Don Soss

Each month, LuxeSF profiles a member of The Luxury Marketing Council. This month we talk with Don Soss, Vice President, Personal Insurance Division for Fireman’s Fund Insurance Company (FFIC). With responsibility for the company’s significant affluent and high-net worth segment of the business, Soss takes us inside an industry that historically markets itself in a restrained fashion but holds enormous potential particularly within the luxury category where the risks and rewards defy common imagination.

LuxeSF: Let’s commence with a description of Fireman’s Fund^® products and services offered for the affluent market.

Soss: We got into the affluent homeowners market in 1980, through the release
of our Prestige Plus policy, which was a special “all-risk dwelling, all-risk contents” homeowner’s policy that was geared toward the needs of the affluent customer. We were actually one of the first to get into that market.

Shortly after the introduction of Prestige Plus Homeowners, we also began offering very comprehensive coverage for collections, e.g., fine art, jewelry, that covered all those items with no deductible; coverage for mysterious disappearance if you lose an item; breakage, if someone knocked it over. The idea was that if I had some of my personal property that was either sub-limited or excluded from my homeowner’s coverage, I now had the ability to schedule it individually and set the item’s value. We were the first ones to develop an extension of coverage for scheduled collection items. In other words, if I had a painting that at the time of loss was insured specifically for a million dollars, but the market value was deemed higher than the insured amount, we were the first ones to develop coverage that would pay up to 150% of the market value. So, for that loss, we would pay up to $1.5 million, even if you only paid for insurance up to a million. That was actually a Fireman’s Fund enhancement (and one that I personally developed).

We continued to evolve our products and came up with more enhancements for our homeowner’s policy, changed the name to Prestige Premier in 2002, and added a Prestige^® endorsement for automobile insurance. About four years ago we actually broadened and moved into yacht insurance. Before that we were pretty much a market for smaller yachts that were piloted by individuals. Now we’ve gotten into yachts that are piloted by captain and crew.

LuxeSF: The super yacht category…

Soss: Yes, and we provide protection and indemnity coverage to cover the captain and crew for injury during the course of their job as well as liability. We also work with our parent company affiliate, Allianz Marine, on large yachts valued over $5 million. They do that internationally, which is necessary given that these super yachts travel the globe.

LuxeSF: What about aviation?

Soss: Aviation is not written by Fireman’s Fund, but we have an operating relationship with Allianz Aviation.

LuxeSF: So, you have all the major luxury categories covered – the home, contents of the home, automobiles, yachts, collectibles, art work, tapestries, rugs, jewelry, etc?

Soss: Yes, and don’t forget excess liability coverage…very important for affluent individuals. People may not realize how vulnerable they are. I see it all the time in automobile accidents. It’s the limit that extends over your auto and homeowner’s policy.

LuxeSF: If I hurt somebody on the road, in other words?

Soss: Yes. If you’re in a major auto accident and the auto coverage is not sufficient or there is an incident in your home – someone slips and falls and is seriously injured. I saw a major loss where college kids were home for vacation and they had a friend over. They were jumping into the pool off the roof and the pool wasn’t deep enough. There was an incident resulting in major brain damage. It’s not common, but these losses can be big, especially if there are multiple people involved or there is an injury that requires long-term medical care.

LuxeSF: And the traditional homeowner’s policy has coverage up to a million dollars?

Soss: Typically it’s $300,000. You could buy up to a million with us. With traditional auto insurance, you could buy up to $500,000 in liability coverage. This excess liability coverage sits over that, and it’s a great deal…… it’s very inexpensive. That’s something that I think someone needs to really talk to their agent about: “Am I fully covered for excess liability?”

That’s an area where I think people really need to pay attention to their limits and their coverage, because traditionally insurers would usually max out at $5 million of coverage, especially some of the companies that sell directly to the customer, and they’re even hesitant to go up to $5 million. A lot goes into an accident claim because you have the medical costs, pain and suffering, and lost wages, and the combined damages could be severe, especially if you have multiple people injured and they’re all claiming injury from the same event. We’re one of a couple of companies that sell high limits, and it’s very affordable coverage. Typically you could probably buy $50 million of coverage for maybe $20,000 – $25,000. Where else could you get that much coverage for that kind of money?

LuxeSF: Are there many insurance players in the luxury arena?

Soss: Ironically, the biggest competition comes from companies that have exclusive agents, also called “direct writers”. We’ve seen data where over 50% of very affluent individuals are insured by a direct writer. They’re fine companies but they don’t offer the type or degree of coverage that’s afforded by a company like Fireman’s Fund that has structured its products specifically for the affluent market.

LuxeSF: And Fireman’s Fund versus a direct writer, the distinction is what?

