When Wood is All You Do

An intense focus on a niche market allows an insurance company to gain a unique understanding of the claims, loss control, and underwriting issues surrounding the typical exposures associated with that niche. In turn, this focus allows an insurance company to enhance its potential profitability.

Pennsylvania Lumbermens Mutual Insurance Company was founded more than 112 years ago by lumbermen for lumbermen to provide property/casualty insurance products to the lumber, woodworking, and building material industries. Today, the company offers property, general liability, inland marine, business automobile, commercial excess liability, and equipment breakdown coverages – a mix designed to protect every aspect of the business of wood.

The company’s long-term commitment to the niche, combined with its successful marketing and advertising programs, has created a strong brand name easily recognized by insureds; and its “open brokerage” approach strengthens current business relationships and builds a solid reputation with potential insureds while also allowing the insured to select any broker they like to represent them to PLM.

With $167 million in annual premium and an “A” rating from A.M. Best, PLM services less than 10,000 policies from 5,300 insureds. “The size of our niche is somewhat limited thus to maximize our growth potential we need to cover a great deal of geography,” said John Smith, president/CEO of the Philadelphia-based company. “We expect to be fully operational in 46 states by year end with licenses in 48, offering a national capability to insureds and brokers alike. But, our focus is not on how many policies or accounts we currently have in a state, but, rather, how do we write all the good wood accounts in every state.”

While PLM has very low new-claims frequency, it does experience very high severity. In Smith’s first 20 years in the business, he could count on one hand the number of million dollar losses he experienced. “We have them every month in the wood business,” he said. “Whether it’s a building full of wood or a truck with 80,000 pounds of lumber on it, we are exposed to severity like few other companies, so our claims people need to be able to work large claims.”

Because PLM works in a severity niche, field and technical services representatives work closely with policyholders, providing an array of loss prevention and control services. The company also offers a host of additional services, including a video library, safety poster program, seminars, building valuation, and thermography.

But, the key to success for any specialty insurance company is a staff that possesses an in-depth knowledge of the niche. PLM builds a powerful team by, first, hiring people with strong insurance expertise. The company then begins the education process by schooling its staff on everything wood and the A.M. Best Underwriting and Loss Control guides. This training is broadened through the PLM’s Technical Services Management System, which contains proprietary information on the niche. When training is complete, PLM’s professional staff has a comprehensive and detailed understanding of the three major classes of business the company underwrites: lumberyards, sawmills, and wood manufacturing.

“Wood, it’s all they do every day, so they become very well versed in it. We take them into typical risks, so they develop an applied knowledge of the operations they will be working with. They understand the difference between good sawdust and bad sawdust; they can speak fluently about ‘hot work permits’; and they know the difference between a headsaw and a resaw. They speak the insured’s language. This first-hand experience has a dramatic impact and assists in developing expertise,” Smith said. “Our expectation is that through our people’s efforts, we will produce superior financial results and provide truly value-added services to our customers and the brokers who represent them.”

Posted: Tuesday, October 16, 2007 12:00:00 AM. Modified: Tuesday, October 16, 2007 3:31:34 PM.

(317) 875-5250 - Indianapolis | (202) 628-1558 - Washington, D.C.

Contact NAMIC | Press | Advertise | Sponsor

We are 1,400 property/casualty insurance companies serving more than 135 million auto, home and business policyholders, with more than $196 billion in premiums accounting for 50 percent of the automobile/homeowners market and 31 percent of the business insurance market. We are the largest and most diverse property/casualty trade association in the country, with regional and local mutual insurance companies on main streets across America joining many of the country’s largest national insurers who also call NAMIC their home. More than 200,000 people are employed by NAMIC members.