Dare To Dream

ABOVE: This photo featuring Irving Maurer (left), sign painter Richard King and Herman Wittwer appeared in the Wisconsin StateJournal the day after policyholders approved changing the organization’s name to American Family Mutual Insurance Company.Insurance Company. Wittwer abstained, saying he did not oppose Advertising Manager Bob Salisburythe change but preferred not to support it. Aberg remained and Promotions Director Charlieadamant, voting against the new name. Policyholders approved Ambrosavage were certain that advertising —the name change on March 6, 1962. But formal adoption would whether it was on television or in some otherwait until the next Policyholders Meeting in March of the medium — didn’t sell insurance. But they didfollowing year. believe that name recognition and the public’s awareness of the company helped open the door Changing the organization’s name was a forthright deci- for agents to sell insurance. When agents ques-sion that would come to be dogged by details. One of the most tioned the value of advertising, Salisbury replied,critical was a new logo. To test the effectiveness of the Farmers “Tell you what. You go out next week and startMutual logo, Salisbury scrambled the letters and took it to prospecting for the Salisbury Insurance Company.Madison’s Capitol Square.Three out of four people couldn’t name See how many appointments you get.”the company or what it sold. Ambrosavage conducted the sameexperiment in four Wisconsin communities within an hour’sdrive of Madison. Only 1 in 5 recognized it. Clearly, changingthe logo had little downside. Farmers Mutual invited advertising agencies, design firms, Dare to Dream | 95

ABOVE: American Family’s billboard on top of the home office on East Washington Avenue drew widespread attention. Brightly litat night, it was the biggest sign in Madison and airline pilots used it as a guide when landing at the city’s airport.artists and others to submit ideas for a new logo. In the meantime, logo,” Ambrosavage said after considering it for several minutes.Ambrosavage and Salisbury asked Naegle Outdoor Advertising “Absolutely.”Company, which handled Farmers Mutual’s signs, to designa large sign for the home office to acquaint people with the “It says it all,” Salisbury agreed.American Family name. Many employees complained that such Maurer was less impressed. He approved the sign only asa sign would be undignified. But with 20,000 cars passing daily, a provisional logo. “I think any official stamp of approval on ait was an easy, low-cost way to familiarize Madisonians — and company emblem might better come from board action, andthousands of others traveling to the Capitol — with the new had better await more inspirational research,” he wrote in a latercompany name. memo. The board, however, loved the design and approved it as the company’s logo before construction of the home-office Naegle presented a design with a basic red-white-and- sign began.blue logo. A simple roofline symbolized home and protection, Naegle bolted on the last pane of the giant red-white-and-with the company name beneath it. “This would be a great blue sign on Oct. 3, 1962 — the company’s 35th anniversary.96 | Advertising a New Name

AMERICAN FAMILY to Farmers Mutual executives, as a foundation of the home. TheINSURANCE: AN commenting, “The trademark we colors red, white and blue pointAMERICAN ICON suggest is a shape symbolizing the up the word American. home. The home suggests secu-When the Naegle rity. The off-center design attracts “We strove for simplicity; to say Outdoor Advertising attention and suggests the modern as much as possible in a few lines. Company was given comfort of a contemporary home, When a design gets complicated,the task of creating an outdoor rather than the static, symmetrical the reader’s eyes skip over theadvertising sign promoting cold feeling of an institution. minor elements and remembranceFarmers Mutual’s new name, quotient drops.”the boss handed the project to “The roofline with its sharp,a young designer, Ed McCartan. red angles and diagonal lines is Over the years, the designA farm boy who had served in an exciting key to the design, became one of the most recog-the armed forces and attended suggesting a protective barrier to nized logos in the industry. “ILayton School of Art and then the the elements of the outside world. guess American Family was prettyChicago Institute of Art for a year, We were careful not to make it happy with it,” McCartan said. “IMcCartan created a sketch “in just too heavy as to be crushing, nor never really thought much abouta few hours.” to be light as to be flimsy. it; we were doing so much stuff at the time and it was just one little Naegle presented the design “The word insurance is right- thing — and it turned out to be a fully at the base of the design, big thing.” Dare to Dream | 97

Construction cost $11,000, but Naegle didn’t charge American Working with a Madison advertising agency, Shumway andFamily for the logo design.The 70-foot-long, 200-foot-high sign Carman, they created the “Take a closer look” campaign empha-was the largest in the city. Easily visible in the day and brightly lit sizing Farmers Mutual/American Family’s protection for theat night, the American Family logo became a friend to airplane entire family. The campaign opened in February 1962 with apilots, who used it as a reference when landing on the airport’s full-page ad in The Saturday Evening Post, followed by ads innorth-south runway. Full-page ads in the Capital Times and the Look and Life magazines in March and April. Each ad cost moreWisconsin State Journal heightened the sign’s impact. “It really put than $8,000, but combined, the three publications reached 52us on the map,” Salisbury recalled later. percent of the households in the 10-state sales territory.OLD FRIEND WITH A NEW NAME To tie local agents to the national ads, the home office provided duplicate ads for placement in local papers as wellChanging the company’s name presented a once-in-a-lifetime as reprints for direct mailings. Also that month, the companypromotional opportunity. To broaden the public’s interest in sponsored a special cooperative advertising campaign, sharing 50the name change and present the image of a successful, regional percent of the cost of agent advertising with a $75 limit.organization, Ambrosavage and Salisbury proposed advertis-ing in regional editions of a few leading national magazines. On March 5, 1963, policyholders voted to adopt the new name, making it official. Within a year of the change, American Family had built strong and widespread name recognition through its overall advertising campaign combined with agentBELOW: To encourage continued advertising, American Family’s Push All Lines programshared half the cost of advertising with agents. As a result, road signs like the one in thispainting popped up across the Upper Midwest in the 1960s.98 | Advertising a New Name

The 1962 “Take a closer look” campaign fea-tured ads in regional editions of The Satur-day Evening Post, Look and Life magazines.Combined, the three publications reachedmore than half the people in Farmers Mutu-al’s 10-state territory. Dare to Dream | 99

co-op advertising. Ambrosavage and Salisbury were concerned introducing the PAL program at a series of special workshops.that those gains would be lost, however, if agents suddenly Mild-mannered, with a receding hairline and heavy glasses,reduced their advertising. “It takes a long time to build advertising Ambrosavage seemed an unlikely promoter. But in front of aawareness,” Salisbury explained. “But when you stop advertising, group he became an off-the-wall evangelist with a penchantawareness drops precipitously and you have to start all over again. for slightly off-color jokes that made the agents howl. To getIt’s a steady drop of rain that soaks through the soil.” the agents involved, he followed every other statement with an enthusiastic “Right?” Quickly he became known as “Mr. Right.” Ambrosavage had this philosophy firmly in mind as he puttogether his 1964 budget. He struggled with the problem of how “You notice the signs on the walls with the phrase Push Allto keep agents advertising, finally settling on an approach he Lines?” he asked agents in one meeting after another in late 1964.called “Push All Lines” (PAL). Since 1959, the company had “That’s what we always want to do — Push All Lines. Right?”shared 25 percent of the cost of agent advertising, up to a certainamount — increasing to 50 percent for special promotions. “Right!” the agents echoed.Under the PAL program, Ambrosavage proposed four special “Well, we came up with a program to do this, and what dothree-month promotions a year, each focusing on the company’s you think we’re going to call this program?”different lines — fire insurance in the winter, auto in the spring, “Push All Lines!”sickness and accident in the summer, and life in the fall. “You’re right — the Push All Lines program. And what’s the objective of this program?” After looking over the proposal — and its increased costs “To push all lines,” the revved-up agents yelled.— Kinnamon peered up at Ambrosavage. “Charlie, if you do this, “You’re right again — to push all lines. The whole idea is bril-we’ll have a 50-50 program all year.” liantly conceived — right?” “Right!” the agents roared. “Well, yeah,” Ambrosavage began, expecting rejection. But The agents loved Ambrosavage, and they loved his PAL.Kinnamon, trusting Ambrosavage’s instincts, let it go at that. Besides increasing agent advertising, PAL presented a built-in theme for quarterly meetings and gave the company a yearly Pushing an idea such as PAL through the home office opportunity to update agents on changes in each of the majorwas only half the job. The agents also had to be sold, since the lines and provide them with new or updated promotional material.responsibility for local advertising remained in their hands. Inthe fall of 1964, Ambrosavage and Salisbury took to the road,BELOW: In the winter of 1964-65, Charlie Ambrosavage and Bob Salisbury introduced the cooperative television advertising programat a series of special meetings with American Family’s 1,700 agents.100 | Advertising a New Name

