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Advantage: EMC

Local presence, local knowledge gives EMC the edge

By Dennis H. Pillsbury

How does a billion-dollar company maintain the feel of a small companyŚwith all the positive attributes that implies? Accessibility, local presence, and agent focus.

For 100 years now, EMC Insurance Companies, Des Moines, Iowa, has answered that question with "Here's how."

Of course, when the company was incorporated in 1911 as Employers Mutual Casualty Association, it was a little easier to act like a small company because it was.

But over the years, the company has maintained a combination of small company values and Midwestern values, where the relationship with the independent agents that represent it remains paramount.

"Our focus is on our agents," Bruce G. Kelley, J.D., CPCU, CLU, president and CEO, points out. "They are our most important customers. And we maintain a close relationship with them through our local branch office structure. We have 16 branch offices across the country and they provide a local presence in the 42 states in which we do business."

"The branches are full service offices," notes Executive Vice President and Chief Operating Officer Kevin Hovick, CPCU. "They appoint the agency, underwrite the risks, service claims and work with agents to provide risk improvement services to clients. All of that is local. These offices have a first-hand relationship with the agencies in their territories allowing their underwriters to foster long-term relationships with their agents. Our branch staff are seasoned professionals who really understand the insurance business."

One of the reasons for this is that "it makes it more rewarding when you can have a close relationship with your customers," says Kent Kochheiser, CPCU, resident vice president and branch manager of the Cincinnati office. Kent, who justly deserves the title industry veteran, has been with EMC since 1979. "I started with the Home Insurance Co. in 1975 in the Phoenix office and, four years later, got an offer from EMC. I haven't looked back. It's been a wonderful experience for me.

"It all comes down to the local contact and the local touch," Kent continues. "The agent can call any of our people; we're there for them. And that gives us a chance to be more in tune with what the agent needs. We actually participate in sales meetings with each one of our agents to find out what they need from us and how we're doing. Our agents feel that there is a franchise value in representing EMC because of our local presence and what that means in terms of service to their clients. That feeling is enhanced by the fact that we have fewer agencies relative to many of the larger companies, so our agents know that we aren't also quoting with their competitor."

Resident Vice President and Branch Manager of the Phoenix office Carl Doot, CPCU, CLU, AU, echoes Kent's remarks, saying that "EMC is absolutely, positively a great company. This is my 38th year with the company and I feel like I have their logo tattooed on my body," he quips. "Management allows us to run the branch. We're local and understand the differences that make our territories unique. Agents like us because of that understanding of their clients' unique needs and also because they know they can walk in the door. In fact, they recently did.

"We had an open house and 120 agents came through. Our underwriters and claims people were mingling with agents from Reno, Las Vegas, California, and so on."

Carl continues: "Another important aspect of EMC is that it takes a long-term view. Agents know from experience that we will not overreact when the market changes. Our branch structure gives us a better understanding of what is heading our way in our territory so we are prepared. That really is an important advantage that we have."

"Another EMC advantage is that we offer valuable loss control services to our commercial policyholders and have been doing so since 1926," explains Kevin. "We provide local, face-to-face assistance through our highly trained loss control representatives in each branch office, backed by experts in the Home Office. We spend nearly twice as much on these services than most of our competitors. And we give business customers access to a wealth of loss control information and tools through our Web site."

Spend money to make money

Ron Jean, FCAS, MAAA, executive vice president for corporate development, readily admits that the branch office structure may be "a slightly more expensive business model on the expense ratio side, but results in great value on the loss ratio side." He goes on to explain that, because of the depth of understanding at the local level, "our underwriters are better able to price our product and also can work directly with agents to reach solutions on tricky accounts. We are also convinced that, because of the close relationship between our underwriters and our agents, we see a lot of good business that should develop favorably on the loss side."

