has been with the company since 1990 having previously served as senior vice president in charge of information technology, business systems, claims, marketing, and services. Salzmann speaks with quiet pride about ACUITY’s goals, initiatives, challenges, and achievements.

“The five elements that make up ACUITY are our underwriting discipline, our in-your-face sales culture, our high-end technology platform, our claims expertise, and our broad product range,” Salzmann says. “Those five things are the underpinnings of who we are.”

The ACUITY product portfolio is indeed broad. Contractors, manufacturers, and assorted retailers, wholesalers, and service providers are among the company’s target classes, which range from appliance repair shops to water drillers. The company also writes a large volume of workers compensation coverage. In addition, it offers a full complement of personal lines products, including auto, homeowners, fine arts, jewelry, coins and stamps, and property and liability coverage for home-based businesses.

Teaming up

How does ACUITY seek to position itself in the marketplace? The answer to that question, Salzmann says, owes a great deal to the fine art of doing the unexpected. “When we sell a major account, we have a five-person team at the presentation: our commercial field underwriter, our sales territory manager, our claims specialist, our loss control expert, and an independent agent. This team walks in with the independent agent and shows the insured that in every conceivable way we can deliver superior service and superior protection and yet be very affordable and offer the best value the insured can find,” Salzmann declares.

“For us, everything comes down to consistency, functioning as a team, really understanding the risks we’re involved in,” he says. “On top of that is a very in-your-face, outgoing, almost swashbuckling sales orientation. Each year our top executives tour the Midwest and give a total of 20 speeches to 3,000 agents, telling them who we are, what we’re doing, the kind of business we want, how to work with us. Our agents are good people. If we tell them what we’re looking for, they’ll work with us on it.”

The brochures that promote these speaking tours are sly, irreverent, and fun. One promotion for the 2004 tour, titled “A Spiritual Awakening,” shows Salzmann and vice presidents Wally Waldhart (sales and communications) and Ed Warren (commercial lines) clad in monk’s robes, looking appropriately solemn as they hold an open book with Gothic script announcing the company’s A+ Best’s rating. The cover for the 2002 brochure shows the same three executives, this time attired as Men in Black, complete with folded arms, fierce scowls, and dark sunglasses. Pulling no punches, the title of the 2002 event was “In Your Face: The Speaking Tour with an Attitude!” The tour goes to cities in Wisconsin, Illinois, Minnesota, and Missouri. Topics covered have included “How is your stress level affected by national versus regional carriers?”... “What should you be doing now to prepare for the next soft market?” ... “What should you be demanding from your carriers?” and “What are the most effective tools for writing good business?” Drawings for cash prizes add to the fun, and attendees earn three continuing education credits.

Succeeding in comp

An important area of focus for ACUITY is workers compensation coverage, which has a well-earned reputation as an extremely troubled line. How is the company able to write this business profitably when others are struggling? “I love the fact that we can offer a service in an area that is distressed—specifically, workers compensation,” Salzmann remarks. “When you sell auto insurance, you’re playing a game of pennies and nickels. You can’t differentiate yourself very much in the market. When you sell workers comp, you can entertain accounts that are desperate and may not be able to get insurance—but they meet all your criteria. You get their attention, and they see the need to operate in a highly safe and responsible manner. They’re looking for your help with loss control.

“When you’re working in a distressed area and you have strengths, you can bring all those strengths to bear to differentiate yourself,” he continues. “Not only do you make money on an account, but the account ends up having fewer losses and getting a better experience mod. At that point, the insured has a decision to make. The insured is likely to say, ‘ACUITY helped me become what I am now from a safety perspective. Now that I’m a better risk, I’m not going to shop for price. ACUITY was there, they’re here now, and they will be here in the future. I don’t care if they’re 2% higher—they’re worth it.’”

At ACUITY, Salzmann says, “We have a battery of work comp strengths that other carriers just don’t have. We’ve focused on the line, we’ve made it of central importance, and we’re always striving to be even better.”