Soss: The gap is so big. Let’s revisit excess liability, as an example. They cap out at $5 million of coverage. Typically, personal injury coverage is not automatically included – personal injury meaning slander, defamation of character – and you’d be surprised how often that comes up. They consider that an optional coverage. All of that is automatically included in our coverage.

If you consider homeowner’s coverage, direct writers don’t offer the breadth and depth. Typically, breakage for personal property is not covered and limits for theft on various items such as jewelry, money, etc. are very small. They’re very hesitant to offer coverage for large jewelry or fine art collections. We want that business. We specialize in it. It’s our bread and butter.

LuxeSF: And presumably if that consumer or client has a $300,000 Bentley, that’s going to be a hard product for a direct writer to cover?

Soss: Yes and no. They can cover it, but they won’t cover it the same way we will. For example, they won’t use factory parts – new parts. They’ll source from refurbished parts.. Then there’s the “temporary use vehicle.” If I have a Bentley and it’s in an accident and I need a rental vehicle, I’m not going to get a Bentley and I’m going to be held to a sub-limit, like the regular car owner. Our Prestige endorsement offers a $10,000 limit with no daily cap. So if you have a Bentley, you have $10,000 to go rent another Bentley for as long as the $10,000 lasts. We allow you to go to your own repair shop versus being forced to go to a network shop. If you’re in an accident, most insurers will tow you to the closest shop. We will tow you to the shop of your choice within 50 miles. Then if you have a specialized vehicle such as a Bentley, and there isn’t a Bentley shop close by, we’ll tow you to wherever that is. If you’re particular about who does the repair work on your car, our coverage is much more aligned toward satisfying your needs and requirements.

I want to come back to the home because there are so many differences in covering a valuable home that people really don’t understand until they suffer a large loss. For example, let’s look at “loss of use” coverage. If your home burns down, we pay additional expenses that you may incur to live. So we’ll put you up in a similar type of home and pay those expenses. That becomes a very important coverage because it could, depending on how big your home is, take several years to rebuild because of need for new plans, permits, etc. Our coverage is unlimited in most states. Other homeowner policies have a 12-month limit and/or a monthly cap. If you have an older home, we don’t have a limit on rebuilding to code. The direct writer policy will have very small limits for that. We provide unlimited coverage. And replace with like kind and quality. If you have special order marble that you got from Italy, we rebuild with replacement marble from the same source

LuxeSF: From your perspective, profile your affluent or luxury customers. Who are they?

Soss: We have different segments. Our affluent segment, which typically would be an individual who has a high value home….

LuxeSF: What’s high value?

Soss: A million and up, depending on the geography. A million dollar home in the Bay Area is a $500,000 home in the Midwest. This individual owns expensive vehicles, collections, possibly has an additional home. That is what we would deem an affluent customer. We also have the high net worth customer, someone who has mansions (plural) or multiple homes, has vehicles at those homes, has art work at each home, and perhaps their own personal staff of assistants, cooks, and gardeners. For these wealthy individuals, we have domestic workers compensation coverage, employer’s liability and personal liability coverage which cover for situations where a staff member sues for unlawful termination, sexual harassment, etc.

LuxeSF: What’s the sweet spot?

Soss: I would say the sweet spot is both segments. Also, the nice part is that our parent, Allianz, is very interested in high net worth clientele. We now have a high net worth facility in London to handle UK exposures in home and auto, and we’re building it out to handle all European exposures. Previously, we really didn’t have a good way to handle a high net worth customer’s home (s) internationally.

LuxeSF: Let’s move over to the sales and distribution side. How is Fireman’s Fund selling right now?

Soss: We only sell through the independent agent. We have sales managers who manage the agents.

LuxeSF: How many agents nationally?

Soss: About 2,500 Personal Insurance agents. These are select agents, the very best.

LuxeSF: What are the attributes of a superior agent?

Soss: A good agent will frequently contact the customer to make sure that their needs have been satisfied. A good agent will physically meet and talk with the customer about renewal coverage, and ask “How has your exposure changed?” How often has your agent actually called you to see how you’re doing? How often has your agent come out and done a physical walk-through of your home? Well, that’s what I see as a successful agent, and those agents have close to a 100% client retention rate.

LuxeSF: Let’s say you’re interviewing a new agent or a new agency, if there were two basic criteria for bringing those agents on board as Fireman’s Fund agents, they would be what?

Soss: It would be that they are experienced at handling the high net worth and affluent customer.

LuxeSF: And secondly?

Soss: That they are profitable. They’ve been in that space so long that they’re successful at it.

LuxeSF: What about cultural, in terms of representing Fireman’s Fund? What are you looking for there?

Soss: It’s not a price play. Agents who sell price really aren’t a good fit with Fireman’s Fund. It’s selling value, which we deliver, not only in coverage, but on the back-end in claims and service.

LuxeSF: The people who read this are from different categories but still dealing with affluent and luxury customers. What lesson is there for them in terms of the way your customers buy from you? What can we learn from the way they approach your product, or the way you approach them?

