Meeting Customers in the Middle Market

Your customers may be in the middle market, but their risks often are just as large as their bigger counterparts.

Ensuring they partner with the right carrier is your best play.

“The middle market is big enough to have exposures that could be the same as or equal to those of national accounts, but they usually have less of a risk management staff to address those or the coverages they need,” says Richard Friesenhahn, QBE North America senior vice president, underwriting leader.

QBE North America is a division of QBE Insurance Group Limited, a top-20 global insurance and reinsurance company. The $14 billion integrated specialist insurer operates in every key insurance market. QBE North America is transforming its commercial business to focus on middle-market customers through an integrated specialist model and limited distribution approach.

“We are one of very few carriers in the United States working with a limited and preferred network of trading partners,” says QBE’s Kevin Brogan, regional executive, central and head of corporate business.

“We probably have 50 trading partners across the U.S. that we work with, but then we fill that out with about 80 partner offices in each region. We have three regions, so think about 240 offices. Of those 240 offices, we treat them special. We go to them on new business. We protect them. We work very hard to meet their need and provide their clients an integrated solution.”

QBE’s integrated specialist model addresses every aspect of a customer’s risk management need and includes specialized underwriting, loss control and claims coordination to ensure the insurance program responds to the customer’s needs should a loss occur—all delivered through a national footprint with regional hubs.

Getting Specialized to Meet Customer Needs

QBE has placed an emphasis on introducing new specialty solutions, including nearly 30 products since 2014 and a host of innovative services and risk management solutions to meet the emerging needs of its broker-partners and customers.

“We have to move as rapidly as the market,” says John Beckman, chief underwriting officer. “For example, we’ve seen very favorable workers compensation results for the last several years because employers are getting better at protecting their employees. As an industry, we need to monitor and develop analytics to understand what the next risk may be in this line so we can help our middle-market customers protect themselves against it and properly price those risks.”

Another example is the work QBE is doing to help educate customers with tailored products and services for risks associated with the #MeToo Movement.

QBE is helping not just with products but with risk prevention services, including access to advisory services to help build employee guidance etc.

“The #MeToo Movement has brought interesting developments to the middle-market space,” says QBE’s Jonathon Fanti, senior vice president, professional lines. More than 7,500 sexual harassment claims were filed with the EEOC in FY 2018, according to the National Conference of State Legislatures. This was a 14% increase from the prior year.

#MeToo and other workplace sexual harassment claims can be covered under a D&O or EPL policy, but many companies don’t take advantage of that option.

“A lot of folks in the middle-market space do not insure for employment practices liability,” says Fanti. “They haven’t gone through the risk management process of developing what their exposures are from their employee base but also from issues that might arise from third parties that are in front of their customers.”

Fanti says many companies also are not training employees or taking other steps to mitigate risk. Many are unprepared and face potential large legal liabilities.

“I think companies are just not up to speed with how to protect themselves on some of the #MeToo Movement issues going on,” says Fanti. “There is liability that could grow in that space from not having proper controls and procedures. We can help. This training could be huge down the road.”

Cyber security is another area where middle-market companies could find themselves vulnerable. According to Cisco’s 2018 SMB Cybersecurity Report, 53% of middle-market companies in 26 countries have experienced a security breach. Twenty-nine percent of middle-market companies say breaches cost them less than $100,000, although 20% report the cost at between $1 million and $2.5 million.

Additionally, a 2018 survey by the National Center for the Middle Market, a collaboration between the Ohio State University Fisher College of Business, Grant Thornton, and Chubb, found 49% of middle-market respondents ranked cyber security as either challenging or very challenging.

Beckman says companies need more than simply insurance coverage.

“Cyber is a perfect example of a risk where companies need much more than a product. It’s the service that goes with it that helps companies plan for and manage a cyber incident testing your security,” says Beckman. “It’s a paradigm shift from simply providing insurance to offering an integrated, holistic risk solution that helps improve the sustainability of our customers—making them more resilient to evolving cyber risks.”

Friesenhahn adds, “For any risk, the first thing you need is prevention. Our Global Risk solutions are designed to help protect the insured and prevent an incident. Second is responding and serving insureds in an incident to mitigate it. Part of that is disaster planning. That’s something that our loss control helps business with. You talk about it, but you never want it to occur. But you need to be prepared so when an incident does occur you have a process.”

International business and expansion is another growing trend in the middle market. More companies have exposures abroad. QBE has approximately 3,000 North America employees with regional hubs across the United States and operates globally in all major markets.

“QBE is particularly strong globally,” says Friesenhahn. “We can help our middle-market customers that realize more opportunities overseas—whether it’s their first trip overseas, they are selling overseas, or they’ve grown to a point where they are putting physical assets overseas, that’s all going to need expertise in multinational. Through our network, we can offer local policies in more than 170 countries outside the U.S.”

Distribution Strategy

QBE North America is using an innovative limited and preferred distribution approach, deliberately limiting the number of brokers and agents it will do business with. The idea is to partner with like-minded brokers.

“We are committed to a small number of trading partners, and through them we have to perform at the highest level to make sure that we get new business opportunities and then give those opportunities all the attention in the world to help our trading partners win and win an integrated way,” says Brogan. “We can do the property, the general liability, the casualty lines, and then we can do the professional lines.”

That makes QBE a solution for brokers looking to conduct more business with fewer carriers and have a carrier that will help differentiate them in the marketplace.

“We try hard to deliver seamless one-stop shopping. There are perhaps a couple other carriers that can offer the breadth of products that we can, but we are smaller, nimbler, and not hindered by a silo mentality,” says Brogan. “We can turn integrated multi-line solutions around quicker, and we try to do it on an individual basis with a limited number of trading partners whom we work closely with. We set a commitment of trying to grow each and every year with them.

“Eighty-five percent of our new business comes through the targeted offices of our trading partners. That doesn’t mean that we won’t work with others whom we may have a relationship with from the past or a contract in place with, but we tell agents and brokers if you are one of target offices, you get special treatment from us because we are making a commitment to you.”

What’s Next

QBE is taking its focus on customers and distribution to the next level, naming Todd Jones, former global head of corporate risk and broking at Willis Towers Watson, as CEO of North America, effective Oct. 1.

“Our new CEO is coming out of the distribution side of the industry—a clear demonstration of someone who is very customer focused. We’re optimistic that his industry expertise around the broker landscape and insights into our customers will help fuel speed to market and ease of doing business. I think if you looked at his background customers should be thinking that this is somebody who is going to worry about us,” Beckman says.