Bruce adds: "Our structure gives us stability. Because we are a mutual company, we don't focus on quarter-to-quarter results. We can and do take a long-range view. At the same time, we have access to capital through our downstream holding company. Our combined ratio last year was 103.7, which is quite good considering that we are primarily a writer of commercial lines coverages. Our mix of business is about 86% commercial lines, split evenly between workers comp, commercial property, commercial auto, and general liability. Another 3% comes from surety and fidelity bonds. The balance is from personal lines. We write about $1 billion in premium with an additional $80 million in reinsurance premium. Policyholder surplus stood at $1.08 billion at year end."

Ron, who joined EMC 32 years ago to start up its actuarial department, proudly points out: "We maintain a very conservative, credible balance sheet that is designed to make certain that any surprises aren't negative. The shareholders of our downstream holding company are informed about our long-term, conservative philosophy and understand that investing in EMC is a long-range play."

Bruce adds, "Thanks to our in-house actuarial department, we have an excellent reserving structure. After all of the named catastrophes, we were able to estimate ultimate losses within six months and were not off by more than 2% or 3%.

Technology that helps agents

Marketing Vice President A. Beech Turner, CPCU, explains that EMC invests in technology in a way to enhance the relationship with agents, allowing them to work within their agency management systems and not increase agency workloads. "We worked closely with the Agents Council for Technology and with the agency management system user groups to develop effective interface. We also support ACORD standards.

"We continue to develop technology that allows our agencies to operate more efficiently. We are a big part of the push for real time and are happy to see an uptick in usage. We've also developed password synchronization as another mechanism that makes it easier for agencies to work with EMC."

On the product side, EMC's online system provides a full range of options for quoting commercial lines business. Agents can easily quote seven lines of commercial business on the system. In addition, all personal lines can be quoted online as well.

Early adopter of ERM

Not surprisingly, given its conservative approach to doing business, EMC was an early adopter of enterprise risk management. Kevin points out that the long-range view of the company meshes very well with the ERM concept. "We've always looked at overall corporate risk and avoided the silo mentality that afflicted many risk management programs in the past. When we develop our long-term strategy, we consider catastrophe risk, operational risk, investment risk, and reputational risk, as well as the more traditional financial risk.

"A lot of people from all of our departments provide input as we develop our ERM models, which are designed to avoid that perfect storm where everything is down at the same time. Needless to say, I work closely with the investment department, which is equally interested in continuing our positive results in that area," he says.

Kevin continues: "People buy insurance based on the future ability to pay. This year, we're celebrating 100 years of providing strength, stability and service. We've been through two world wars and the Great Depression and survived by paying attention to those three areas. We don't do anything fancy. We've simply surrounded ourselves with great people and utilize the best marketing system in the industry and treat all our customers with respect."


"Agents and their clients know that they are insured by a company that has always been there and will continue to be there in the future," Bruce adds. "I am very proud that we were recognized for this attribute when we were included on the Forbes list of the '100 Most Trustworthy Companies' in 2010. By the same token, I am not surprised. We pride ourselves on being transparent and honest in all our dealings."

The company also invests in the education of its people. "We want our people to be knowledgeable about the business so they can provide the best service and expertise to the agents and their clients," Bruce says. "We were recognized in 2010 as having the highest percentage of CPCUs in any insurance organization in the country. More than 10% of our employees are CPCUs."

EMC is celebrating its first century, but the conservative philosophy and long-range strategy make it clear that there will be many more to come.


From left: Kevin J. Hovick, CPCU, Chief Operating Officer and Executive Vice President; Ronald W. Jean, FCAS, MAAA, Executive Vice President for Corporate Development; and Bruce G. Kelley, CPCU, President and Chief Executive Officer.


"Our structure gives us stability. Because we are a mutual company, we don't focus on quarter-to-quarter results. We can and do take a long-range view."

—Bruce G. Kelley


One of EMC's strengths and differentiators is its field office structure. The company has 16 field offices and five service offices across the country. On the left is Kent Kochheiser, CPCU, Resident Vice President and Branch Manager of the Cincinnati office. On the right is Carl Doot, CPCU, CLU, AU, Resident Vice President and Branch Manager of the Phoenix office. Their offices are shown behind the branch managers.







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