Eyeing Affluent Market, Nationwide’s Crestbrook Launches in Illinois

Well-to-do Illinois residents and their insurance agents now have an additional option when it comes to protecting their assets.

Crestbrook Insurance has selected Illinois for the launch of what is essentially a start-up insurance company focusing on the affluent market.

A subsidiary of Nationwide Mutual Insurance, Crestbrook isn’t really a new entity. It is “an original CalFarm company that was purchased by Nationwide in the mid ’90s,” according to Crestbrook President Jim Pedersen.

Crestbrook writes in California in affiliation with Nationwide subsidiary Allied Insurance’s private client business. But for all intents and purposes, Crestbrook is a start-up designed to help Nationwide expand its portfolio into the profitable high net worth market via the independent agency channel.

Crestbrook is “a stand-alone stock company, solely owned by Nationwide,” Pedersen said.

The company decided to launch in Illinois for three primary reasons.

One is that “Illinois is a top-25 affluent state, so it’s one of the states we intended to be in at some point,” Pedersen said.

It also has a fair regulatory environment, he said. Regulatory delays or issues relative to getting to market were not a concern.

Finally, the company has strong enough relationships with agents and brokers that specialize in the affluent market in Illinois “to work through some of the early bumps that any new company is going to have in their first state when they launch,” he said.

Crestbrook has plans to open in 15 more states in 2014 and an additional 15 in 2015.

Target Customers

The customer base that Crestbrook seeks to serve would on average have primary homes with replacement costs that range between $500,000 and $5 million.

They may also have additional coverage needs, such as secondary homes, excess umbrella, personal collections, automobiles and expensive toys.

Pedersen said the company is comfortable with the $500,000 to $5 million range and “will write some risks higher than $5 million … but that’s our core appetite.”

In this market, price is important but customers are also willing pay for additional coverage and “invest in risk mitigation on their properties,” Pedersen said.

With a focus on protecting their assets, affluent clients “want a carrier that provides coverages such as unlimited replacement costs, unlimited loss of use, waiving deductibles on losses over $50,000, bundling ID theft and travel-assist, providing an effective rate if you’ve got jewelry in a vault versus not having jewelry in a vault,” Pedersen said.

“It’s really demonstrating to them that, as they do things to protect and manage their risk, you can provide both a policy and a pricing structure to represent that,” he said.

Ready for Competition

Crestbrook is confident it has the ability to compete on several levels with insurance organizations that have an established presence in the high net worth market such as Chubb, ACE, AIG Private Client, PURE and Fireman’s Fund.

“We believe our value proposition has a few competitive advantages as we enter the market,” Pedersen said.

For one thing, Crestbrook’s “technology platform and delivery will not be burdened by the challenges of legacy,” he said. Additionally, “we see ourselves as being much more efficient, much better at the user experience, as a result of not having to deal with legacy assets [such as] 10-, 20-, 30-, 40-year old policy administration systems and all their constraints.”

Another advantage, Pedersen said, is that Crestbrook has been able to recruit and select its associates and employees for marketplace talent and skills, as well for culture and behavior, as a start-up.

“Many larger organizations with legacy are not in the same position to be able to do that,” he said.

“We also believe that our agent benefit package overall — commission, incentive compensation agreements, some additional marketing, and philanthropic aspects to our benefit package because of our reduced cost burden on the information technology side — will allow us to offer something that will excite agents, relative to, one, we value you. Two, we know we’re the new kid on the block, and we’re willing to make an investment in you so that you make an investment in trusting us with your clients,” Pedersen said.

The company doesn’t plan on a large number of agency appointments and will instead rely on relationships with agents and brokers who have experience in the target market.

Potential agency partners will have access “to the affluent market, have clearly made investments with their agency in the affluent market,” Pedersen said. They will also “have appointments with some of our key competitors in that market. Competition is good, and we’d like the opportunity to come in and potentially offer them a simplification or consolidation strategy. Or, if not, and they’re willing to take on another carrier, we collectively believe that both they and us can meet our production and premium standards.”

By the end of 2015, “when we’re up and running in 31 states, we might have approximately 500 appointments,” Pedersen said.