The Hanover Insurance Group Profile
The Hanover Insurance Group, Inc. (THG), through its subsidiaries, engages in property and casualty insurance products and services business. The company markets its products and services through independent agents and brokers in the United States (U.S.).
Segments
The company operates through four segments: Core Commercial, Specialty, Personal Lines and Other.
In its Core Commercial, Specialty and Personal Lines segments, the company underwrites its insurance products through Hanover Insurance, Citizens and other THG subsidiaries. The company distributes them through select independent agents and brokers throughout the U.S.
Other segment consists primarily of business from Opus Investment Management, Inc. (Opus) and earnings and expenses related to the company’s holding company.
The company’s agency and customer-centric strategy focuses on providing specialized insurance products and services with an emphasis on disciplined underwriting and pricing, quality claims handling and customer service.
Lines Of Business
Core Commercial
The company divides Core Commercial into two distinct businesses, small commercial and middle market, both of which focus on account business.
The company’s Core Commercial product suite provides agents and customers with products designed for small and mid-sized businesses. Small commercial offerings, which generally include annual premiums of $50,000 or less, deliver value through product expertise, local presence and ease of doing business. Middle market accounts, with annual premiums generally in the range of $50,000 to $500,000, require greater underwriting and claim expertise, as well as a focus on industry segments.
Core Commercial coverages include:
Commercial multiple peril coverage insures businesses against third-party general liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products sold. It also insures business property for damage, such as that caused by fire, wind, hail, water damage (which may include flood), theft and vandalism.
Workers’ compensation coverage insures employers against employee medical and indemnity claims resulting from injuries related to work. Workers’ compensation policies are often written in conjunction with other commercial policies.
Commercial automobile coverage insures businesses against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle and property damage to other vehicles and property. Commercial automobile policies are often written in conjunction with other commercial policies.
Other core commercial coverage includes monoline general liability, commercial umbrella and monoline property.
The company’s strategy in Core Commercial focuses on strengthening and expanding its market reach through differentiated product offerings, industry segmentation, and franchise value through selective distribution. The company continue to make enhancements to its products and technology platforms that are intended to drive more account placements in its small commercial and middle market businesses. In small commercial, the company has gained significant momentum with the launch of TAP Sales, the company’s new agent quote-and-issue platform, making it easier and more efficient for its agents to do business with it, leveraging its agency analytics capabilities, comprehensive service center offering, and full suite of digital self-service tools. In middle market, the company maintained its focus on specialized industry segments, a key area of market differentiation. The company continued to grow its most profitable industry segments, including technology, human services and financial institutions, taking a measured approach in more challenging segments. The company also capitalized on the strength of its localized field structure, creating a competitive advantage in sourcing new business, as well as its robust claims and risk management capabilities.
Specialty
Specialty offers a comprehensive suite of products focused predominately on small to mid-sized businesses. This includes numerous specialized products that are organized into four distinct divisions:
Professional and Executive Lines coverage is primarily composed of professional, management, and medical liability, which provides protection for directors, officers and other employees of companies that may be sued in connection with their performance, and errors and omissions protection to companies and individuals against negligence or bad faith, as well as protection for employment practices liability.
Specialty Property & Casualty consists of:
Hanover Programs business, which offers coverage to markets where there are specialty underwriting or risk management needs related to groups of similar businesses;
Hanover Specialty Industrial business, which provides property insurance to small and medium-sized chemical, paint, solvent and other manufacturing and distribution companies, and fire and allied lines coverages;
Excess & Surplus business that includes non-admitted general liability and property coverage to risks outside of the appetite of standard commercial lines; and,
Specialty General Liability encompasses admitted coverages for higher hazard liability risks.
Marine coverage includes inland and ocean marine, and insures businesses against physical losses to property, such as contractor’s equipment, builders’ risk and goods in transit, and also covers jewelers block, fine art and other valuables.
Surety and Other includes coverage for construction and other firms, as well as sole proprietors in the event of claims for non-performance or non-payment, and commercial surety coverage related to fiduciary or regulatory obligations.
The company has continued to invest in its Specialty businesses, refining its broad product offering, focusing on the lower end of the risk and account-sized spectrum, leveraging its highly regarded service center, which has been, and the company expects will continue to be, a critical growth lever for the company.
The company believe that this distribution of Specialty products, primarily through retail agents supplemented by select specialists helps to enhance its overall agent value and increase growth opportunities by providing agents easier access to placement solutions for Specialty needs, including those that complement Core Commercial accounts.
Personal Lines
Personal Lines coverages include:
Personal automobile coverage insures individuals against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles and other property.
Homeowners and other personal lines coverages insure individuals for losses related to:
residences and personal property, such as those caused by fire, wind, hail, water damage (excluding flood), theft and vandalism;
liability claims by a third-party for bodily injury and/or property damage experienced at residences; and,
personal umbrella, inland marine (jewelry, art, etc.), fire, personal watercraft, personal cyber and other miscellaneous coverages.