TURN ON THE TUBE spent an average of six hours a day in front of 40 million black- and-whites, making it a powerful vehicle for advertising. But itTelevision was introduced in the mid-1940s, and Americans wasn’t until the spring of 1963 that two North Dakota agents —were quick to tune in. In 1947, there were 10,000 television sets Maurice Allshouse and John Soli, both under District Managersprinkled across the United States — offering just a few hours Wayne Wadeson — led American Family onto the airwaves.of programming each day. A decade later, American familiesPIONEERS IN TV the best team that week from of a collective radio advertis-ADVERTISING among the 90 high school football ing program, District Manager teams in the viewing area. On the Wally Huebsch and State DirectorDistrict Managers Frank Wednesday night broadcast, an Joe Stephan convinced agents Feivor and Fran Thomson American Family agent presented in Minneapolis and St. Paul to were among the first the winning coach and captain sponsor three 1-minute commer- American Family managers to pool with a football autographed by the cials every week on the popu- their agents’ co-op advertising Green Bay Packers. “Agents are lar Mel Jass “Evening Movie.” money to advertise on television. finding that they are ‘TV Stars’ and Jass, a colorful television person- In the fall of 1964, the two districts enjoy being recognized wherever ality, “talked” the American sponsored the “Team of the Week” they go,” the All American agent Family commercials directly to his segment on a local Green Bay TV magazine reported. 72,000 viewers, giving the ads a station’s sportscast. Each week, a warm, friendly appeal. committee of sports experts chose Following up on the success Dare to Dream | 101

The two pooled their co-op advertising money for American BELOW: Bob Salisbury (left) and Charlie Ambrosavage took aFamily’s “vacation special” campaign to sponsor five evenings ofa local 10:20 p.m. newscast. last-minute look at the script for a new television commercial. The idea clicked with Salisbury and Ambrosavage, whopromoted it to district managers across 10 states. Most wereskeptical, but with the home office increasing its share of agentadvertising to 50 percent, more managers and agents found theirway onto television. In January 1964, a second North Dakotamanager, Henry McKay, convinced his 10 agents to pitch in $5a month to sponsor the evening sports report once a week. In April, the All American agent newsletter reported thatdistrict managers Al Henning in North Dakota, Joe Dittmer andWalt Rottmann in Missouri, Fran Thomson and Frank Feivor inWisconsin, and Dale Mathwich in Illinois were developing TVadvertising programs. As they set up their programs, these and other districtmanagers naturally looked to Madison for the commercials. ButSalisbury didn’t have any yet. With the help of Shumway andCarman, he quickly developed advertising slides and copy forlocal announcers. In December 1964, Shumway and Carmanproduced a series of commercials at Madison’s WKOW-TV topromote AmPlan, American Family’s new monthly payment plan. Tracking expenditures for this co-op advertising initia-tive presented a few headaches. Once TV stations had aired thecommercials in their respective markets, they sent the bill toSalisbury. After paying the TV stations’ charges, Salisbury divviedup the bill between the company and the agents, charging eachagent’s share to his account. But as more agents advertised ontelevision, this decentralized approach proved unwieldy. It alsoexposed poor advertising choices by some agents and manag-ers. “One guy was buying time on [the TV show for children 5THE PITCH ended their pitch, the room fell silent. “Then Millard Ehlers, an agentHarvey Pierce (right), then a from Marshall — sort of a veteran district manager in Windom, spokesman — started to laugh,” Minnesota, supported co-op Pierce recalled. “He said, ‘Just wait advertising. But with 18 independent until policyholders see my face out agents still serving multiple compa- there! This is wonderful.’ Boom — it nies, he dreaded the meeting promot- was sold.” ing co-op television advertising. After Ambrosavage and Salisbury102 | Advertising a New Name

LEAVING THE HOUSEBefore the mid-1960s, the St. Paul’s Apache Plaza Shopping Combined with the cooperative company urged agents to Center, across the hall from the television advertising program, work out of their homes, rest rooms. “It was the cheapest cooperative agent offices gave primarily to reduce an agent’s space available,” he said. American Family a more polished, overhead. But, in a way to increase professional image that helped their visibility, a handful of agents Initially angered by Huebsch’s recruit high-caliber agents. By the emerged from their homes to rent disregard for company policy middle of 1966, the company had office space in shopping centers and tradition, State Director 25 co-op offices sprinkled across and downtown districts. Joe Stephan visited the office its 11-state operating territory. and was quickly convinced of Four years later, nearly half of the It’s uncertain who established its benefits. Soon, Huebsch had company’s 1,000 agents worked American Family’s first store- agent offices in two more shop- out of co-op offices. front office. Wisconsin East State ping malls. “It wasn’t long,” he Director Paul Miller put two said, “before we were leading the By 2017, very few agents agents in a Kenosha office in 1964. company in sales.” worked in shared office space. About the same time, two Missouri Most leased or owned their agents, Harland Curry and Jim After visiting St. Paul, Sales offices, occasionally renting space McCloskey, opened an office on Research Director Bill Kleinheinz to a fellow agent. Some American Natural Bridge Street in St. Louis. proposed a program under which Family agents created profes- American Family leased both sional business environments in But Wally Huebsch, a district office space and equipment and their offices situated in lovely, manager in St. Paul, commonly shared the cost — roughly $3,000 refurbished old homes; but no receives credit for popularizing in 1965 — with agents. Reluctantly, agents were known to be working agent offices. In 1964, Huebsch Agency Director Gus Kinnamon out of their own residence. leased space in the basement of agreed.Wisconsin East agent ArdenWurch was typical of manyagents in 1961 who worked outof an office in their home. TheWurch agency and residencewere on South Highway 100west of Milwaukee. Dare to Dream | 103

and younger] “Romper Room!” Ambrosavage recalled. “Why? Mathisson accepted the challenge and put together aBecause he could afford it.” presentation for the executive staff. American Family, through Mathisson, would produce the commercials and contract with By the autumn of 1964, Salisbury and Ambrosavage knew television stations across 10 states. The preferred timeslot wasthey needed a different approach. Minnesota State Director Joe the local, late evening news — when Mathisson believed peopleStephan, excited by Wally Huebsch’s success at pooling his agents’ were most in the mood to be informed. If that wasn’t available,money for radio advertising, convinced five district managers and timeslots immediately after the news or during the popular60 agents in the Minneapolis/St. Paul area to join a cooperative “Tonight Show” were the second and third choices. To make theradio advertising program — and he was looking into televi- plan affordable, the company needed at least 600 agents chip-sion. With that in mind, Salisbury and Ambrosavage considered ping in $25 dollars a month, with American Family matchinga company-wide television advertising program. the agents’ contributions. About that time, the Mathisson Advertising Agency, a American Family’s executive staff agreed to support thehighly regarded Milwaukee firm that handled the Miller Brewing program — provided Ambrosavage and Salisbury convincedCompany’s promotions, approached Salisbury about American enough agents to participate. That would be difficult. In 1964,Family’s print advertising. Salisbury and Ambrosavage told American Family had 1,400 field representatives. But full-timeMathisson they were more interested in television. After explain- career agents — those most likely to participate — numbereding that senior management would be wary of an expensive fewer than 500.program run by the home office and that the district managers,many of whom enjoyed the prestige ofworking with local television stations,might resist, Ambrosavage asked thead agency to make a proposal. “I can’tpay you for any work up front,”he said.“But if the program goes through,you’ll be our agency.”BELOW: Bob Salisburyhammed it up whileshooting a Dixielandversion of the AmericanFamily Jingle.104 | Advertising a New Name

