Legend in the Making

West Bend Mutual Insurance Co. is growing so quickly that president and chief executive officer Tony Warren acknowledges a fear about "jinxing" his firm’s great fortunes. In the last three years, the company’s revenue has doubled, and for the last 12 months,
its revenue was about $600 million. Assets have climbed from $605 million in 2000 to $1 bil-
lion in 2003. About 75 percent of the West Bend-based property and casualty insurance company’s busi-
ness is with small and medium-sized commercial customers. The remaining 25 percent is from the company’s home
and highway personal lines package, which is a combination product for automobile and homeowners insurance.
With that kind of growth, you might think company officials would gleefully shout about their success.
However, Warren and his corporate team are taking a humble approach to spreading the good news about the 110-year-old company’s growth.
West Bend Mutual’s executives recently analyzed the worst possible scenarios that could imperil the company, just to make sure it is prepared for any emergency, Warren said.
"We’re paranoid because we’ve been so successful," said Warren, who became president in 2000 and chief executive officer in 2002. "What bullet is out there to get us?"
The company’s executives say West Bend Mutual’s move to the next level began in 1982, when John "Rocky" Dedrick became president and CEO. It was under Dedrick’s direction that the company added the "legendary service" marketing slogan, and employees have worked hard to deliver on its promise, the executives say.
"In 1982 this company started to change, and the culture started to become one that allowed individual associates to start to make a difference in how we operated the company," said Warren, who succeeded Dedrick. "We started to focus on relationships – long-term, solid relationships. We started to focus on
performance, service. And from that
point on, each year we focused on getting better, so continuous improvement started to become part of our culture."
West Bend executives say the high level of customer service provided by the company’s employees has led to its success.
"I think it begins with a
culture of really caring," said John Duwell, senior vice president
of claims and administration. "Our people don’t provide good service because we demand it. They provide good service because they really care about the agent and about the policy holder. Part of it is being fast, and we are very fast in first contact with customers, in production of business. Our agents will say when we visit them, no one is better when it comes to policy service. That’s just getting the policy in the hands of the customer, than West Bend Mutual."
West Bend Mutual serves customers in Wisconsin, Iowa, Illinois, Minnesota and Indiana. The firm also owns Michigan Insurance Co.
In the five states, excluding Michigan, the company has 437 independent agents.
"That’s a very small number of agents for a company of our size," Warren said.
West Bend executives say having a small number of agents is an advantage.
"Our agents value the West Bend Mutual contract," Duwell said. "They don’t want to lose that contract, so part of not losing that contract with an insurance company is to produce good business."
The company places a significant priority on establishing strong relationships with its agents.
"I spend probably 20 percent of my time interacting with the agents," said Dale Kent, chief financial officer. "It is an expectation of all of the officers here, we will know the agents, support the agents, go out and visit the agents, take part in any special events we have with the agents. It’s been ingrained in the culture that we think agent first."
West Bend executives say the company has low turnover. That is a big advantage, they say, because experienced employees do a better job of working with customers and agents.
"The people that are on the front lines with our customers or the agents, they’ve been here for many, many years, so they understand their job and they understand how this company works," Kent said. "In high-turnover companies, it’s very hard to provide good customer service when your people are new and just learning the company."
West Bend Mutual executives say they use input from the employees to improve the company and to make the employees understand that their expertise is critical to the success of the firm.
"We surveyed our associates three years ago, just to make sure we had a good feel for what they felt was important to our company and what made them so loyal to us," Warren said. "We did that because we’ve noticed that as companies get larger, they tend to lose all of the neat things that you did when you were smaller. Pretty soon, you’re not the company you were when you started out."
The input from those meetings with the employees was used to create a list of core values, which now drives each decision the company’s executives make.
A significant benefit the company provides for employees is a generous flex time package, Warren said.
"If they have to do things with their family, they just take off," he said. "And they’ll come back and work twice as hard until the chore is done because they were able to take off and do what was important to their family. We know the family is an important part of their life, and there’s a balance you have to make, and so flex time allows them to do that."
The company’s culture of excellence works on its own to eliminate sub-par employees, Warren said.
