SPECIAL REPORT: Salute to Program Managers

Some of today’s most successful program managers have pulled the plug on association endorsements. They’re not anti-association but they have decided that these endorsements are not always worth the trouble or extra costs.

John McCaffery, director of marketing for Conshohocken, Pa.-based NSM Insurance Group, appreciates that many of his colleagues in the program marketplace have found industry endorsements beneficial in turning profits, but to him it’s not good business.

McCaffery says that while he often supports industry associations by sponsoring various events, NSM does not actively seek their endorsements for insurance programs. “We don’t generally do that,” McCaffery said, because “I don’t like to directly pay to play.”

“The problem with working through an association is that the association wants some kind of additional financial support,” said Rich Look, director of communications for West Chester, Pa.-based Venture Insurance Programs, which currently has eight insurance programs, ranging from its flagship golf and club program to its highly specialized military housing program.

That financial support often comes in the form of a dividend paid back to the association based on the premium generated through the association’s endorsement of an insurance program, Look said. He cautioned that some might question whether such a dividend, years ago referred to as a “kickback,” is ethical.

McCaffery takes a similar view. “Overall it’s too transparent,” he said. McCaffery said if his own professional association endorsed a product, and the association earned money by endorsing that product, he’d feel underserved by that association. Instead, McCaffery said he’d prefer the association to present options for possible vendors and services. “That’s why I’m joining,” he said, “to get those options.”

The NSM marketing director added that he always offers support to associations in industries his company insures, but will not seek out direct endorsements for insurance products. “I like to participate with the association so I can be at the venues they offer to talk about their industry and who serves them,” he said, adding it’s an important way to understand the markets they insure. However, he noted, “I want to participate through the front door not the back door.”

W.H. Brownyard Corp. in Bay Shore, N.Y., has had its share of industry endorsements over the years, according to Bryan Brownyard, chairman. Brownyard has sought industry endorsements in the past, but experience has taught his firm they are not rock solid.

“We’ve done it (secured endorsements) over the years, but then the (association) administration changes and you lose the endorsement,” Brownyard explains. “We prefer to stay away from industry endorsements … we’d rather do it on our own.”

Brownyard Group, which writes program business for security guard services, pest control services, private investigators and alarm services, as well as cosmetic manufacturers, chooses to stand on its reputation rather than rely on that of industry associations, Brownyard said. “It just seems that our (firm’s) reputation in most of the industries we insure is larger than the association’s image,” he said. “It’s just that we’ve been around for so long and would rather do it ourselves.”

Board expectations
Sometimes the association’s board members have expectations that the program manager cannot meet and when that happens, it can lead to headaches.

The board members might expect the program to be available to all members, even though all the risks might not meet the program manager’s underwriting criteria, says Venture’s Look. “When you are working with an association, they assume that you will write all of its members, or at least provide a quote to all members,” he said. “Venture prides itself on writing the higher class of business and as a result, if we are working with an association we might be only able to write 20 percent of the members,” he noted.

In Venture’s 14-year history, the firm has worked with a couple of golf club associations. “We kept getting phone calls from board members of the association asking us to write this account, or that account because ‘he’s a friend of mine.’ That’s no way to do business, so we just opted to not get involved with the associations anymore.”

Obtaining an association endorsement is not without some value, Look adds. It can be a way for a program manager to get his or her “foot in the door” in a particular industry. “There are lots of program managers that do this,” he added.

While Look, Brownyard and McCaffery might not be sold on them, association endorsements remain an integral part of the marketing scheme of other program managers.

Kennesaw, Ga.-based Thomco has been successful at marketing its insurance programs through industry endorsements. Founded in 1977 as an wholesale insurance organization, Thomco became an exclusive niche program manager in the mid-1980s. Today, Thomco writes 15 national programs and is best known for its specialty in the child care arena.

Greg Thompson, Thomco’s CEO, said that over the years his firm has held endorsements from a few industry associations that have helped them market their program business effectively. Thomco was for many years endorsed by the National Association for Day Care Centers and is currently the selected market for the National Association of Education of Young Children for in-home programs.

Thompson says association endorsements have their place but managers need to set some guidelines. Program managers should never compromise their underwriting standards by an across-the-board agreement to “take all comers. … You never have that requirement and I don’t know of anybody else who does,” he said.

Also, in a typical association endorsement arrangement, the program manager and association will arrange a fee for service agreement but these have to be properly handled.