So in the fall of 1964 and winter of 1965, Salisbury and Sunday evening television show in the late 1960s.Ambrosavage again hit the road to sell the agents on a cooper- Pulling the line “All your family’s protection under one roof ”ative TV advertising program. And, again, Charlie “Mr. Right”Ambrosavage carried the ball. “Greetings. It’s a pleasure to have from one of Salisbury’s brochures, Carroll wrote a 50-second tune,you see me again — right?” he began. “Bob Salisbury and I make complete with two stanzas and an instrumental bridge. A fewa great team — right? You and I make a great team — right? You weeks later, Ambrosavage and Salisbury returned to Chicago toand your managers make a great team — right? You and Regional hear the jingle for the first time. “He’d come up with this march,”VP Dale Eikenberry make a great team — right? You and Herman Ambrosavage recalled. “I tell you, it was an inspiring experienceWittwer make a great team — right? Working together — pooling to listen to that.”our talents and resources — that’s the secret to success — right?” The first recordings were made using Carroll’s 14-piece As Salisbury had predicted, some district managers resented orchestra and a male quartet. They recorded the song 37 timesthe home office takeover. Some agents didn’t like the proposed before Carroll felt it was just right. Copyrighted July 9, 1965,timeslots. But by the time the two men returned to Madison, the jingle made its debut later that month at the All Americannearly 800 agents had signed on to the TV advertising program, Convention in New York City. The jingle was an instant successproviding — with the company’s contribution — nearly a half a with the field force. Not only could agents order a taped versionmillion dollars for television advertising. for radio spots and color-film version for TV ads, they could also receive, without charge, a 33-rpm record with the three commer- That summer, Ambrosavage and Salisbury began looking for cial versions on one side and three instrumental versions on thesomeone to write a jingle to go along with their radio and tele- other. “This high fidelity recording is for you to enjoy at home,”vision commercials. Pouring over directories and making phone Salisbury wrote in a memo to the agents.calls, they came upon David Carroll, a respected Chicago orches-tra leader who wrote jingles on the side. He went on to become In March 1966, after nearly a year of preparation, Americanthe musical director for “The Smothers Brothers,” the top-rated Family’s first cooperative television ads aired on 36 stations, reach- ing more than 2 million homes. The series of five commercialsTHE PIANO kept paying his life insurance father appeared only in the earli- premiums. “It isn’t something he est pictures, with just the motherSince the mid-1960s, can see or put his arms around,” and daughter in later shots. The American Family produced the gentle voice said. “It’s really subtle message was that the some of television’s just a good feeling he gets from father’s life insurance paid for hismost memorable commer- knowing that her future is secure.” daughter’s piano lessons and hercials. American Family’s 1977 The commercial ended with a upbringing.award-winning “Piano” spot was young woman playingone such commercial. This deli- Brahms beautifully andcate, soft-edged advertisement the announcer saying,allowed the viewer to perceive “American Familymore of its meaning with each Insurance says, ‘Youviewing. don’t buy life insur- ance for you. You buy The “Piano” opened with a little it for her.’”girl struggling to play Brahms’s“Waltz 15 in A Flat.” The playing Many viewers whogrew perceptibly more accom- were not paying closeplished as the camera panned attention didn’t real-family photos on the wall and the ize until the second ornarrator described how the father third viewing that the Dare to Dream | 105

BELOW: A series of five commercials featured Charlie, an Amer- were able to out-advertise our competitors from that moment on,” Salisbury said. At the same time, the company kept its totalican Family agent who never appeared on camera, talking advertising budget — as measured against premium volume —with his customers. To capitalize on this effect, many agents at 1 percent.wore “Charlie” buttons, linking themselves with the popularTV commercials. THE OLD SOFT SELL featured “Charlie,” an A year on television did more to put American Family in the American Family public’s mind than 35 years of radiator emblems and novelty agent, talking with items. In 1967, Salisbury again scrambled the letters of the typical families about American Family logo and stood on a street corner in Milwaukee their insurance needs asking people to name the company. More than 80 percent and coverage. Never could — a four-fold improvement over the company’s previous shown on camera, emblem. “They even started singing our jingle,” Salisbury said. Charlie could have Name recognition translated into dollars and cents. After been any agent. The stagnating for several years, the number of American Family company capitalized on policies increased to 726,899 in 1966, up from 688,440 the year this effect by providing agents before. Full-time agents jumped from 509 to 590 in the same with lapel buttons bearing the name period. “We grew more in numbers of policyholders, upgradedCharlie. “I have been wearing my Charlie button, and people our manpower, developed more premium volume, and madehave noticed it and remarked about it,” one agent told The All a larger profit than during any other year in the past decade,”American magazine that spring. Maurer reported to policyholders in January 1967. The quality of the commercials and the regularity of theirappearance during popular programs gave American Family Those trends continued as American Family grew in bothunprecedented visibility. By 1974, 1,500 agents enrolled, and the size and market share. “Success has many authors, and thereadvertising and promotions budget skyrocketed to $1.8 million. were many factors contributing to the growth of American “With agents agreeing to pay half the cost of advertising, we Family,” Salisbury reflected. “But advertising played one of the principal roles.”LETTING DATA efforts under her direction. And advertising strategies for theDRIVE MARKETING careful review of the results led to amfam.com internet home page, adjustments and influenced future launched in 1996.While Bob Salisbury and campaigns. Charlie Ambrosavage Along with Advertising had relied largely upon That data-driven approach led Administrator Jon Fugere,their well-honed instincts to make to significant improvements in Knapstein directed the creationdecisions about marketing for core marketing programs, such of award-winning, warm televi-American Family, when Annette as television advertising, agent sion commercials for AmericanKnapstein joined the firm in 1983, co-op advertising and direct Family. Building on the company’sshe embraced the power of infor- marketing. In the early years of reputation, these commercialsmation. Extensive research and the Information Age, Knapstein emphasized American Family’smarket analysis served as the saw the marketing potential of the compassion and dependabilityfoundation for all marketing fledgling internet and developed and its policyholders’ loyalty.106 | Advertising a New Name

Advertising would continue to play a large and important commission Knapstein earned as an “advertising agency” wentrole for the company in the coming decades. back to the field force. By 1985, nearly 800 agents had enrolled in the metro advertising program. Advertising Manager Bob Salisbury had hired AnnetteKnapstein in September 1983 as an advertising specialist to opti- Knapstein succeeded Salisbury as advertising directormize the co-op advertising program, particularly for metropolitan in 1990, and the position evolved into director of integratedagents. “Agents in major metropolitan areas couldn’t make their marketing communications. In 2006, Knapstein was named viceco-op money go as far,” Knapstein explained. “And with many president of office administration, serving in that role for moreagents or groups of agents advertising, they weren’t presenting a than five years. During that time, she continued to implementunified image of the company.” data-driven, cost-effective practices and solutions to improve the workplace and day-to-day administrative operations of the Starting in Milwaukee, Knapstein worked with metro-area company. She returned to the marketing division briefly as viceagents to buy advertising. Not only did this unified approach president before retiring in 2012 after a 29-year career.give the agents additional buying power, but the 15 percentBELOW: During the years she directed American Family’s advertising programs, Annette Knapstein and her team won industryawards for creativity and impact. She used research and data to make disciplined decisions about content and spending. Dare to Dream | 107

To increase the number of agents in the 1960s, Executive Vice President PeteMiller named Joe Nicolay (below) the company’s “manpower czar,” giving himresponsibility to quickly and significantly increase the number of people sellingFarmers Mutual products. Nicolay was a forceful, demanding leader who gavedistrict managers agent recruitment quotas and expected results.