	Irreverent and fun, ACUITY’s Speaking Tour brochures invite agents to listen and learn from top executives.

Winning streak

In a volatile, even tumultuous time for the property/casualty industry, ACUITY consistently achieves impressive results on a number of fronts. Among these accomplishments for 2003 are a 92.3% loss ratio, 10 points better than the industry average; a record 35% increase in statutory policyholder surplus; and over 15% growth in premium volume. What’s more, the company has tripled its contingency commissions over the past five years. ACUITY has won an unprecedented eight ACORD awards and has earned Best Company honors from a number of organizations, including Best Mid-sized Employer in the Nation from HR Magazine, Ward’s Top 50, placement in the Fortune 100 Best Companies to Work For, and PIA National Company of the Year. How does ACUITY do it?

Salzmann’s answer is a four-letter word: team. “I know that’s a worn-out phrase, but everything we do is centered around building a team,” he says. “If you build a team, it’s pretty hard to do something wrong—either wrong because it was stupid or wrong because it was unethical. I believe there’s a ‘light of day’ test. If you’re doing something that can stand the light of day, you’re not doing something terrible,” he says. “If a team is working on something, that’s as ‘light of day’ as you can get. If I walk into a room with eight other people and the goal is to come up with the best solution to a problem, we argue it out until we get an answer everyone agrees with, or we don’t go home that night. We just won’t quit until it’s done that day and it’s done right,” he declares. What’s more, he notes, when discussing an idea, team members don’t pull any punches. “If someone comes up with a harebrained idea, the other team members don’t hesitate to say, ‘That’s a harebrained idea,’” Salzmann says. “The idea is dropped, and the team goes on to find a better solution.”

The court has ruled: ACUITY has posted another great year.

He offers an example of successful teamwork: “We just finished a building expansion that more than doubled the size of our corporate headquarters,” he says. “We formed a three-person team who had never handled a building project, not even their own homes. They interviewed architects and builders and chose one of each, and we hired an owner’s representative. This six-person team finished our building ahead of schedule and under budget in time to run a seven-night open house in conjunction with a PGA tournament here in Sheboygan.” For a Midwestern town of 50,000, this was a very big deal, Salzmann says. “We had the world of golf coming here, and everyone tuning in for a week. We gave every employee an extra vacation day, a ticket to the tournament, and full access to our food and beverage chalet, which was $150 a head per day. Also, employees and their families were invited to the open house, and they got the same gifts we gave our independent agents.”

This is just one example of why ACUITY wins Best Company kudos. “You can’t con anyone into giving you a #1 Employer award,” Salzmann says. “First of all, the Great Place to Work Institute surveys 250 employees anonymously at random and compares your 250 to all the other companies competing. To win, you have to operate in a way that shows you believe in what you’re doing. Otherwise, your employees will never believe that you’re sincere, and they won’t believe in what they’re doing. For us, it’s doing things like the PGA outing,” Salzmann continues. “We could have bought just enough tickets for our agents so we could get more business from them, but we knew our employees also would love to be there. When we do the same things for our employees that we do for our agents several years in a row, they take notice.”

Employees’ Christmas treat this year sounds like another sports fan’s dream come true. “We’re about 75 minutes from Lambeau Field, where the Green Bay Packers play,” Salzmann says. “We’ve rented buses to drive our employees up to Lambeau Field, which has a beautiful convention center inside the football stadium, and our Christmas party is going to be in the stadium, with a catered meal and Packers players signing autographs.”

Three times a year, ACUITY brings employees together for a town hall meeting where executives address every aspect of how the company is performing. “Then we throw it open for questions,” Salzmann says. “When the questions stop, we get things going by asking employees if they have any scandalous rumors or juicy gossip to report. That gets a laugh and stimulates more questions.”

