The Hartford 2015 Annual Report Download - page 7

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Personal Lines
Principal Products and Services
Personal Lines provides automobile, homeowners and personal umbrella coverages to individuals across the United States, including a
program designed exclusively for members of AARP (“AARP Program”). The Hartford's auto and homeowners products provide
coverage options and pricing tailored to a customer's individual risk. The Hartford has individual customer relationships with AARP
Program policyholders and, as a group, they represent a significant portion of the total Personal Lines' business. Business sold to AARP
members, either direct or through independent agents, amounted to earned premiums of $3.2 billion, $3.0 billion and $2.9 billion in
2015, 2014 and 2013, respectively.
During 2015, Personal Lines completed the rollout of its new auto product, Open Road, which is now available in 44 states. The Open
Road product increases pricing flexibility and market responsiveness, and continues to be refined based on experience. In addition,
Personal Lines has rolled out its telematics program, TrueLane, to more states, and the program is currently available to customers in 44
states in both the direct and independent agent channels.
Marketing and Distribution
Personal Lines reaches diverse customers through multiple distribution channels, including direct-to-consumer and independent agents.
In direct-to-consumer, Personal Lines markets its products through a mix of media, including direct mail, digital marketing, television
and advertising, both digitally and in publications. Through the agency channel, Personal Lines provides products and services to
customers through a network of independent agents in the standard personal lines market, primarily serving mature, preferred
consumers. These independent agents are not employees of the Company.
Personal Lines has made significant investments in offering direct and agency-based customers the opportunity to interact with the
company online, including via mobile devices. In addition, its technology platform for telephone sales centers enables sales
representatives to provide an enhanced customer experience, positioning The Hartford to offer unique capabilities to AARP’s member
base.
Most of Personal Lines' sales are associated with its exclusive licensing arrangement with AARP, with the current agreement in place
through January 1, 2023, to market automobile, homeowners and personal umbrella coverages to AARP's nearly 38 million members,
either direct or through independent agents. This agreement provides Personal Lines with an important competitive advantage given the
expected growth of the population of those over age 50 and the strength of the AARP brand. The Company has expanded its relationship
with AARP to provide its industry-leading small business products offered by Commercial Lines to AARP members who are small
business owners.
In addition to selling product through its relationship with AARP, Personal Lines sells products to non-AARP customers, primarily
through the independent agent channel and within select underwriting markets where we believe we have a competitive advantage.
Competition
The personal lines automobile and homeowners insurance markets 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 compete by offering agents commissions and additional incentives to attract new
business. To distinguish themselves in the marketplace, top tier carriers are offering online and self service capabilities to agents and
consumers. A large majority of 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 increases price competition. Carriers that are able to differentiate their
offering and work with agents to identify value beyond price are more likely to be successful in this market.
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, such as The Hartford, have written a greater percentage of their new business in preferred market segments. Such segments
tend to have better loss experience but also have lower average premiums. Also, new auto technology advancements — including lane
departure warnings, backup cameras, automatic braking and active collision alerts — are being deployed rapidly and are expected to
improve driver safety and reduce the likelihood of vehicle collisions. The Hartford is one of the first companies to introduce a vehicle
safety discount to consumers whose vehicle is equipped with new safety-promoting technology.