Change before you have to. — JACK WELCH, former CEO, General Electric6 CHANGING WITH THE TIMES

CHAPTER 6 | CHANGING WITH THE TIMESW ith the end of gas rationing — and its convenient gauge of miles driven — most insurers in the late 1940s abandoned the mileage factor in setting premiums and returned to the prewar classification system. Underwriters,stereotyped as seeing only black and white, found themselves share fell as other insurers refined their classification systems,swimming in gray. Limited to a few broad categories, they were enabling them to offer lower rates to preferred classes.forced to lump unrelated risk groups together. Women under Working at tables piled high with punch cards containing25 were grouped with their parents. People who drove long detailed information on Farmers Mutual’s half-million poli-distances for work shared a higher rate class with young, unmar- cyholders, Hayes, Assistant Controller Don Breitenbach andried men. As a result, rates were too low forsome drivers and excessively high for others. To compensate for the inadequacy of BELOW: After World War II, as the economy boomed, more cars were on thethe system and stop persistent underwrit-ing losses, many insurers in the early 1950s roads, including Madison’s Capitol Square.turned to merit/demerit plans that increasedpremiums for people involved in accidentswhile lowering rates for accident-free drivers.But Howard Hayes, who had joined FarmersMutual in 1937 and become its underwrit-ing manager in 1944, opposed merit rating,arguing that it penalized the careful driverwho nevertheless had an accident. Instead,Farmers Mutual emphasized strict underwrit-ing rules.The company refused to insure malesunder 25, for example, even though it oftenlost longtime policyholders when their chil-dren reached driving age. Strict underwritingenabled the company in 1955 to turn its firstunderwriting profit in years. But its market110 | Changing With the Times

ABOVE: After World War II, Farmers Mutual’s underwriting department struggled to fit too many drivers into too few categories.underwriter Jim Pfefferle shuffled and reshuffled the data, trying On Labor Day, 1951, the millionthto find a new scenario. The outcome: the selective merit plan, American soldier to die in 176 years ofwhich reintroduced the mileage factor, charged higher rates to war fell in Korea. The millionth traffic fatality onpeople who drove to work or long distances for business, and American roadways occurred only a few monthsreduced rates for “family pleasure and convenience” drivers. later — after only a half a century of driving.The plan also imposed higher rates on drivers under 25. Young,unmarried men with their own cars paid the highest rate — and classes. Farmers Mutual fine-tuned its new rating system and inFarmers Mutual insured them only if their parents had been poli- 1960 introduced the safe young driver program, a merit/demeritcyholders for 18 months or more. plan for unmarried men under 25.The company also dropped its to-and-from-work class because it unfairly penalized small-town Many insurers eventually adopted the basic principles of the residents. Instead, it applied the higher rate to those driving 30selective merit plan, but Farmers Mutual initially suffered under or more miles per week to work. The new system also chargedit. Even though the rates for these drivers were high, the plans a higher rate to those who drove more than 7,500 miles a year.were still competitive in the marketplace and they attracted a Two years later, Farmers Mutual became the first insurer to offerflood of younger men, accounting for one-third of the compa- a preferred rate to drivers beginning at age 30, rather than theny’s new applications. On the other hand, premiums for the industry standard of 25, and it increased rates on drivers over 70.“to-and-from-work” class were too high, which drove away busi-ness. And rate reductions for pleasure-car drivers failed to attract To help agents use the new system correctly and improvenew low-risk motorists. their risk selection, the company started a resident underwriting To improve its pricing, Farmers Mutual hired its first actu-ary in 1956, former South Dakota State Insurance CommissionerGeorge Burt. But the trouble lay not only in the rates but in the Dare to Dream | 111

program. Previously, all underwriters worked in the home office, preferred risks, leaving less-discerning companies to cover thevisiting their districts once a year to get to know the agents and higher-risk standard classes. This approach, however, made itteach them how to classify applicants. Moving to St. Paul in difficult for agents representing Farmers Mutual exclusively toApril 1962, Fran Brewster became the first resident underwriter. make a decent living. Other companies prospered by insuring allBrewster soon had counterparts in Indianapolis,Topeka, Omaha types of drivers. One such company was Dairyland Insurance,and Milwaukee. founded by Don Anderson and Stu Struck, a former college friend of Al Gruenisen, who was at that time American Family’sSUCCESS AND THE STANDARD RISK regional vice president in Wisconsin.For more than 30 years, Farmers Mutual prided itself on being After visiting with Struck, Gruenisen toyed with thea class mutual, keeping rates low by restricting membership to notion of insuring standard risks. Aggressive and outspoken, Gruenisen often found little support for his ideas among theBELOW: Using a demerit system to set premiums, American Standard insured drivers who didn’t qualify for coverage with FarmersMutual. The more points a driver had, the higher the premium. Moving traffic violations earned two points, “improper” passingfour points, and violations such as drunken driving, racing, or assault with a car earned nine points.112 | Changing With the Times

executive staff. But on this issue, he found a powerful ally — Between 1960 and 1970, 37 million new drivers climbed behind theTreasurer Hugh Wallace. Together, the two men developed an wheel, among them 15 million drivers between the ages of 18 and 29 — the group with the worst underwriting-for-profit plan that record for fatal accidents. would allow Farmers Mutual to put up $2 million to be the lone stockholder in American Family Life Insurance Company, it invested only $400,000 — half what insure standard risks by charging was needed — to launch the American Standard Insurance Company or ASIC. The board insisted its affiliated windstorm higher premiums. Articulate and and life companies provide the balance. Summing up the board’s attitude, Secretary Alex Opgenorth said, “Farmers Mutual can’t staunchly conservative, Wallace shoulder this loss alone.” enjoyed broad respect throughout With a green light from all three boards, Hayes, Kinnamon, Gruenisen and Vice President of Operations Pete Miller the organization. Nevertheless, the proposal received a cool reception from the executive staff. But public outrage over theAl Gruenisen growing number of drivers unable to buy insurance had many insur-ance executives worried about state — and possibly federal— action. After much soul-searching, in early 1961 the FarmersMutual board approved the formation of a subsidiary to insurethose drivers believed to be at higher risk who did not qualifyfor Farmers Mutual. Although the Farmers Mutual board hadTHE BEETLE INVASIONBy 1958, a small, oddly shaped car from Germany, the Volkswagen Beetle, had captured 5 percent of the American market. Within a decade, the Beetle and other economy cars accounted for nearly 30 percent of the cars on the road. Reasoning that these smaller cars were more maneu- verable, weighed less and required less room to park, Farmers Mutual and other insurers in 1960 offered a compact-car discount. But when fatality rates in compact cars proved twice that of larger automobiles, insurers quickly repealed the discounts. Dare to Dream | 113

