The Hartford 2010 Annual Report Download - page 8

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Consumer Markets
The Consumer Markets division constitutes the reporting segment.
Principal Products and Services
Consumer Markets provides standard automobile, homeowners and home-based business coverages to individuals across the United
States, including a special program designed exclusively for members of AARP (“AARP Program”). The Hartford's auto and
homeowners products provide coverage options and customized pricing tailored to a customer's individual risk Although The Hartford
has individual customer relationships with AARP Program policyholders, as a group these customers represent a significant portion of
the total Consumer Markets business. Business sold direct to AARP members amounted to earned premiums of $2.9 billion, $2.8
billion and $2.8 billion in 2010, 2009 and 2008, respectively. Consumer Markets also operates a member contact center for health
insurance products offered through the AARP Health program, which is in place through 2018.
Marketing and Distribution
Consumer Markets reaches diverse customers through multiple distribution channels including direct sales to the consumer, brokers and
independent agents. In direct sales to the consumer, the Company markets its products through a mix of media, including direct
marketing, the internet and advertising in publications. Most of Consumer Markets’ direct sales to the consumer are associated with its
exclusive licensing arrangement with AARP to market automobile, homeowners and home-based business insurance products to
AARP’ s nearly 37 million members. The Hartford’ s exclusive licensing arrangement with AARP continues until January 1, 2020 for
automobile, homeowners and home-based business. This agreement provides Consumer Markets with an important competitive
advantage given the number of “baby boomers” over age 50 many of whom become AARP members during this period.
The agency channel provides customized products and services to customers through a network of independent agents in the standard
personal lines market. These independent agents are not employees of The Hartford. An important strategic objective of the Company
is to develop common products and processes for all of its personal lines business regardless of the distribution channel. In 2010, the
Company continued the rollout of its new Open Road Advantage Product and, as of December 31, 2010, this product was sold in 33
states across the Company’ s distribution channels, including directly to AARP members, through independent agents to both AARP
members and non-members and directly to non-members. In 2009, Consumer Markets piloted mass marketing direct to the consumer
without the benefit of an affinity partnership. In 2010, Consumer Markets changed its strategy away from mass marketing to targeting
specific customer groups, including individuals in the over 40 age group, and writing business through affinities other than AARP. The
Company entered into an affinity agreement with American Kennel Club effective January 1, 2011 and expects to enter into additional
affinity arrangements in 2011.
Competition
The personal lines automobile and homeowners businesses are highly competitive. Personal lines insurance is written by insurance
companies of varying sizes that compete on the basis of price, product, service (including claims handling), stability of the insurer and
brand recognition. Companies with recognized brands, direct sales capability and economies of scale will have a competitive advantage.
In recent years, a number of carriers have increased their advertising in an effort to gain new business and retain profitable business.
This has been particularly true of carriers that sell directly to the consumer. Industry sales of personal lines insurance direct to the
consumer have been growing faster than sales through agents, particularly for auto insurance.
Carriers that distribute products mainly through agents have been competing by offering agents increased commissions and additional
incentives to attract new business. To distinguish themselves in the marketplace, top tier carriers are offering on-line and self service
capabilities to agents and consumers. More agents have been using “comparative rater” tools that allow the agent to compare premium
quotes among several insurance companies. The use of comparative rater tools has further increased price competition. Carriers with
more efficient cost structures will have an advantage in competing for new business through price. The use of data mining and
predictive modeling is used by more and more carriers to target the most profitable business and, carriers have further segmented their
pricing plans to expand market share in what they believe to be the most profitable segments. Some companies, including The
Hartford, have written a greater percentage of their new business in preferred market segments which tend to have better loss experience
but also lower average premiums.
Wealth Management
The Wealth Management division consists of the following reporting segments: Global Annuity, Life Insurance, Retirement Plans and
Mutual Funds. Wealth Management provides investment products for over 7 million customers and life insurance for approximately
716,000 customers.
As part of the Company’ s strategic decision to focus on its U.S. businesses, the Company suspended all new sales in its Japan and
European operations in the second quarter of 2009 and divested its Brazil joint venture, Canadian mutual fund business and its offshore
insurance business in 2010.