The Hartford, Progressive, ABA Team up for Community Bank Program

Agents submitting community bank risks to the new alliance between The Hartford and Progressive should expect to work with underwriters from each carrier but the companies promise a quick turnaround.

The “sweet spot” for the underwriters includes accounts with up to $2 billion under management, according to the insurers, although the alliance program can handle accounts with up to $5 billion.

The Hartford Financial Services, Progressive Casualty and the American Bankers Association (ABA) jointly announced the new alliance last month, which brings the two national carriers together to offer a full package of insurance protection for community banks. According to Jeff Hall with the ABA, Progressive and now The Hartford are the only insurance carriers endorsed by this bank trade association.

Progressive has had a close relationship with the ABA since February 1987, when it began administering and underwriting the coverage for ABA’s captive insurance company, American Bankers Professional Fidelity Insurance Co. (ABPFIC), which reinsures the program managed by Progressive. Progressive/ABPFIC coverage options include bankers’ professional liability, directors and officers coverage, fiduciary liability and a range of fidelity and surety bonds unique to banks.

ABA’s relationship with The Hartford began with the announcement of the alliance. However, The Hartford formalized its community bank package program four years ago. The Hartford package provides standard coverages (property, liability, automobile, workers’ compensation and umbrella protection) along with several bank-specific protection options, including mortgage protection, foreclosed property protection, protection for trust properties and other specialized property forms.

The Hartford says it spent more than a year researching and revamping its mortgage protection program, unveiling the new program two months prior to the announced alliance. Wes Gardner, middle market director of Industry Solutions at The Hartford, said that the carrier compared and studied the programs of other major banking industry insurance players, including Chubb, Travelers, Zurich and Cincinnati in the development of the new program. According to Gardner, the new program is as good as any available.

Individually, the two carriers were only able to provide part of the protection necessary for community banks, leaving bank clients having to purchase the missing pieces elsewhere. The alliance fills the gaps in each carrier’s individual program. The alliance rounds out the programs offered by the two carriers, said Michael Read, business leader, Progressive Insurance ABA Program.

The alliance program is designed for banks with up to $5 billion in assets under management; “but our sweet spot are banks with up to $2 billion assets under management,” said Gardner.

There are between 7,000 and 8,000 banks falling within this criterion per information supplied by John Hall, public relations with the ABA. This is approximately 90 percent (by count, not by assets) of all banks.

Agents will continue working with the underwriting personnel with whom they have a current relationship. Banking submissions from both sides of the alliance will be directed by the regional underwriters to a newly established banking team in New Hartford, N.Y. This team will manage the flow of applications to the correct underwriting department.

Progressive will continue to underwrite its legacy program as will Hartford maintain underwriting control of its array of coverages. Agents have the potential of working with two separate underwriters under this arrangement. But, according to Gardner, The Hartford’s research indicates that agents writing this class of business do not mind and even prefer working with two underwriters who can provide individual expertise in a particular line of business; especially for operations as specialized as banking.

Thomas Hambrick, media relations specialist with The Hartford, stated via e-mail that banks are not required to be members of the ABA to qualify for this program. Eligibility will be based on SIC code, according to Hambrick.

According to Gardner, more than 50 percent of the agents currently using one or the other program are common to both carriers, so the carriers do not expect many agent/broker appointment issues. Each situation will be evaluated on its own merits. If there is little chance that a steady stream of business will flow from a particular agent, The Hartford may consider offering a limited appointment to allow that agent who has previously worked with Progressive access to the entire program. Progressive only requires an agency be appointed if commission is paid to the agency.

When asked about quote turnaround, The Hartford’s Wes Gardner said that quotes will be turned around “reasonably quick.” Gardner stated that this class of business does not require 45 days to complete all the necessary underwriting. Quotes can easily be ready in less than 30 days, according to Gardner.

The companies expect their pricing will be very competitive. “Our hit ratios are above average,” said Gardner. Further, Progressive’s captive program reinsurer, the ABPFIC, has distributed underwriting profits to its client banks every year since 1991. This past year, it returned more than $5 million to 1,053 of its clients. Although distribution has always hinged and will continue to hinge on profitability, Progressive’s Read says that the distribution will continue as always. The Hartford’s part of this alliance program will not be included in this distribution program.

The Hartford, Progressive and the ABA said they are confident that the brands and reputations these carriers bring with them will make this program successful. “Community banks are a good insurance risk for an agent to pursue,” stated Read.