BELOW: Pete Miller, Farmers Mutual’s first executive vice presi- developed plans for ASIC. Slowly, others in the company began to see the merit in the idea. Careful underwriting could weeddent, served as the first president of the new American Stan- out the worst risks, and quarterly — rather than semi-annualdard line. — renewals would enable the company to raise rates or cancel policies promptly. More important to some, American Standard could improve Farmers Mutual’s sales and underwriting profit. Rather than cancel policies and send drivers to competing compa- nies, Farmers Mutual could transfer its marginal risks to American Standard. After a period of safe driving, those more-risky drivers could return to Farmers Mutual. Similarly, young drivers could be insured through American Standard until they qualified for Farmers Mutual.This would also improve agent incomes, making it easier to recruit and retain an exclusive field force. With Miller as president, Gruenisen as executive vice pres- ident and a staff of five, American Standard opened its doors in Wisconsin on Sept. 30, 1961. There was no fanfare, noTHE SHAPE OF 60-inch metal desk. The type- “RK 55” (for Robert Kelliher, asTHINGS TO COME writer always seemed to be in well as Riege and Kuemmel) the way — particularly for policy also boasted a lower desktopBob Kelliher, the director of typists, who had to spread their and a built-in wastebasket. The systems and procedures for work around the bulky machine. desk won first-place in the 1958 the company and the man National Office Management who had introduced the power Kelliher, with the help of staff Association’s annual awards and of IBM to the business in 1942, members George Riege and Frank was written up in the New York was an innovator in a number of Kuemmel, designed a 55-inch Times. Custom-built for Farmers ways. In 1958, in the midst of yet desk with a wing for the type- Mutual, the RK 55 remained another space crunch, Kelliher writer. The “L” shape increased popular among its clerical staff took a fresh look at the standard the desk’s work space while into the 1970s. reducing its overall length. The114 | Changing With the Times

Joe Chvalaphotographs, no breathless anticipation. Agents were not to pros- board of directors approved the gradual acquisition of licensespect for American Standard, but only to submit applications for in additional states — provided that the management for thosethose who had first applied to Farmers Mutual but did not qualify. new areas requested no funds for expansion until the Midland Region became profitable and adequate staffing became avail- The opportunity to sell to a wider range of people excited able. At the annual meeting the following year, Irv Maurer, nowmany exclusive agents. Those who sold themselves and their poli- president of the company, told policyholders of his dream tocyholders on Farmers Mutual’s strict standards, however, kept the expand across the continental U.S. “To sustain the momentumnew company at arm’s length. Meanwhile, non-exclusive agents, we now have, we should plan to expand into 38 additional statesmost of whom placed standard risk drivers with other companies, in the next 10 years,” Maurer said.were happy to insure more of their customers with ASIC. In thefirst two weeks, American Standard issued 418 policies. With “He sort of dropped that on us to get us thinking beyondexpansion into Iowa and Minnesota, sales reached 2,400 by the what we were doing at that time,” recalled Bob Koch, then lifeend of December and 10,000 — with $1.3 million in premiums company vice president.— in the first year. The logistics and expense of national expansion using the Marketing Manager Joe Chvala aimed American Standard’s agency model proved to be too steep for company leaders. Itadvertising at three growing markets — the young, the elderly would be decades before the internet and technology enabledand military personnel, who were included as a higher-risk the company to create complementary agent/online/call centergroup because they had no previous insurance, little drivingexperience or higher numbers of driving violations or claims. BELOW: When Irving Maurer announced plans to make FarmersPremiums doubled the second year, and the company turned inan underwriting profit of $107,000. By 1966, American Standard Mutual a national company, the regional insurance carriercollected $8.5 million in premium on 40,000 policies. Such rapid served just ten midwestern states.growth — with its corresponding increase in acquisition costs— stretched the young company’s surplus just as it wasabout to receive its first A.M. Best rating. Withoutadditional capital, American Standard would ratea “C+.” American Family Life and AmericanFamily Mutual stepped in with a $1.5 millioncontribution to surplus, earning AmericanStandard a “BBBB” financial rating and an“A+” policyholders’ rating.FROM SEA TO SHINING SEA?In 1960, with the nation in a deep recessionand the company suffering its fourth straight yearof underwriting losses, the American Family Mutual Dare to Dream | 115

distribution systems nationwide — thereby realizing Irv of the 10-state service area everyMaurer’s dream. year. To keep some of them as Planning for expansion forced Farmers Mutual to evaluate itsexisting regional structure. Treasurer Hugh Wallace and Agency customers and establish a base inDirector Gus Kinnamon had estimated that a region required150,000 policies to support its management structure. With just new states, the company allowed66,000 casualty and fire policies, the Central Region lagged farbehind projections, pushing per-policy expenses to 40 percent above independent agents outside the 10the other regions. On Oct. 1, 1961, Farmers Mutual disbanded theCentral Region. Illinois and Indiana became a part of the Wisconsin states to service American FamilyRegion, and Iowa joined Minnesota and the Dakotas in theNorthwest Region. Central Region Vice President Bill Kleinheinz, policyholders beginning in 1962.who had formerly worked in public relations for the company, nowreturned to the agency division as sales research director. The company would augment The major question of how to enter a state economically the natural growth of the fastest-using the company’s field structure remained unanswered.Wallace and Kinnamon estimated the break-even point to be $4 Joe Nicolay growing areas with direct-mailmillion in annual premiums — 50,000 to 75,000 policies. Usinga top-down development plan beginning with a state director marketing. Once a state had a fewand four district managers, the company would suffer 10 years oflosses before the new state would start to turn a profit. hundred policyholders, American Family would send in agents The executive staff opted for a bottom-up approach. and district managers — and eventually a state director.Research indicated that about 2,000 policyholders moved out But first, the company had to expand and strengthen its field force. Decimated by the agency reorganization program, the company’s field force — once more than 3,200 agents strong — had fallen to just over 1,500 by 1961. To begin this work, Executive Vice President Pete Miller asked Sales Training Supervisor Joe Nicolay to design an inno- vative district manager development program. Most companies promoted successful agents to managers. But experience showed a good salesperson didn’t always make a good manager. Consequently, companies regularly lost talented agents who failed in management.BELOW: To build interest in the new American Family LifeInsurance Company, Sales Training Instructor Don Mahoneycreated a promotional campaign featuring space travel, anew phenomenon exciting Americans in the early 1960s.He and Bob Koch traveled across the company’s oper-ating territory “in a station wagon filled with the space-ship and bags of silver dollars,” said Mahoney. Agentswould receive $5 for writing a $5,000 policy and $20for writing a $10,000 policy. Here, Mahoney presentedKoch with $180,000 worth of apps from Illinois.116 | Changing With the Times

Nicolay’s management development program provided Wally Huebsch Joe Stephanagents with extensive training before they committed tobecoming managers. To ease anxiety, the program — empha- BELOW: New Colorado State Director Don Mahoney stood onsizing that no one outranked the salesperson — treated themove to district manager as a job shift rather than a promotion. the balcony of the Capitol in Denver.Any agent-turned-manager who decided the job wasn’t work-ing out could take over the next available agency. “You didn’t go GO WESTdown to being an agent, you simply returned to being an agent,”Nicolay explained. “Some of the best agents in the company are By the mid-1960s, American Family held licenses in most statesformer managers.” west of the Mississippi, planning was complete, underwriting profits had returned and a new name was in place. The company In March 1961, the first 12 agents in the management devel- was ready to go west.opment program attended a four-day training school at the homeoffice. Afterward, each agent completed 24 hands-on manage-ment projects, such as recruiting an agent. Upon finishing theseprojects, an agent was eligible for — though not guaranteed —a district manager position. To further ease the transition, the company also developedan advanced compensation plan and group health insurance planfor district managers. With district manager training and development in place,Miller turned his focus to recruiting a top-notch sales force. Hecentralized the function in 1962, appointing Nicolay director ofsales manpower development. “You’re the manpower czar. Youdon’t report to anybody but me,” Miller told the former tankcommander. “You go over the regional vice presidents and statedirectors and right to the district managers if you have to. Youcan cut through all levels and all lines.” In his new role, Nicolay identified several barriers to recruit-ing and retaining full-time agents. One was the policy thatdistrict managers repay a portion of a failed agent’s advance, andAmerican Family responded by removing that requirement. Thecompany also replaced the underwriting bonus, which dampenedgrowth, with a bonus plan that rewarded selective underwritingand growth. And management revised agent contracts to elim-inate separation benefits that inadvertently encouraged agentsto leave the company, introducing instead an extended earningsprogram that rewarded long-tenured agents. A forceful leader, Nicolay had a bearing that demandedrespect. In the field, his decisive no-nonsense style resembledthat of George Patton, the general he served under in World WarII. Nicolay leaned hard on district managers to recruit, impos-ing quotas and expecting results. His efforts paid off. Althoughthe total number of agents increased only slightly during thethree-year experiment with centralized recruiting, the numberof full-time agents more than doubled to nearly 600. In 1965,when Al Gruenisen became secretary and general counsel, Millerpromoted Nicolay to Wisconsin regional vice president. Dare to Dream | 117

