Travelers 2008 Annual Report Download - page 28

exposure in Florida. Massachusetts has dedicated resources in underwriting, claim, finance, legal and
service functions. While New Jersey and Florida have also had dedicated resources, they are now
moving toward sharing resources in a similar manner as other marketing regions. The Company
continues to maintain its single state companies in each of these states.
Personal Insurance uses a consistent operating model with agents outside of the single state
companies discussed above. The model provides technological alternatives to agents to maximize their
ease of doing business. Personal Insurance agents quote and issue approximately 97% of Personal
Insurance’s new business policies directly from their agencies by leveraging either their own agency
management system or using Personal Insurance’s proprietary quote and issuance systems which allow
agents to rate, quote and issue policies on line. All of these quote and 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 8,100 agents each day with updated policy information.
Personal Insurance continues to develop functionality 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 provides, on behalf of an agency, a comprehensive array of direct
customer service needs, including response to billing and coverage inquiries, and policy changes.
Approximately 1,440 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 direct marketing. Personal Insurance
handles 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’s product offerings to their members. In addition, 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 of Personal Insurance property and casualty insurance products is generally developed
based upon an estimation of expected losses, the expenses of producing, issuing and servicing business
and managing claims, the time value of money associated with such loss and expense cash flows, and a
reasonable allowance for profit. The Company has a disciplined approach to underwriting and risk
management that emphasizes profitable growth rather than growth in premium volume or market share
alone.
Personal Insurance has developed a product management methodology that integrates the
disciplines of underwriting, claim, actuarial and product development. This approach is designed to
maintain high quality underwriting discipline and pricing segmentation. Proprietary data accumulated
over many years is analyzed with respect to Personal Insurance’s business. Personal Insurance uses a
variety of proprietary and vendor produced risk differentiation models to facilitate its pricing
segmentation. Personal Insurance’s product managers establish underwriting guidelines integrated with
its filed pricing and rating plans, which enable Personal Insurance to execute its risk selection and
pricing processes.
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