“You can’t just give money to the association for endorsing you,” he noted. In most states that would be considered rebating, which is illegal, he added. “What you can do is say, ‘In exchange for you endorsing us, and giving us a free booth at your convention and a free ad in your magazine, we will pay you 1 or 2 percent of the premiums that we write on your association members,'” he explained.

According to Thompson, frequently the income received would exceed the value of the services offered to the association, “but at least you’ve got a fee for services agreement which is legal.”

Another way Thomco has negotiated fee for service agreements for association endorsements is to offer special coverages, or another attractive preferred pricing, coverage or rate exclusively to members of association. “So there is a hook that if you are a member of the association, you get a better deal than someone who is not a member,” Thompson said.

Separate marketing plans
Most program administrators employ other traditional marketing techniques, even if they do not align with associations.

Thomco’s Thompson says that his firm devises separate marketing plans for each of its 15 programs every year.

“We have something called the master marketing list that details all of our initiatives for all programs on a calendar year basis,” Thompson said. The list includes various marketing strategies to be used in each program, including direct mail, media to advertise in, Internet strategies, and others. The decision of which marketing method to use when and where varies by industry and program, he noted.

“For some programs, it’s difficult to get a list of potential insureds, so then you have to get creative,” he said. Some industries will have great trade magazines to advertise in, while others do not, “so you have to find another way to identify them,” he added.

Thomco will market directly to potential insureds and to independent agents as well, but that success depends on the industry.

“Most senior living,” for example, “comes through a small number of specialty agents,” Thompson said. It’s important to examine the nature of the business, he said.

Life stages marketing
NSM’s McCaffery also develops individual marketing plans and strategies for each of his company’s programs and tailors them based on the maturity of the program.

“We have different strategies at different life stages of our programs,” McCaffery said. “The launch program for us really comes down to an annual plan broken into 52 weeks and it covers everything. Where we are going to be? What trade shows? What magazines? What kind of space for print advertising? We have sales people and all the managers on the street. Where are they calling? What state are they in? Where are we going to blast the independent agent? Where we are going to put banner ads to attract their attention?”

NSM will also get involved with agent and broker associations and might develop a plan for participating with each of the associations. “We are trying to attract the agents and brokers,” he said. “Wherever we can put the program in front of the agents and brokers that are working in that industry, we take advantage of that.”

Venture’s marketing plan consists of a push-pull approach, according to Look.

“You are pushing your products onto the insurance buyer and then you are trying to pull the sale through the insurance agents,” Look said. “So you get your awareness up among the insurance buyer, and as long as the buyer has an understanding that you are a player in their market they are comfortable bringing your name up.”

Also, if the buyer knows the program manager’s expertise, a quote from an agent on behalf of that program manager is better received, Look adds.

Agent relationships
According to NSM’s McCaffery, successfully marketing of a program begins with the relationship with the agent.

“The thought is that we need to start a relationship with an agent with insureds in that industry so our advertising is not verbose,” he said. “Fundamentally in our business everything is based on the relationship. All of our marketing is driving the first conversation.”

Venture’s Look agrees, noting that the more a program manager can make the agent or broker part of its brand, the more success they will have together. “If the agent or broker views you as a partner as opposed to just a market, you are going to have more success.”

Brownyard Group also markets programs exclusively through brokers. But Brownyard says that in order to be successful at marketing a program, a program manager must first establish itself as an expert in the field. “To the clients and the brokers, that is the most important thing,” Brownyard advised.

The Brownyard Group, like other program managers, works with industry consultants to advance the firm’s knowledge about the industries they insure. “In (our) security guard program, we have ex-police officers that have been involved in private investigation; pest control we have chemists and some state legislators. In pest control there’s a lot of legislation that affects new business. In hairdressers, we have people that have been working in (the industry) for 30 to 40 years,” Brownyard said.

Find the buyer
For Thomco’s Thompson, the biggest challenge can be identifying where the best place is to market.

“In some cases we go through insurance agents,” he said. On certain programs, a program manager’s best bet might be to advertise the program to as many agents as possible, but in other programs the best bet might be to go straight to the insured.”

While Thomco writes only through independent agents and brokers, Thompson says whatever is the best tactic to reach the insurance buyer will be the most successful. “The key factor in marketing is you must focus on finding the buyer.”

There is no one magic bullet in marketing, Look adds. “It’s a combination of things, but if you are doing things right, it gives the impression that you are everywhere. And when the time is appropriate, you will catch the broker’s eye when they are thinking about your industry.”

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