"The folks that don’t, I guess, belong or perform in this company, we don’t have to deal with, because the culture deals with them," he said. "The culture is so strong that people that don’t fit in recognize that and they leave. It’s really astounding"
West Bend Mutual executives say they want to continue working to improve what the company does and add marketshare in the six states the company serves. They have no plans of going public with the company or expanding into a nationwide insurance firm.
"We don’t care about being big," Warren said. "If we pay attention to getting better at everything we do, we will become big. How do you define big? Companies that focus on just size tend to be less successful."
"Bigness is not important," Duwell said. "It’s far more important to be good. If we do things well, we will get big. Unlike some other companies, our No. 1 goal is not to be big."
West Bend Mutual will consider expanding into other Midwestern states, but its top priority is to grow in its existing markets.
"We believe there is room to continue to grow our business with our current partners," said Kevin Steiner, senior vice president of marketing. "We think there is great potential just in the six states we do business in today. We have no plans and no interest in going to the West Coast, the East Coast or the South. It’s just good business practice for us to analyze the rest of the Midwest if at some point in time it’s a good idea to go to additional Midwest states."
"There’s so much expense attached to entering a new state," Duwell said. "If there are great opportunities that reside in the six states that our franchise now writes business in, and we can pick those opportunities up, it’s far more efficient than to do a geographic expansion."
Since 1991, the company’s headquarters have been in a 150,000-square-foot office building on 160 acres at 1900 S. 18th Ave. in West Bend. From his office, Warren can look out at a natural prairie and see deer and coyotes.
West Bend Mutual executives are just beginning to think about a possible building expansion.
"We have made an effort using technology to avoid expanding," Duwell said. "When we occupied this building in 1991, we planned to occupy it for
10 years without expanding. But, imaging technology has helped us to
make that 14 years rather than just 10. But we’re right at the point where we’ve got to make a decision. We haven’t initiated plans yet to expand, but, we’re on the edge. We’ve started with a clean slate of paper. It could either be an addition to this building, it could be a separate building."
The company has prospered in West Bend for 110 years and plans to remain there.
"I think if you would ask all of the officers, they would say it’s a safe bet this company will be here for at least another 110 years," Duwell said.
The region has grown to the point that West Bend is now part of metropolitan Milwaukee, and the company’s executives say they have little difficulty attracting workers in the Washington County community. About 560 of the company’s 700 employees work at the West Bend headquarters.
"There’s a quality of life issue we enjoy here that I have not seen anywhere else," Warren said. "The ability to come to work and look out your window and see open prairie is pretty astounding."
The company plans to continue adding to its payroll.
"Looking at the past couple of years, we’ve added probably 25 to 30 jobs a year," Warren said. "That might taper off a bit. Going forward, certainly 20 to 30 will be added year to year."
West Bend Mutual Insurance Co. Historical Timeline
1894 West Bend Mutual Fire Insurance Company is established in West Bend.
1895 Assets total $2,300.
1908 First corporate headquarters built at 519 Hickory St., West Bend.
1915 Assets total $80,816.
1930 Adds windstorm and tornado policy and extended coverage for hail, smoke, riot and vehicle damage.
1937 Begins doing business in Illinois.
1940 Moves to new 5,000 square-foot corporate head-quarters at 300 S. 6th Ave.
Assets total $540,000.
1949 Begins doing business in Iowa.
1950 Begins doing business in Indiana.
1953 Company writes first casualty policy. Begins offering general liability coverage.
1956 Begins offering homeowners insurance.
1957 "Fire" droped from company. name.
Assets total $1.7 million.
1958 Casualty department established. Begins offering commercial liability.
1959 Begins offering auto insurance.
1960 New 15,000 square-foot corporate headquarters built at 1115 S. Main St.
1980 Assets total $48 million.
1982 John "Rocky" Dedrick named president. 34,000 square-foot addition added to headquarters.
1984 Home and Highway personal lines
package introduced.
1991 Moves to new 150,000 square-foot corporate headquarters on 160 acres of natural prairie and woodlands at 1900 S. 18th Ave.
2000 Tony Warren named president to succeed John Dedrick. Dedrick remains CEO.
Assets total $605 million.
