Travelers 2006 Annual Report Download - page 28

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Principal Markets and Methods of Distribution
Personal Insurance products are distributed primarily through approximately 8,700 independent
agents located throughout the United States, supported by personnel in eleven marketing regions, three
single state companies and six service centers. In selecting new independent agencies to distribute its
products, Personal Insurance considers each agency’s profitability, financial stability, staff experience and
strategic fit with Personal Insurance’s operating and marketing plans. Once an agency is appointed,
Personal Insurance carefully monitors its performance. While theprincipal markets for Personal
Insurance’s insurance products are in states along the East Coast, in the South and Texas, Personal
Insurance is expanding its geographic presence across the United States.
Personal Insurance operates single state companies in Massachusetts, New Jersey and Florida with
products marketed primarily through independent agents. These states represented approximately 19% of
Personal Insurance direct written premiums in 2006. The companies were established to manage complex
markets in Massachusetts and New Jersey and property catastrophe exposure in Florida. Each company
has dedicated resources in underwriting, claim, finance, legal and service functions.
Personal Insurance uses a consistent operating model with agents outside of the single state
companies (see discussion above). The model provides technological alternatives to agents to maximize
their ease of doing business. Personal Insurance agents quote and issue approximately 99% of Personal
Insurance’s policies directly from their agencies by leveraging either their own agency management system
or using Personal Insurance’s proprietary quote and issuance systems which allows agents to rate, quote
and issue policies on line. All of these quote a nd issue platforms interface with Personal Insurance’s
underwriting and rating systems, which edit transactions for compliance with Personal Insurance’s
underwriting and pricing programs. Business processed by agents on these platforms is subject to
consultative review by Personal Insurance’s in-house underwriters. Personal Insurance also provides a
download capability that refreshes the individual agency system databases of approximately 6,000 agents
each day with updated policy information.
Personal Insurance continues to developfunctionality to provide its agents with a comprehensive
array of online service capabilities packaged together in an easy-to-use agency service portal, including
customer service, marketing and claim functionality. Agencies can also choose to shift the ongoing service
responsibility for Personal Insurance’s customers to one of the Company’s four Customer Care Centers,
where the Company renders customer service on behalf of an agency by providing a comprehensive array
of direct customer service needs, including response to billing and coverage inquiries, and policy changes.
Approximately 1,300 agents take advantage of this service alternative.
Personal Insurance also markets through additional distribution channels, including sponsoring
organizations such as employers and consumer associations, and joint marketing arrangements with other
insurers. Personal Insurancehandles the sales and service for these programs either through a sponsoring
independent agent or through two of the Company’s call center locations. A number of well-known
corporations make the Company’s product offerings available to their employees primarily through a
payroll deduction payment process. The Company has significant relationships with the majority of the
American Automobile Association (AAA) clubs in the United States and other affinity groups that make
available Personal Insurance’sproduct offerings to their members. Since 1995, the Company has had a
marketing agreement with GEICO to underwrite homeowners business for their auto customers. This
agreement has added profitable business and helped to geographically diversify the homeowners line of
business.
Pricing and Underwriting
Pricing levels for Personal Insurance property and casualty insurance products are generally
developed based upon an expectation of estimated losses, the expense of producing, issuing and servicing