Close Close

Life Health > Running Your Business

Ohio National: Breaking the mold among mutual insurers

Your article was successfully shared with the contacts you provided.

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.

See also: Little-known, AAA-rated firms are beating the insurance giants

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. 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.

See also: Why life insurers are saddling up to Silicon Valley

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.

See also: Share tracker data with life insurers? Consumers like the idea

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?

Huffman: We’ve been very successful at recruiting experienced producers from other companies. One reason is our consistency: We haven’t changed the basics of our distribution strategy since 2005.

Most of our distribution consists of independent producers, so we have to earn their business every day.

To that end, we give them the latitude to run their practices as they see fit. Last year, we introduced a tag line: “Your business. Your vision. We’ll help.”

When producers approach us, they want a solid relationship, quality products, competitive compensation, a superior value proposition and a company that’s easy to do business with. That’s what we offer them.

They also find attractive the fact that we’re a mutual company: We’re owned by our policyholders — not stockholders. And so we need to serve their best long-term interests. That’s a huge differentiator in the marketplace.

Hersch: How did your formative years in the industry inform your approach to doing business at Ohio National? What lessons and expertise do you bring to your current position from earlier stints?

Huffman: My background is unusual in that I spent about half of my 40 years in the business as a producer and general agent, an experience not shared by many of my industry peers. And so I have a unique perspective as a CEO: I’ve delivered death claim checks and had clients become disabled and secure DI benefits under policies I’ve sold. I’ve seen the difference we make in people’s lives.

Hersch: Is there a philanthropic component to the company’s mission?

Huffman: Yes. For a number of years we’ve had a foundation, which has made grants of more than $20 million. Last year, we donated $1.5 million to organizations in the Greater Cincinnati area.

We don’t just give money; we also encourage people to give back to their communities. So all of our associates are offered a service day when they can volunteer for whatever organization they have a passion around.

See also: AALU: Shifting from defense to offense on Capitol Hill

I personally serve on the boards of several organizations in the Cincinnati area, as do other executives at the company.

Our associates are also building homes in partnership with Habitat for Humanity. We’ve been building two houses per year since 2008; we’re constructing our 15th and 16th homes this year.

Our charitable efforts also extend to our variable annuity business. VA policyholders have the option to receive prospectuses and other reports electronically, which saves us a lot in printing and mailing costs. To encourage them to go electronic, we offer to send a $10 gift to Make-a-Wish Foundation of America. Since the program’s introduction in 2010, more than 20,000 Ohio National policy/contract owners have participated; and we’ve given more than $230,000 to the foundation.

This is a classic win-win: for our company and policyholders — and for Make-a-Wish.

Hersch: How much success have you had recruiting young people into the profession?

Huffman:We’re attracting a lot of young people, both 20- and 30-year-olds; that’s brought down the average age of our producers. The profession represents a great opportunity for them, as it has been for me.

When young people are surveyed about what’s important to them, at the top of the list is not making money, but “Am I making a difference?” That’s what we offer in this business: the ability to make a difference, build financial security and change lives.

Hersch: To what extent does your leadership approach represent a departure from prior business practices at Ohio National? How are these changes reflected in the corporate culture and focus?

Huffman: The company’s CEOs since our founding in 1909 have had different styles. What hasn’t changed is our value system; that’s been key to our success.

As for myself, the leadership style, skills and insights I bring to my position were cultivated over many years, first at MassMutual, where I served for more than 20 years, then in top executive positions — including president, chairman and CEO — at Union Central.

Turning to the corporate culture, we’re proud of the fact that the Cincinnati Enquirer has named Ohio National a top employer — awarding us the #1 or #2 spot — in Cincinnati for the past six years. We’re very employee-focused because it’s our home office associates who drive our business.

About 50 percent of company operations are associated with our people — as it should be. We do things that are fun. And we regularly bring to the home office people from the field to talk about their practices: how they do business; and how their work makes a difference in their customers’ lives. That gives all of us at the company, particularly those who don’t have field experience, a real appreciation for the importance of what we do.

Hersch: Other insurers are recruiting more producers and home office people of different backgrounds, including women, to better serve multicultural markets. Is this outreach also a priority at Ohio National?

Huffman: Yes, very much so. Our corporate philosophy is that diversity is everything — from the top down. The number of women who serve as officers at the company has doubled since I became CEO.

But diversity is not just about gender, sexual orientation or skin color; it’s also about recruiting people of varying backgrounds, perspectives and life experiences. By diversifying our workforce, we end up with better products and solutions. It’s just good for business. 

Warren S. Hersch is senior editor of NUL&H. 

 See also: The coming IoT revolution: a 6-point plan for life insurers