The company’s strategy in Personal Lines is to provide account–oriented business (i.e., writing both an insured’s automobile and homeowners insurance, along with other Personal Lines coverages when applicable) through select independent agents, with a focus on increasing geographic diversification. The company maintains a focus on working with high quality, value-added agents that stress the importance of consultative selling and account rounding (the conversion of single policy customers to accounts with multiple policies and/or additional coverages, to address customers’ broader objectives). The company focuses on making business investments that are intended to help it maintains profitability, build a distinctive position in the market, deliver value to agents and customers, and provides the company with profitable growth opportunities. The company continues to refine its products and to work closely with these high-potential agents to increase the percentage of business they place with it and to ensures that it is consistent with its preferred mix of business. Additionally, the company remains focused on further diversifying its geographic mix beyond its largest historical core states of Michigan and Massachusetts.
Other
The Other segment primarily includes Opus, which provides investment advisory services to affiliates and also manages approximately $2.0 billion of assets for unaffiliated institutions, such as insurance companies, retirement plans and foundations. The Other segment also includes earnings on holding company assets; holding company and other expenses, including certain costs associated with retirement benefits due to former life insurance employees and agents; its run-off voluntary property and casualty pools business; and its run-off direct asbestos and environmental business.
Marketing and Distribution
The company serves a variety of standard, specialty and targeted industry markets. The company’s business consists of approximately 41% Personal Lines, 36% Core Commercial, and 23% Specialty. Core Commercial, including its small and middle market businesses, Personal Lines and the majority of its Specialty business distribute its products primarily through a network of independent agents.
Core Commercial, Specialty and Personal Lines
The company’s Core Commercial, Specialty and Personal Lines independent agency distribution and field structure are designed to maintain a strong focus on local markets and the flexibility to respond to specific market conditions. During 2022, the company wrote 19.7% of its Core Commercial, Specialty and Personal Lines business in Michigan and 8.6% in Massachusetts. The company’s localized field management structure is a key factor in the establishment and maintenance of productive, long-term relationships with well-established independent agencies. The company maintains 35 local offices across 23 states. The majority of processing support for these locations is provided from its Worcester, Massachusetts; Howell, Michigan; Salem, Virginia; and Windsor, Connecticut offices.
Independent agents account for substantially all of the sales of its Core Commercial and Personal Lines property and casualty products, and the majority of its Specialty products. However, some Specialty business, such as Hanover Programs, is also distributed through managing general agents or wholesale distributors who have expertise in the industries served or products offered. The company appoints agencies based on profitability, track record, financial stability, growth potential, professionalism and business strategy. Once appointed, the company monitors their performance and, subject to legal and regulatory requirements, may take actions as necessary to change these business relationships, such as discontinuing the authority of the agent to underwrite certain products, or revising commissions or bonus opportunities. The company compensates agents primarily through base commissions and bonus plans that are tied to an agency’s written premium, growth and profitability.
The company is licensed to sell property and casualty insurance in all fifty states in the U.S., as well as in the District of Columbia (D.C.). Throughout the U.S., the company actively markets Core Commercial and Specialty policies in 40 states and D.C., and Personal Lines policies in 20 states.
The company manages its Core Commercial and Specialty business portfolio with a focus on growth from the most profitable industry segments within its underwriting expertise. The company’s Core Commercial business is generally comprised of several complementary commercial lines of business, consisting of small and middle market accounts, which include targeted industry segments. Additionally, in its Specialty segment, the company has multiple specialty lines of business. The company seeks to maintain strong agency relationships as an approach to secure and retain its agents’ best accounts. The company monitors the quality of its business written through ongoing quality reviews, accountability for which is shared at the local, regional and corporate levels.
The company manages its Personal Lines business with a focus on acquiring and retaining preferred accounts. approximately 88% of the company’s policies in force are account business. Approximately 53% of its Personal Lines net premiums written is generated in the combined states of Michigan and Massachusetts. In Michigan, based upon direct premiums written for 2022, the company underwrites approximately 7% of the state’s total market.
Approximately 64% of the company’s Michigan Personal Lines net premium written is in the personal automobile line and 33% is in the homeowners line. Michigan business represents approximately 45% of its total personal automobile net premiums written and approximately 37% of its total homeowners net premiums written.
Approximately 65% of the company’s Massachusetts Personal Lines net premium written is in the personal automobile line and 31% is in the homeowners line. Massachusetts business represents approximately 13% of its total personal automobile net premiums written and approximately 10% of its total homeowners net premiums written.
The company sponsors local and national agent advisory councils to gain the benefit of its agents’ insight and enhance its relationships. These councils and its other strong agency relationships provide market and operational feedback, input on the development of products and services, guidance on marketing efforts, support for its strategies, and assist the company in enhancing its local market presence.
Other
With respect to its Other segment business, the company markets its third-party investment advisory services directly through Opus.
History
The Hanover Insurance Group, Inc. was founded in 1852. The company was incorporated in 1995.