First stop — Denver.The mile-high capital of Colorado was Montgomery Ward. With a five-person staff, AmPlan beganhome to 1.1 million people in 1966 and was growing at the rate operation Jan. 1, 1965. In three weeks, it had 350 accounts. Byof 2,500 people a month. year’s end, AmPlan had 5,700 accounts, representing more than 12,000 policies. Except for its monthly billings, AmPlan was Minnesota State Director Joe Stephan and Twin Cities’ not computerized. “We hand-posted every charge, credit andDistrict Manager Wally Huebsch volunteered to lay the ground- payment,” Wilpolt said, “and manually balanced accounts atwork in Denver while keeping their Minnesota jobs. The home the end of the month.” Within four years, AmPlan was turn-office agreed. In the spring of 1966, they rented space in Denver’s ing a profit.new Villa Italia shopping complex, a 72-acre mall that enclosedone-third the retail space in of all downtown Denver. In June, As the nation began to take prosperity for granted, theHuebsch recruited two of his best agents, Frank Jones and Don stigma earlier generations felt over going into debt began toBaker, to be the first Denver district managers. Oliver Dirks, an disappear. Interest payments became tax deductions. Consumeragent in Canton, South Dakota, moved to Denver in July as the credit companies opened offices in strip malls across the country,first agent. The quick work enabled American Family to begin and automakers launched their own finance companies.This newColorado sales on Aug. 1, 1966 — two months ahead of schedule. competition also forced banks to become aggressive lenders. ManyFor the next couple of years, Huebsch regularly flew to Denver to paid finder’s fees to insurance agents who referred car-buyershelp recruit and train. But progress was slow. “It was a lot tougher to them for loans. Fearing that banks and automakers might oneon those guys than we thought it would be,” Huebsch said. “It day also sell insurance, insurance companies decided to beat themwas lonesome. Nobody knew American Family. Nobody cared to. to the punch by opening their own finance firms.There was no claims staff, no underwriters, no support.” BELOW: Norb Vanden Heuvel (far left), Hugh Wallace, Howard But they forged ahead. By the time Don Mahoney, former Nebraska state direc- Padley from the contractor Orville Madsen & Son, Irvingtor and sales training instructor, became the first Colorado state Maurer and Bob Kelliher reviewed plans for the 1966 con-director in 1968, American Family had five district managers and struction of a 60,000 sq. ft. east-wing addition to the East42 agents in the state. A year later, Colorado sales surpassed Iowa Washington Ave. building. Less than 10 years later, plansand South Dakota. Development costs, however, remained high, were underway for the 77,000 sq. ft. west wing.and in 1970 the executive staff tabled plans for expanding intoadditional states, preferring to concentrate on filling gaps in thecompany’s existing markets. “We simply hadn’t established a prof-itable manner of opening up new states,” Maurer said.MONTHLY PAYMENTSAND LONG-TERM LOANSIn the 1960s, Americans became enamored with credit cards andmonthly payment plans that helped them buy now what theycould afford later. By the time Treasurer Hugh Wallace recom-mended American Family develop its own monthly paymentplan, several insurance companies had already introduced similarprograms. Working with Koch and Pete Miller, Wallace devel-oped the American Family Monthly Payment Plan (AmPlan) tomake it easier for middle-class families to budget for insurancepayments. The plan encouraged people to place all their insur-ance with American Family and roll all of their premiums intoa single monthly bill. To manage AmPlan, Wallace hired Senior UnderwriterGene Wilpolt, who had learned monthly billing proceduresduring a five-year stint in the management program at retailer118 | Changing With the Times

Frank Luedtke Seeing the trend, Wallace, for loan expertise and hired Frank Luedtke, a former managerDean McCarthy Gruenisen and the former WW2 for Transamerica Finance Corporation. With 15 years’ experi- veteran-turned-insurance man ence in the consumer loan business, Luedtke had the expertise Robbie Robinson, among others, to get AFFS off to a fast start. By June 1969, he and his assistant, urged American Family to enter the Dean McCarthy, another former Transamerican, had AFFS up finance market. American Family and running. and American Standard together insured more than 800,000 auto- Luedtke understood that the key to Financial Services’ mobiles, with notes against roughly success lay in the field. He forged relationships with strong two-thirds of them. Financing just district managers like Paul Moosmann in Washington, Missouri, 500 of those cars would equal $1 and Joe Sanks in Janesville, Wisconsin. In four months, AFFS million in loans. had $1 million in loans, and within a year, $2.5 million. By its fifth anniversary, the company had eight branch offices, 12,000 In 1969, American Family accounts and more than $23 million in loans. resuscitated Webb, Inc., its old management company, to provide GOVERNMENT STEPS IN auto loans to American Family policyholders. Maurer chaired the In the 1950s, state legislatures had continued to debate the new company, named American virtue of compulsory auto insurance, which the insurance indus- Family Financial Services (AFFS), try resisted vehemently. As an alternative, the industry proposed and Pete Miller became president. uninsured motorist coverage, which broadened medical cover- Miller went outside the company age and provided death and disability payments to insuredBELOW: Network news cameras rolled as Irving Maurer, chair of the National Association of Inde-pendent Insurers, spoke at the NAII’s 1968 annual convention in New York City. RIGHT: FarmersMutual was among the leaders in offering uninsured motorist protection in 1957. Dare to Dream | 119

THE INSURANCE injuries and fatalities, the IIHS manufacturers to build safer vehi-INSTITUTE FOR became a respected, independent cles. The companion HighwayHIGHWAY SAFETY nonprofit scientific and educa- Loss Data Institute supported the tional association completely mission with scientific studies ofFrustrated by the constant funded by insurers. insurance data, publishing human increase in auto accidents, and economic loss costs by vehi- insurance companies joined A state-of-the-art vehicle crash cle make and model. together in 1959 to establish the test facility in Virginia began test- Insurance Institute for Highway ing crashworthiness of cars and American Family CEOs Dale Safety (IIHS). Dedicated to trucks. Its test results, widely Mathwich, Harvey Pierce and publicized through media cover- Jack Salzwedel all served as IIHS reducing traffic accident age, helped pressure auto board chairs.120 | Changing With the Times Photo courtesy of the Insurance Institute of Highway Safety.

