Policy Options and Offerings are Major Issues for Mid-Size Manufacturers
Coverage options and product offerings, rather than price, are the most important factors for middle market manufacturers when they go looking for insurance to cover their businesses. At least that’s the conclusion of a study conducted by The St. Paul Companies prior to the release of its new product for mid-size manufacturers, DesignPoint for Manufacturers.
St. Paul conducted an online survey of around 500 independent agents and brokers for the recently released study. It also conducted a less formal study before developing its new product. According to Bonnie Preston, St. Paul’s vice president of product development for the commercial middle market, who was instrumental in developing the DesignPoint product, the results of both surveys were similar.
Product liability was identified by 71 percent of the online survey respondents as the most important coverage for mid-size manufacturing customers. Forty-three percent said mid-size manufacturing customers need insurance products not currently available or easily accessible in the insurance marketplace. Product recall was considered by 44 percent of the agents and brokers to be one of the leading products needed by mid-size manufacturers.
“If anything it was kind of a confirmation of what we suspected the needs were of our manufacturing clients,” Preston said. “Product recall coverage, for example.” She noted that one thing that surprised her somewhat on the most recent survey were the responses to a question that asked agents to list the emerging needs of manufacturers. “One key thing that came back was [a need for] international product liability—a worldwide product liability. I hadn’t realized it was as much of a need as it really is.”
Forty-eight percent of the survey respondents identified international product liability exposure as the new or emerging risk faced by mid-size manufacturing customers that may require additional insurance products or coverage.
According to a company announcement, the launch of St. Paul DesignPoint is part of a campaign to expand and grow St. Paul’s business in the mid-size manufacturing sector. “The St. Paul has been insuring manufacturers since 1865, giving us nearly 140 years to cultivate our expertise in this area,” stated Dennis Crosby, president—commercial middle market. “Today’s manufacturers face a litany of risks and their insurance needs have become increasingly complicated. St. Paul DesignPoint was developed to anticipate and protect against the risks manufacturers face as they do business in a complex global marketplace.”
Preston said Crosby has been a driving force behind energizing the company’s new middle market commercial arena. He “really brought a new focus and new energy and he’s a man of great strategy and vision,” Preston added. “He said ‘let’s take a look at where we are writing a majority of our business.’ And the majority of our business fell into five different industries: manufacturing, wholesale and distribution, service industry, retail industry and real estate. Manufacturing came out ahead of the whole group. Out of the $1.4 billion in total volume that we write in mid-market commercial, manufacturing is close to 25 percent of it and just a bit over $300 million in volume. So it’s a very important industry. … We wanted to make sure that we kept a proper focus on it since it’s such an important part of what we do.”
The major industry groups St. Paul is targeting with DesignPoint, according to Preston, include “food processors, fabricated metal manufacturers, furniture and fixture manufacturers, household electronics manufacturers, miscellaneous manufacturers such as manufacturers of clocks and jewelry and that type of thing.” She added that the company is looking at the mid-size manufacturing sector with an eye toward regional needs and differences as well as specialized concerns.
We “wanted to treat this very much like a specialized approach to manufacturing,” said Robin Nicks, St. Paul’s regional executive for the South Central region. “They are an important segment that we market and offer coverages for, and so many times they need these different coverages and by providing them in one place they don’t have to go to different carriers.”
Nicks noted that even within regions, manufacturers’ concerns can differ widely. “We have a variety of manufacturers in Texas,” she said. “We’ve even seen a variety between different regions. … Houston tends to be a little bit more industrial than the Dallas area. So it [DesignPoint] gives broad enough coverage so that we can really adapt that to the type of insured that we have within each region.”
Preston commented that St. Paul’s key competitors in the mid-size manufacturers market are likely to be “Hartford, Travelers, Chubb in this particular arena, CNA to a certain extent.” She pointed out however, that because coverage needs can vary in different areas, “we also run into some very, very strong regional companies depending on where we are in the country.”
The company has tried to respond to manufacturing clients’ specific needs through broad enhancements to property, manufacturers’ liability, product recall coverage and manufacturers’ errors & omissions coverages, according to Preston.
She said the worldwide products liability coverage included in the manufacturers’ liability enhancement differs slightly from other such coverage agents may be familiar with.
“The thing that makes the worldwide products liability coverage a little bit different is that it now responds to suits brought overseas as well as to claims resulting from occurrences overseas,” Preston said. “In most other domestic GL coverage, they do provide coverage for worldwide products liability, but the claim or the suit has to be brought within the United States.”
The St. Paul has filed for approval of DesignPoint for Manufacturers in most states and the product has been approved in between 25 and 30 of those. Preston said there are a few states, New York, California and Louisiana, for which the company is still preparing its filing information.
Agents and brokers reply
Among the agents and brokers responding to the survey, 44 percent said mid-size firms—those that typically have more than 50 employees and pay premiums ranging from $50,000 to $1 million—comprise between and one and 25 percent of their overall business. For some 31 percent of the respondents, between 26 and 50 percent of their accounts were mid-size businesses.
Fifty-eight percent of the respondents said that between one and 25 percent of their middle market clients were involved in manufacturing, while 22 percent said manufacturing clients made up between 26 and 50 percent of their mid-size business accounts.
For forty-five percent of those responding to the survey, their mid-size manufacturing insurance business increased over the past year, while 53 percent said that sector of their business stayed about the same. Only three percent replied that it had decreased.