2002 Warren named president and CEO. Dedrick named board chairman.
2003 Assets total $1 billion.
P&C market could soften
Adjustments after 9/11 have changed the industry
West Bend Mutual Insurance Co., a 110-year-old company, has achieved significant growth under the leadership of president and chief executive officer Tony Warren. Warren was named the company’s president in 2000, when the firm had assets of $605 million. Warren was named president and CEO in 2002. In 2003, the company’s assets had surged to $1 billion. Warren says the insurance industry has undergone significant changes in recent years. What lies ahead? Warren spoke recently with Small Business Times managing editor Andrew Weiland about the outlook of the commercial property and casualty insurance industry. The following are excerpts from that interview.
SBT: In general, where do you think the commercial property and casualty insurance industry is going?
Warren: "I think the past three to four years have been a very interesting time for the insurance industry. 2001 impacted the entire industry. The affect of 2001 and a soft market that had gone on for 15 years created an environment that companies simply could not exist, companies needed to dramatically increase rates. So, in the past three to four years, companies have been increasing rates across the board to build surplus, improve ROE (return on equity) and bring some stability back to an industry that really had gone through a very long soft market caused by excess capacity.
"Whenever there is excess capacity, people are always fighting over market share. And 2001 stopped that. 9/11 took a lot of capacity out of the industry. So there has been a three- to four-year cycle of increasing rates. Now we’re seeing there has been a level of profitability. That means that all of a sudden, now that you’re making money, you want to write some more business. Last year, we started to see some softening of property rates on the part of the industry and also the re-insurers that re-insure us. There has been more profit, and so the surpluses are now building to the point there will be people out trying to buy business. So we’re at the end of a hard market where the rates were hardening, and now it looks like we’re going into a softer market where rates will get softer and more competitive."
SBT: How did Sept. 11, 2001, affect
this industry?
Warren: "Certainly if you are a national carrier, writing a lot of national risks and international risks, 9/11 was really devastating. I think the total tab on 9/11 was probably around $50 billion, and you add that to an escalating situation where you have a lot of reserves being put out for past sins on the environmental side, you’ve got a deteriorating workers comp environment because of medical inflation, all of those things tended to impact the industry, more-so however in the national companies with big accounts. Terrorism did not impact us that much, but it did impact the cost we pay for our re-insurance, because all of a sudden, the definition of risk was redefined because people knew that terrorism is out there.
"Although we don’t have a lot of business exposed to terrorism, from a re-insurance standpoint the cost for us went up. Just the awareness of a terrorism risk has cost us more expense. We offer our terrorism insurance coverage. It’s mandated on workers compensation, because of the terrorism re-insurance act. The offer we have to the rest of our clients for casualty and property insurance is generally declined because people don’t see much exposure to terrorism on the small business side. Somebody in Rice Lake really isn’t concerned about terrorism."
SBT: Will Hurricane Charley in Florida, one of the worst storms in years, have a ripple effect through the industry?
Warren: "Not really. The insurers are more aware what their exposure is than they were 10 or 15 years ago. So, the impact to the business, yeah it will cost some money, but the insurance industry was prepared for that and they understood the exposures they had. It’s a well-prepared industry now, when you look at natural catastrophes. We know today exactly where the heart of our property exposure is.
"There are two intersecting streets in Waukesha, and there is an apartment building on that corner and somewhere around this apartment we’ve got about $100 million in property business exposed. And so, knowing that, we can re-insure against that worst hit, that’s our worst scenario. And every company has that same kind of data, so they know what their worst exposure is. They were unprepared for that 20 years ago. But now it’s down to block, it’s down to apartment, it’s down to house, it’s down to within a mile of what your greatest exposure is."
SBT: So you know where to pray a tornado doesn’t hit?
Warren: "Uh-huh. We have a route. We know exactly where it could hurt us the worst. And we insure for that event. And so, the increase and availability of information and modeling has made the insurance business a lot different business, and we are better prepared."
SBT: Have technological advancements made it possible for you to have that kind of data?
Warren: "Yeah. More and better computers, more data and the ability to use data differently makes a big difference."
SBT: What are some of the advantages and disadvantages of doing business in the state of Wisconsin for your company and for your customers?
Warren: "I think Wisconsin is unique because it’s got a very fair and a very open and receptive insurance commissioner’s department. The department only has 60 employees. They are there to serve the public and the insurance industry and be the watchdog for the citizens of Wisconsin. We know them. They know us, and they do a great job of regulating both sides of the house. You compare that to a California, which has over 1,400 employees (in the insurance commissioner’s department), and California has a whole different reputation, one that is not favorable at all to the insurance industry and one that is always in some dispute with someone about some regulation. They are so highly regulated that a lot of industry folks do not want to venture into the state or are anxious to leave the state. Wisconsin is well-known as being a state where you have a fair chance of making a reasonable dollar if you are an insurance company, and also if you are a citizen you have a very fair chance of getting any grievance resolved to your benefit."