motorists involved in accidents with uninsured drivers. Many at had briefly held a similar role in the late 1950s, the companyFarmers Mutual raged against the new — and costly — direc- hadn’t had a full-time public relations person for most of itstion. “This is immoral!” Vice Chairman Bill Aberg decried when history. In 1974, he, Miller and Kinnamon created a public rela-the executive staff recommended board approval of such cover- tions committee. The following year, Gruenisen hired Kathrynage. Despite objections, Farmers Mutual became a leader in Gibson as part of the corporate legal staff to handle public rela-offering this protection in 1957. tions and employee communications. Eight years later, Ralph Nader’s book “Unsafe at Any Speed: ‘I LOST A GOODThe Designed-in Danger of the American Automobile,” ignited FRIEND YESTERDAY’a national debate about auto safety. Congress responded with theHighway Safety Act, which mandated improved auto and high- On March 30, 1968, Herman Wittwer suffered a stroke atway design. Insurance carriers, long conscious of the need for his home in Fort Lauderdale, Florida. All that week, anxiouscar and driver safety, weighed in through the Insurance Institute letters and telegrams traveled between Fort Lauderdale andfor Highway Safety (IIHS) and the National Association of Madison. Doctors initially listed Wittwer in fair condition butIndependent Insurers (NAII) auto repair committee chaired byGruenisen, American Family’s secretary. As inflationbattered Americans in the late 1960s, critics chas-tised insurance companies for “exorbitant” rate hikes.By 1967, regulators in 24 states were investigating theinsurance industry. At the same time, three congres-sional committees and the U.S. Department ofTransportation conducted inquiries into allegationsof price-fixing through the national rating bureaus,the future of state-federal regulation, whether invest-ment income should be considered when settingrates, and the advantages of no-fault insurance. As chairman of the NAII in 1967-68, Maurerled insurers through this difficult period. In testi-mony before congressional panels and throughan aggressive public relations campaign, theNAII and its members successfully defendedan industry caught in the inflationary spiral ofskyrocketing medical and repair costs and theever-increasing number of accidents. On the no-fault issue, Gruenisen servedon — and eventually chaired — the NAII’sno-fault committee, which developed a modi-fied no-fault plan that became a model formany states.The plan ensured instant paymentof a person’s medical bills regardless of faultwhile preserving the right to sue for addi-tional damages. By the mid-1970s, 15 statesenacted similar legislation, and Congressabandoned national no-fault legislation. Gruenisen’s work with legislativeissues convinced him American Familyneeded someone working full time inpublic relations. Although Bill Kleinheinz Dare to Dream | 121

his condition worsened, and the following Sunday — April 6, Family Mutual (the parent company), American Standard, and1968 — Herman Wittwer died at 79. American Family General (the windstorm company). Koch and Miller worked well together, by and large avoiding conflict. At Wittwer had retired five years earlier but remained chair- the board level, Koch succeeded Wittwer on the mutual board,man of the board and maintained his office at American Family. and Wallace succeeded Wittwer on the life board.He and his second wife, Dorothy (Stearns Mayer), spent muchof the winter in Florida. When in Madison, however, Wittwer PLANNING FOR PROFITalways stopped by the office, with his lively walk and cheerful“good morning” brightening executive row. After reading the mail, Hobbled by ineffective underwriting tools, intense competitionhe chatted with whoever came through the door. However, rarely and tight rate regulation, insurers experienced 10 years of under-was that person Irv Maurer. In fact, the two men didn’t speak for writing losses between 1955 and 1965. During this decade-longthe last two years of Wittwer’s life. down-cycle, American Family accumulated $4.4 million in underwriting losses. Inflation added insult to underwriting One of Wittwer’s regular visitors when he was in the office injury. By the mid-1960s, many insurers tacitly accepted under-was longtime custodian Ray Sather. For years, Sather joined writing losses — provided they were offset by investment income.Wittwer for a cigar and conversation about the WisconsinBadgers. The day following Wittwer’s burial in Madison’s At Farmers Mutual, Treasurer Hugh Wallace and RuthRoselawn Cemetery, Sather sat in Wisconsin Regional Vice Kutz, money center specialist, managed the group’s $36.8 millionPresident Joe Nicolay’s office pensively smoking a cigarette. “I lost portfolio through a Chicago brokerage firm. Following thea good friend yesterday,” Sather said. It was a loss shared by many. conservative course set by Wittwer, Wallace and Kutz invested $34 million in double- and triple-A bonds; $2.5 million in stocks, After Wittwer’s death, Maurer advanced to chairman andCEO. Koch became president of American Family Life, andMiller became president and chief operating officer of AmericanDon Breitenbach Brent Johnson Hugh WallaceCONTRIBUTIONS introduced contributions account- enabled American Family to moreACCOUNTING ing to American Family — and accurately measure the cost of the industry. The system recog- sales and service for individualIn 1969, American Family nized fixed and variable expenses segments of its business. The new Treasurer Hugh Wallace, Budget — concepts previously not applied system also helped management Director Brent Johnson and to the insurance business. estimate when a new line or terri- Controller Don Breitenbach tory would begin to turn a profit. Contributions accounting122 | Changing With the Times

W. ROBERT KOCHWORKING UP THROUGH THE RANKSBored with his homeroom class President 1977 - 1982 For Koch, that single year stretched at Madison’s Central High, Bob Chairman and CEO 1982 - 1989 into 41. He advanced quickly to senior Koch stared absently out the underwriter and in December 1951 window toward the old Boyd Mansion, After Daniels sold the eatery, was named head of the life depart- where more than 100 people worked Koch also learned the value of a qual- ment. Eighteen months later, he for Farmers Mutual, and wondered ity product. The new owners didn’t moved to the agency department as what the people there were doing. believe in working on Sunday, and sales personnel manager. While there, Thirty-five years later, Koch often told receipts dropped 40 percent. To cut he helped develop the company’s the story, chuckling before he added, costs, they purchased lower-quality exclusive agency plan, including the “Now, as president, I look out at every- food. Within three years, the restau- advanced compensation plan. In 1957, one working and wonder what in the rant closed its doors. he initiated home office sales schools. world they’re all doing.” Koch graduated from the univer- That autumn, Koch was selected to Born on March 25, 1925, to a sity in June 1948, and immediately head Farmers Mutual’s new life insur- fourth-generation Madison family, received a job offer from the Vicks ance venture — American Family Life Koch and his older sister came of age Corporation. While the thought of Insurance Company. His enthusiasm during World War II. His parents, like moving to New York City greatly created a sense of excitement and many others, lost everything in the appealed to him, he decided for family team spirit that helped the company Great Depression. At age 6, he moved reasons to remain in Madison a year become one of the nation’s fast- with his family into a relative’s second- before joining Vicks. In the mean- est-growing life insurance companies. floor apartment on West Washington time, he took an underwriting job at Avenue. Koch lived there until 1943, Farmers Mutual. Koch became vice president of the when he graduated from high school life insurance company in 1959 and and joined the military. He served as president in 1968. Following the 1977 an M.P. for Gen. George Patton’s Third retirement of Irving Maurer, he became Army as it rolled north across Europe. president of the American Family Insurance Group and five years later, After the war, Koch enrolled in the chairman and CEO. During his tenure University of Wisconsin and returned with the company, Farmers Mutual/ to his high school job at the Chocolate American Family rose from one of Shop, a popular Madison restaurant. the 20 largest insurers in Wisconsin in There he received his first lessons in 1948 to one of the 20 largest proper- management. The owners, a couple ty-casualty companies in the nation named Daniels, didn’t hire waiters; when he stepped down as chairman in they hired dishwashers who worked 1989. He remained on the board until their way up to the wait staff. “Train March 31, 1995. people from the ground up,” Koch summarized. “And give them incen- Always active in community tives. The more responsibility you give affairs, Koch remained engaged in someone, the better they’ll respond.” several nonprofit organizations for Koch also responded well to the many years. In his mid-80s, he led a approach, eventually managing the multi-million-dollar fundraising drive restaurant in the Daniels’ absence. for the Society of St. Vincent de Paul. He died in 2016 at the age of 90. Dare to Dream | 123

and the remainder in mortgage felt confident that his company’s time had come. The group’s capacity ratio — the measure of premium revenue (risk assumed) loans. In 1960, the company hired against surplus (ability to handle risk) — stood strong at $1.79 to $1. The group had a lean operation, seasoned leaders and a grow- 30-year investment veteran Fred ing force of well-trained, exclusive agents. Maurer’s confidence was justified. Blue ink returned in 1965 and — with few excep- Morton as its first vice president tions — remained for nearly a decade. In 1967, American Family had its first of many “best years ever.”Total applications exceeded of investments. Though a conser- 200,000, group premiums reached $69 million, and single-year life insurance sales surpassed $100 million. vative financial manager, Morton But challenges remained. By the time President Richard increased investments in lower- Nixon took the oath of office in January 1969, annual infla- tion was 6.2 percent. The new president immediately cut federal rated, higher-return “A” bonds and spending and tightened the nation’s money supply, pushing interest rates to the highest level in a century. UnemploymentFred Morton common stocks to take advantage jumped from 3.5 percent to 6.2 percent by January 1970. Stock of the strong economy. By creating this new posi-tion, Farmers Mutual acknowledged the growing importance ofinvestment income. But it did not accept underwriting losses as away of life.The executive staff vowed to set adequate rates to showan underwriting profit. While insurance carriers following theAmerican Agency System struggled with the situation, MaurerBELOW: In 1974, 21 severe storms, including a tornado in Oshkosh, Wisconsin, resulted in $6.2 million in claims paid by AmericanFamily. Storm losses contributed to a disastrous year for the group, forcing management to draw $9 million from policyhold-ers’ surplus.124 | Changing With the Times

