Ohio National: Breaking the mold among mutual insurers

Not every mutual insurance company can boast increases in life insurance sales for 26 consecutive years, dividend payouts to participating policyholders for 92 years, a growing Latin American market, independent distribution channels and the distinction as a top workplace for six years running.

That enviable description belongs to Ohio National Financial Services, a Cincinnati-based carrier that’s expanding its industry footprint as never before — and making its presence felt among both competitors and producers.

To learn more about what’s powering the 107-year-old insurer’s gains, and how it’s positioning itself for the future, NUL&H Senior Editor Warren S. Hersch interviewed Gary T. “Doc” Huffman, the company’s president, CEO and (since 2012) chairman of the board. The wide-ranging interview explored the carrier’s enterprise and distribution strategies, changing product focus, philanthropic initiatives and corporate culture.

Hersch: Earlier this month, Ohio National reported increases in 2015 revenue and in new annual individual life insurance premiums. How do you account for the gains? What is the carrier doing differently relative to prior years?

Huffman: When the financial crisis began in 2007, we were the 31st largest writer of new life insurance premiums in the U.S. Today, we’re in 22nd place. Our life insurance business has also grown for 26 consecutive years. No other insurer can claim this record.

The reason we’ve been so consistent over the years is because we’re strategically focused. We’re now in the third year of our current five-year strategic plan, which we’re calling K2.

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This strategy is about positioning our company better for the future, in part by diversifying our earnings and revenue. To that end, we’re retooling our infrastructure: people, processes and technology. We’re also continuing to attract and develop talent for our distribution channels. These include:

1. 1. Career/Builder general agencies that are developing marketing organizations and recruiting producers;
   2. Personal producing general agencies; and
   3. Institutional sales, including banks and broker-dealers.

We’ve been expanding these distribution channels. Under the K2 strategy, we’re adding 10 builder agencies annually nationwide; we added 20 in the first year of the plan and 23 in the second year. In the first quarter of 2016, we added another 10 — so a total of 53 new distribution outlets nationwide. Each can produce, we believe, about $500,000 in life insurance premiums annually.

Between our traditional and institutional channels, nearly 40,000 people across the U.S. are licensed to do business with us, among them over 1,300 new producing general agents. These folks cater to our target markets: small and midsize businesses/business owners, the affluent and upwardly mobile or emerging affluent. Serving our distributors are more than 1,300 home office associates, a headcount that’s increased by 50 percent since the 2008 Great Recession.

As to diversifying our product mix, we’ve been focused on two major product lines: life insurance and annuities. We also offer retirement plans and disability income insurance, solutions we didn’t aggressively market in prior years.

That’s changing. As part of the K2 plan, we’re growing these businesses to become a bigger part of our company. The four product lines — life insurance, annuities, DI and retirement planning — are now each marketed by a strategic business unit serving the U.S. market. We also have a Latin American operation, our fifth strategic business.

Hersch: Why has the company expanded into Latin America?

Huffman (pictured at right): Historically, the U.S. life insurance market has been flat. When you account for inflation, the industry has actually gone backwards. My predecessor, David O’Maley, began looking at emerging markets in 1999 as a hedge against the U.S. market.

Ohio National first expanded internationally with the 2000 purchase of BHIFAmerica Seguros de Vida of Santiago, Chile — now Ohio National Seguros de Vida. Since then, the unit’s assets have grown to more than $1 billion, transforming what we originally viewed as an R&D project into a major business.

We folded this business into a Latin American strategic business unit to put greater focus on the region. We now have an office in South Florida staffed by people who are bilingual and have worked in Latin America for most of their careers.

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In addition to the Chilean subsidiary, we also formed ONSV Peru in 2013. And in 2014, we established a joint venture in Brazil by purchasing a 50 percent stake in Centauro Vida e Previdencia.

Hersch: Why was it necessary, or advantageous, to organize the company around five strategic businesses?

Huffman: Again, we created this structure to place greater focus on each of the businesses. Now I have division heads that wake up each morning thinking about the top line, the bottom line and everything in the middle. They’re also working more collaboratively with each other than they were under prior corporate structure.

Hersch: I don’t see indexed products among your insurance and annuity portfolios. Why’s that?

Huffman: Historically, we haven’t manufactured these products, but we have noted a growing demand for them in recent years and so we’re developing them. As to the recently finalized fiduciary rule, we’re also developing a no-commission product that producers can wrap a fee around. 

Hersch: Life insurers are intensifying their focus on technology — big data, predictive analytics, mobile apps, CRM software, wearables and other IoT solutions — to gain greater insight into the preferences of customers and prospects, and to better tailor their offerings. What technology initiatives are Ohio National pursuing to gain a competitive edge?

Huffman: We’re implementing IT solutions to be more efficient and enhance the customer experience for all our constituencies: end customers, distributors and our home office associates.

Part of this consists of an enterprise strategy to collect and warehouse real-time data — sales, financial management and customer information — that our strategic business unit heads and shared services units need to run the business effectively. The quicker we can get this information to our teams, the better the decisions we’ll make long-term.

Our distributors will also benefit from this initiative. Most producers are very good salespeople. What doesn’t come to them naturally is analyzing their businesses: knowing where they’re making money, who their most profitable customers and prospects are, and how to identify and leverage cross-selling opportunities. The data we’re aggregating will help them become better business people.

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Last year, we also introduced for producers of our life and DI products a mobile e-app that’s been received very well by the field. The software has shaved days off our underwriting cycle time; that’s a huge advantage.

The mobile e-app accounts for 41 percent of all insurance applications we’ve received since September 1, 2015. We expect this percentage to grow, as advisors are quickly adopting the technology.

Hersch: How are the products and services you offer agents and advisors distinguished from the solutions available from competitor carriers? Why would a producer choose to affiliate with Ohio National?