Soss: At the higher end, I think that you’re buying more than just, “Insure my home.” It’s more than coverage. We have a risk management side to it, where for any home valued over $1.5 million (in some areas it could be lower), we actually send a risk manager to evaluate a home not only for hazards but also to make sure the replacement cost is adequate. Also, we have a list of preferred vendors we work with, so that if, as a result of the inspection, we do find something that may need repair or something that would help the customer from a safety or a loss perspective, we will set that up.

LuxeSF: But from a consumer’s viewpoint, what’s going on there? It’s a financial transaction. “I want to make sure that if the thing burns down or if I destroy the car, I’m going to get my money back.” Above and beyond that?

Soss: I think it’s more of an attitude. The customer who buys from Fireman’s Fund is interested in protecting their assets, protecting their family, and will welcome the consultative support of an experienced and independent agent as well as having a company like Fireman’s Fund that has the breadth of coverage and the depth of expertise in consulting advice.

LuxeSF: You’re describing an advisor. Do they really want an advisor?

Soss: Yes. That’s what they’re looking for. They want to deal with a professional. I think an affluent high net worth customer is looking for a consultant who can systematically and adroitly analyze their level of exposure and then offer the appropriate coverage.

LuxeSF: How does Fireman’s Fund differ from other high-end insurers?

Soss: Our loss settlement process is second to none. We look for coverage versus trying to exclude it. We are also very good about adjusting losses. On the front end, we’re very good about helping you control the situation so you don’t have losses to begin with. The earlier example I gave of the engineer conducting a property review is a case in point. The engineer or risk consultant will provide recommendations on what you should be doing to correct problems. It could be that your alarm system is not adequate. You only have two smoke detectors in a 10,000 square foot home.

LuxeSF: The current recession – do you see any trends? Are we seeing people take out less insurance?

Soss: We’ve seen an increase in deductibles. I think people are looking to keep their premiums down. Surprisingly, we’re still seeing very low fraud.

LuxeSF: What are your primary marketing strategies?

Soss: Well, we have an agent newsletter and an agent website. Our senior management just did a Road Show throughout the country going to 21 markets. We also co-brand with agents. Normally when we advertise in a magazine we will co-brand with an agent. We’re involved in events and promotions such as event collaboration with the Newport Mansions in Rhode Island which we insure, as well as classic car shows.

LuxeSF: Given this recession, have you made any shift in your marketing strategies?

Soss: We are really more of a referral-type marketing organization. We don’t blanket the airway with ads because we go through an independent agent and we’re really looking for a certain type of customer referral base. The other thing that we’re invested in is philanthropy and cause marketing. We give a portion of our profits to support firefighters for safer communities. Since 2004, we have awarded more than $23 million in grants to over 1100 fire departments across the country for equipment, training and community education. The disbursement is directed through the agents who we co-sponsor. There’s usually pretty good press when we bring out a check for $50,000 to a fire department. We get a lot of interest from the community when we do that.

LuxeSF: So, your marketing communication philosophy or strategy is really not geared toward the public. Those dollars are supporting the agents in one form or another and reinforcing the value of the Fireman’s Fund name. Everyone knows who you are I’m assuming.

Soss: Most of the direct consumer message comes through our PR efforts.

LuxeSF: Does the high end affluent consumer know that Fireman’s Fund is in the luxury space?

Soss: That’s a good question. If they’re going through an independent agent, they do. But you have this big segment where they don’t. They see insurance as a commodity. They’ve known their direct agent since they were this high, and if he says “I’m covered, I’m covered”. It’s difficult to change thinking behavior, to get them to consider a company or independent agent who really understands how to appropriately insure a high net worth or affluent individual.

LuxeSF: Hot products for the future? Anything you want to talk about?

Soss: Green. We just introduced two new products that I think are really exceptional. We are the first insurer to develop a program for rebuilding green, or recognizing homes that are already green. Our coverage for partial or total loss will allow you to rebuild either your dwelling or certain contents to a more energy efficient state including appliances, windows, roofing, low volatile organic compound carpet and, paint, etc. We have wood that is guaranteed not to deplete the rain forest. And then if it’s a total loss, we allow you to rebuild according to LEED certification as certified by the U.S. Green Building Council. In California there is no cost for this. It’s just automatically included in our coverage. In other states the cost is minimal.

And we’ve introduced another coverage endorsement. It’s Smart Home coverage. It addresses equipment breakdown. This policy actually covers you in the event that you have an elaborate alarm system or smart home with integrated services such as security, fire alarm, lighting, sound, HVAC, etc. It will cover the computer or system that broke down and anything that’s affiliated with the system.

The only thing that I would add is that we have an extensive premium credit or discount structure. We offer deep credits for various alarm systems such as water leak detection and alarm signal continuity.