Independent Agents Worried About Nationwide/Harleysville Deal

By | September 28, 2011

Northeastern independent agents with Harleysville appointments said they are leery about the reported Nationwide/Harleysville deal and have lots of questions.

According to a report by Bloomberg last Friday, giant Nationwide Mutual Insurance is in talks to purchase Pennsylvania-based regional property/casualty carrier Harleysville Group Inc.

Harleysville’s independent agents are wondering what will happen if the deal is reached and what role they might play in Nationwide’s distribution strategy.

While Harleysville is a dedicated independent insurance agency company with about 1,300 agencies in 32 states, Nationwide primarily uses contract agents who sell only Nationwide products, as opposed to independent agents who sell for multiple insurers.

But Nationwide is not a complete stranger to the independent agency distribution force. Its Allied Insurance unit writes in 33 states using independent agents and some of its Titan nonstandard auto products are sold through independent agents. Allied is responsible for about 23 percent of Nationwide’s total premium.

Nationwide is the country’s sixth largest auto insurer and seventh largest home insurer, the largest writer of farmowner policies and, through its ownership of Scottsdale Insurance Co., the fourth largest excess and surplus lines insurer. It is also a leading writer of pet insurance through its affiliate, VIP Pet Insurance.

Agents who now represent Harleysville appear to like their current arrangement and are worried about any change. Several agreed to talk with Insurance Journal about their concerns under the condition their names be kept confidential.

One independent agency owner in Pennsylvania described Harleysville as a “good ally” for his business. He said he’s worried about the deal. The deal could end up hurting local independent agencies, he said.

“I am surprised that there is much of an affinity between the carriers, although the press release will work hard to make the connection. Harleysville is a good ally to us and I am concerned that the unique capabilities that they provide to us will be obscured under the Nationwide banner,” said agency owner, who spoke on condition of anonymity.

“I am also concerned that we will gain more Harleysville competitors and diminish our franchise value if Nationwide chooses to allow access to Harleysville to their captive agent system. As an independent agent, I do not prefer to blur the line between the independent agency system and direct writers, and I am not aware if they have or can have plans to keep two separate yet distinct distribution systems.”

He argued that having an independent regional carrier that can make decisions based on the needs of a limited geographic territory favors the independent Harleysville producer more than having a carrier managing strategy on national territorial basis. As long as Harleysville is able to act as a regional carrier unencumbered by a national strategy, no harm – no foul, but whatever the initial intention is stated, it typically develops towards a commonality of the parent identity, he said.

One New York-based independent agency principal said she is not thrilled with the prospect of a direct writer taking over.

“We really don’t have much information at this time. We are not too happy about the idea of a direct writer taking control of one of our regional carriers,” said the agency principal, who also declined to be identified.

“We fear that it would eliminate one of our markets, one of the few where an underwriter can actually underwrite a risk instead of simply responding to the referrals from the computer system. We just happened to have a marketing rep in here earlier today — they have no information about the situation either.”

Harleysville Appointments?

Another independent agency owner from upstate New York said he wants to know how Nationwide would treat agents with a Harleysville appointment. “This is surely a shock. I would have many questions such as what is going to happen to my partner and I with our Harleysville appointment. Since Nationwide has captive agents, does that mean we will no longer be able to write for them?”

“How about our current clients: will we be able to service them?” the agency owner asked. “If they are going to allow us to continue, are they going to treat us as captive with all the restrictions that brings, or will we be able to be treated as independents, meaning that they would have to be competing with other companies for a piece of our pie?”

Not all agents who spoke with Insurance Journal oppose the deal.
One Pennsylvania-based independent agent said he would welcome the proposed merger. The agent currently does business with both Harleysville as well as Nationwide’s Allied and Victoria units. He says Nationwide may be purchasing Harleysville to expand its independent agency foothold.

“Actually, Nationwide has been tremendously expanding their use of independent agents through their Allied and Victoria subsidiaries. As an independent agent who currently represents Harleysville, Allied and Victoria, I would welcome the combination of these carriers into a single contract and only having to attempt to meet a single production goal moving forward,” the agent said.

“Allied has not generated the level of market penetration that they had originally intended and I believe that merging Harleysville and Allied would instantly gain Nationwide the independent agency footprint that they are seeking.”

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