Treating employees well is simply a fact of life at ACUITY. “We put 8% of employees’ income into their 401(k), whether they put in a penny or not,” Salzmann says. “We have not increased health insurance premiums for our employees in four years. In fact, we’ve improved benefits in every one of the last four years. We do at least five different surveys for everyone who works for us to make sure that his or her compensation is in the correct range, and if it isn’t, we adjust it. We do this before we evaluate an employee for a merit increase and before we consider a promotion, so an employee can get all three adjustments at the same time.”

ACORD accolades

The teamwork approach, Salzmann points out, helped ACUITY win a record-breaking eight technology awards from ACORD. “We’ve been truly paperless in personal lines for nine years; we have no paper folders, period. In commercial lines, we’ve been paperless for two years; in claims for close to three years. That’s the reason we’re so efficient and can provide such rapid service,” he explains. “That’s where we really shine.” The ACORD awards, he points out, are given only for interface accomplishments. “We have very sophisticated data mining and data warehousing systems so we can track losses and pricing quickly. If ACORD gave awards for internal processing and decision management systems, I believe we’d win those awards as well,” he says.

“We have a computer steering committee, and any project over 200 hours has to be approved by the committee,” Salzmann explains. “Why? So we don’t waste a lot of time on maintenance and we’re always building new and advanced systems. Our goal is to build the best paperless commercial lines issuing system available, so we’re not going to waste hundreds of hours fixing minor problems.”

ACUITY recently added another honor to its list of automation awards: In September the company was named to the InformationWeek 500, a listing of the most innovative users of information technology in the United States. Although about 30 insurers made this list, ACUITY was the only P&C regional independent agent carrier, as well as the smallest P&C carrier.

Keeping agents happy

Happy employees are motivated—to work as a team, to perform at a high level, and to provide five-star service to agents. It’s no surprise that ACUITY’s staff, from the top down, is committed to creating and maintaining strong ties to the independent agents who distribute the company’s products.

“At one time we had 1,200 indepen-dent agencies,” Salzmann says. “We canceled half of them when the new management team came on board, because those agencies really weren’t committed to us and would try to block the market with multiple quotes. We went down to 600 agencies, and since then we’ve added another 100 with plans to add another 50. We choose agencies that are dedicated to the independent agency system,” he says. “They’re looking to grow, they’re investing in themselves, and they have a positive view of automation. We believe in the independent agency network. And we believe in the agents who believe in themselves. We work to create an intense mutual loyalty,” Salzmann declares.

“When we go on our speaking tour, we’re on the road for a month. In each city, we have dinner with our agents at the best restaurants. We tell them our story and listen to theirs, and the next morning we give three hours of speeches. We tell them what we’re looking for, and we talk about industry trends, even if they’re negative,” he continues. “Some of what we say is blunt and hard hitting, right in their faces. We get such wonderful response to our meetings because our agents find the information valuable.”

Banking on success

ACUITY owns and operates ACUITY Bank, which it uses as a channel through which agents can offer financial services to their commercial clients. “Our agents have their finger on the pulse of a lot of small businesses,” Salzmann says. “Our bank specializes in Small Business Administration loans. An agent can identify a client who is looking to expand its business. The agent can contact the bank and tell the lender all about the business, because it’s in the agent’s local community. The bank will extend a loan, and we’ll pay the agent a finder’s fee,” Salzmann says. “Similarly, we can sell a host of other products through our independent agent network, without our agents having to become bankers as they would if they dealt with home mortgages. The beauty of it is that no one else is taking this approach. By making SBA loans to our agents’ clients, we’re doing a huge service for a business that’s just starting out or just starting to expand,” he comments, “and we can do it without losing our shirts because we know the businesses through our independent agents. We’re insuring these people, so we’re already taking a risk with them, and we believe in them.”

Whatever challenges may lie ahead for the property/casualty industry, Salzmann believes ACUITY is ideally positioned to surmount them. “We are in the enviable position of having capital strength, strong leadership, and buy-in from our employees,” he says. With that powerful mix, ACUITY’s Men in Black might be caught humming that ’80s classic: “The Future’s So Bright, I Gotta Wear Shades.” *

For more information:
ACUITY
Web site: www.acuity.com