SBT: You say Wisconsin is a fair state to do business for your industry. But, there’s a belief held by many, that this is a tough state to do business in, that taxes are too high and there’s too much regulation. Do you think that is an unfair assessment by some?
Warren: "I think that’s a different issue. You can argue about taxes, and we are highly taxed, and that is a detriment to business, particularly new businesses trying to start in the state. It would be nice to have some tax relief. But you also notice again the educational system in the state ranked in the top one or two in the (ACT) standpoint. So, we continue to score highly in the education of our children. So, there is some benefit, I guess, to higher taxes. But we are highly taxed, and there’s no way around it. I don’t know of a lot of people that are racing out of the state to go elsewhere because of high taxes, but I do know of some companies that have not come into the state and started new plants or new locations because of what they perceive as high taxes. So I think it’s a detriment to new business coming in."
SBT: Looking at the federal government, one of the issues President Bush has talked about is tort reform. Do you think we need tort reform in this country?
Warren: "Tort reform is something we would like to see, some limit to restrict and modify the ability to begin class-action suits. That is a laudable effort. We support any kind of tort reform. The real winners in any kind of court environment tend to be the attorneys. The defendants and plaintiffs don’t reap the full benefit of the rewards."
SBT: What do you think about the possibility of this country having a vice president who is a former trial lawyer?
Warren: "I’m not going to get involved in that one at all."
SBT: What lines of insurance do you think are going to grow in demand, and what lines do you think are going to decline?
Warren: "I think the segment that operates in small business will be a very lucrative one. I think we will continue to see growth across the board, but primarily in general liability, in auto and in workers compensation. Small business as a line of business is extremely vibrant. If our company wrote whole line large companies, I would worry a bit about our future. This country is less and less driven by big companies and more and more driven by small and medium-sized companies. The kind of rebirth of our economy, as you look around, it’s all small businesses and a lot of family-owned businesses. The big companies tend to continue to lay-off, restructure, they right-size, they outsource. So more and more of our economy is driven, as we think it should be really, by small business."
SBT: As a whole, do you feel property and casualty insurance is affordable for small businesses?
Warren: "Oh, I think so. I think if you look at the history of insurance, insurance has probably been the best bargain that people have had over the past 10 to 15 years. Because during most of that time we’ve been in this very soft market where rates have been depressed, companies have been fighting over business. Each company has to grow a little bit each year, and with that you’ve seen prices being depressed. That cycle will start again, and I think insurance is one of the best bargains you can still get."
SBT: What about staffing issues in this industry? How competitive is it to find good, competent people? Is there an adequate supply of capable workers?
Warren: "The industry has a hard time with recruiting new people because nobody starts out in college wanting to be an insurance person, and the people that do, you wonder about. The insurance business is a very under-valued industry. We’ve done a poor job portraying ourselves to young people as a vibrant industry. We are lucky here, because we have a continuous stream of people that knock on our door who want to work for us because we’re stable, we’re well-known, we have a reputation for treating people honestly and right and for giving them a chance to succeed. But we can’t rely on people walking in our door. We are recruiting now, annually, new trainees, precisely because in about 15 years, a third of our staff retires.
"We are also starting a whole new succession planning process internally to make sure that as we age and as each of our managers starts to look around that they have a succession plan that is in affect for their department. Beyond that, I am working with the Wisconsin Foundation for Independent Colleges, trying to find ways to increase internships in our industry. At the same time, we are trying to convince some local and independent colleges to develop insurance courses so we can expose more young people to the insurance business. "The insurance business is one of the biggest businesses in the state, and yet nobody seems to know about it. There’s no place else in this county that you can go and find the number of professional jobs that are existing now and will be available in the future than here. There are bigger companies with more employees, but most of them tend to be factory work or more manual-labor related. As far as professional jobs in one spot, this is it in Washington County. There’s a tremendous potential for some very highly paid people here."
September 3, 2004, Small Business Times, Milwaukee, WI