Brokerage

Hanover’s Push into Specialty Aided by Good Communication with Agents

Hanover’s distribution network acts as a good example of how a carrier can do a better job of getting products into the market through active listening.
By: | July 30, 2018 • 5 min read

Distribution is critical for every insurance company. Hanover Insurance Group, a small- to middle-market player with its own network of agents, sees the relationship it’s built with its agency network as a crucial asset and something unique.

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The key is a philosophy of responsiveness based on communication, collaboration and trust.

“I love the fact that they listen,” said Charles Brophy, president and CEO, HUB International New England and U.S. East Regional President, HUB International.

“I love that we have access to the senior management and not just from a perfunctory standpoint. They’re sincere about coming back and helping improve our operations.”

Hanover’s manageable size makes that possible.

“It’s not our approach to try to support and service thousands and thousands of agents,” said Bryan Salvatore, executive vice president and president of specialty at Hanover.

“Our model is actually very focused for a company that lives in the small commercial, middle-market space.”

Fostering Relationships

“The depth of that relationship becomes really important to us,” said Salvatore. “From our standpoint, less is more. And doing it right with a select group is more powerful than trying to service a much bigger percentage of the marketplace.”

“We have a kind of a narrow-distribution franchise view,” said Dick Lavey, president, Hanover Agency Markets. “We think about the agent across all of our businesses, and the only way that strategy works is if we have deep relationships, deep and broad.”

Bryan Salvatore, executive vice president and president of specialty, Hanover Insurance Group

This is not to say that Hanover is small: “Over the last 10 years, Hanover has built a good-sized diversified specialty business,” explained Salvatore.

“We have strong expertise, people with decades of experience — dedicated expertise. We basically built a billion-dollar-premium specialty operation.”

But growth hasn’t changed their philosophy.

“They have the horsepower, the financial strength of a large company, the national breadth, a footprint in product,” said Brophy, “yet they still maintain that local touch, and in my opinion, a true caring.”

One way they do that is through a holistic approach, which avoids the silos of some other companies.

“If the agent has customers and product needs or coverage needs that touch seven different areas, we do the work to align internally so we’re doing the best we can to satisfy all those different needs,” said Salvatore. “He’s not having seven different experiences.”

And he doesn’t have to deal with seven people, either: “We have a key point person with that relationship: our regional vice president,” said Salvatore.

“It’s data plus dialogue that really informs us. My priorities are those needs that come out of the sharing of information and the dialogue that comes from the agent.” — Bryan Salvatore, executive vice president and president of specialty, Hanover Insurance Group

Having a single point person provides powerful benefits to agents.

“Time is money,” said Brophy. “We need to drive efficiencies, not only from technology, but in utilization of our time.

“If we can have an individual who takes ownership and will quarterback that opportunity internally instead of us going through all the different silos within Hanover — to have someone that can take it, build it, know where that talent and skill set in this product lie within the organization, and come back to us with a single solution — that’s tremendous.”

The Benefits of Collaboration

Providing that level of integration is no small feat, said Lavey.

“You can’t just snap your fingers and say, ‘I’m going to do the same thing.’ It takes a lot of commitment and time.”

It also takes a philosophy that values collaboration.

“The environment here is quite special,” said Salvatore. “There is not a lot of parochialism or silos … When we’re building out products, when we’re advancing those products, building out capabilities, we’re doing it in a way that says, ‘I don’t know that it needs to be in my unit. It can be in somebody else’s area, but let’s just make sure we work together to manage the outcome.’ ”

That philosophy extends to the top.

Dick Lavey, president, Hanover Agency Markets

“They’re a fairly large company, yet the access to senior management — Jack Roche, Dick Lavey — they’re very approachable,” said Brophy.

“Their willingness to get in the trenches and work with us to come up with a solution for our customers is great. A lot of other carriers — you get the layers. You don’t necessarily have those layers over there.”

That listening has concrete impacts on Hanover. Salvatore cited one particularly resonant conversation with an agent who told him, ‘Don’t just build something and then bring it to me and say, Here it is. As you build it, check with us and make sure it’s fitting what we need in the marketplace.’

“That’s a more informed outcome,” said Salvatore, “that again reaffirms their confidence in us and that the end-product we deliver is stronger.”

According to Brophy, even Hanover’s expansion into specialty is due in part to listening to their agents.

“They were missing out on the opportunity to provide some of the specialty and some of the wraparound coverages,” he said. “So, to their credit, they listened, and went out and got the talent and grew out the program.”

Data, Plus Dialogue

Of course, effective communication is more than listening. It’s asking questions and sharing answers as well. Hanover drills deep into their agents’ books to understand their business.

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“We have some proprietary tools that we use to engage with our agents,” said Lavey. “We have different ways to extract data and then present the data back in ways that put a spotlight on what the opportunities are for us, so there’s sort of a series of data extraction and data analytical tools.”

“It’s data plus dialogue that really informs us,” said Salvatore. “My priorities are those needs that come out of the sharing of information and the dialogue that come from the agent.”

That level of communication is only possible with trust: “You’ve got to have trust between the carrier and yourself,” said Brophy, “because you’re divulging all of your customer base, all your expirations, your premiums, your segments of business, your verticals, and enabling them to grab that data, to turn around and come back to you and say, ‘This segment of your business, we think we can improve. We think we can provide a better product.’ ”

According to Brophy, trust pays dividends beyond insurance products. Hanover provides actionable insights in areas such as Insurtech, hiring and retention and more, including some not directly related to Hanover’s business.

“In this day of disruptors and digital interaction and all the different ways customers want to be delivered, we have to listen to the voice of the customer and come up collectively with a solution that resonates with them,” he said.

“Hanover is willing to listen, talk about it and come up with a seamless solution for our clients.”  &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

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Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

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We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

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Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

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Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now and where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

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More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]