On Jan. 1, 1970, American Family Mutual homeowners, health and life insurance sales. “Throughout 1971,” Insurance Company merged with American Miller said, “we plan to stress our ‘all-your-family-protection-un- Family General — the windstorm company — form- der-one-roof ’ concept.” Direct mail campaigns helped agents ing the general lines division that handled windstorm, drum up new business in the company’s other lines. Applications farm fire, and farmowners insurance. that year hit 323,818, led by a 43.5 percent increase in health lines.and bond prices plummeted, adding momentum to a downward “When we merely follow the competition,” Maurer told thespiral that led to the nation’s steepest economic decline since the executive staff, “we lose our individuality . . . then we are engineer-Great Depression. ing ourselves to mediocrity, and we become just another insurance company.” But by realistically defining objectives and developing The recession wreaked havoc on the insurance industry. plans to meet those objectives, Maurer explained, “we are actingInflation made estimating future replacement and repair costs like a leading insurance company.”difficult. The problem was even more acute in health lines, whereunforeseen medical advances drove up the cost of diagnosis and Through the mid-1970s, inflation — driven by the Arab oiltreatment.Traditional actuarial formulas proved inadequate, forc- embargo, a slumping stock market and catastrophic storms —ing underwriter Jim Pfefferle and his actuarial staff to rely on hammered property and casualty insurers. In 1974 the Americantheir judgment and intuition more than ever. Family Group suffered a $9 million operating loss, forcing the company to dip into the surplus. Miller called it “a year most fire As insurance companies raised premiums in the face of rising and casualty insurers would like to forget.”costs, they struggled to maintain a balance between premiums andsurplus. Normally, investment income bolstered surplus. But with UNITED WE STANDstock and bond markets on the decline, investment losses reducedindustry surpluses as premium revenues shot up. The result was When Bob Koch was promoted from vice president to president ofan industrywide capacity crunch. To keep premium-to-surplus American Family Life Insurance Company in 1968, the 10-year-ratios in balance, many companies limited — or even prohib- old organization had $500 million of life insurance in force.ited — the sale of new policies. The restrictions angered agents, Annual premiums exceeded $6 million, surplus neared $4 millionwho found their incomes restrained just as the cost of living was and assets totaled almost $22 million — a sturdy springboard forgoing through the roof. BELOW: American Family Life President Bob Koch (left), lead- American Family, however, found itself in an enviableposition at the turn of the decade. Under its pricing-for-profit ing life insurance District Manager Joe Tisserand (center), andapproach, the group’s policy count grew from 716,000 in 1964 Vice President John Reed unveiled a new award for districtsto 995,000 in 1969, and the policyholders’ surplus jumped from selling more than $5 million of life insurance in 1974.$20 million to $31 million. As a result, American Family Mutualand American Standard maintained a capacity ratio of $2.18 to$1. Taking advantage of this strength, the company stepped uppromotions for auto insurance in 1970. This included a direct-mail campaign for the first time since the company’s early years.Nearly 500 agents signed up for the program, allowing thecompany to send letters promoting American Family’s two-cardiscount to 1 million non-policyholders. Sales increased 20 percent in 1970. New applications reachedan all-time high of 288,507, pushing the all-lines policy count to1.1 million. American Family improved its position in the marketand cemented relations with its 1,800 agents. The following year— hoping to solidify its connection with more than a quar-ter-million new policyholders — American Family focused on Dare to Dream | 125

continued growth. Koch chose John Reed, sales personnel direc- the field force, Koch enjoyed and respected Reed. As he becametor, as his top lieutenant. Reed started with the company in 1954 more involved with the American Family Group, Koch readilyas an agent in Mauston, Wisconsin, and earned his stripes as a entrusted the management of the life insurance company to Reed.direct manager in Tracy, Minnesota, after the Minnesota upris- “I knew he was there if I needed him,” Reed said. “But as long asing that saw scores of agents quit over a dispute with the home things were going well, he was hands-off.”office. Traveling together to promote more life insurance sales to Over the years, the field force gained more confidence inTHE AFLIC LIFE DIAMOND CLUB By 2017, the rewards program continued, with agents earning their first ring and diamond withIn 1971, American Family Life Insurance Company 28 life applications and 2,500 points based on the introduced the AFLIC Life Diamond Club, present- amounts of coverage sold. Agents added additional ing diamond rings to agents who sold more than diamonds to the ring with higher sales levels and a $1 million of life insurance in a single year. That persistency of 85 percent. year, President Bob Koch presented rings to Chuck Webster, Joe Tisserand and Don Payne. In 1978, In 2016, 818 agents achieved AFLIC-level honors Gloria Hannon of Emporia, Kansas was the first with another 399 reaching higher levels, includ- woman to earn the honor. ing 23 Centurian agents who recorded at least 100 applications.Don Payne Joe Tisserand Chuck Webster Gloria Hannon126 | Changing With the Times

selling life insurance. In 1966, Chuck Webster of the home office companies. In the 1970s, conglomerates bought many of thoseagency became the first American Family Insurance agent to companies as cash-flow vehicles, ratcheting up the competitivesell more than $1 million of life insurance in a year. In 1971, Joe level. American Family Life flourished in this atmosphere, reach-Tisserand, another Madison agent, broke the $2 million mark. ing $1 billion of in-force life insurance in 1972, $2 billion in 1976 and $3 billion in 1978. The following year, Tisserand, a natural teacher and coach,became a district manager in Madison. Combining advanced life American Family’s health lines had a slower start butinsurance training with a highly competitive attitude, he led his evolved into a major contributor to the group’s overall successteam to the top spot in 1973 — a position they held for the next in the 1970s and 1980s. Considered an accommodation line in12 years. “I was a firm believer that training builds confidence the early 1960s, health insurance initially received little atten-and confidence equals sales,” said Tisserand, who would even- tion from senior management. But with healthcare costs risingtually become vice president of the life insurance company. “We at twice the rate of inflation, middle-class Americans wonderedwere more aggressive in life insurance.” how they would continue to pay for healthcare. Convinced of the growing demand for quality health insurance, Product Training Aggressiveness became essential to success in the life Supervisor Robbie Robinson led American Family’s effort toinsurance market in the 1970s. Before that, life insurance was make health insurance a major line. In 1968, health lines hada gentleman’s game dominated by conservative, establishedBELOW: Floyd Desch (seated, center) heads the newly established marketing division in 1971. Seated (from left) are Charlie Ambro-savage, Desch and Bill Kleinheinz. Standing (from left) are Fran Hanson, Robbie Robinson, Tom Frost, Bob Salisbury, Dick Har-meling, Flynn Roskam and Dick Adler. Dare to Dream | 127

its first 2,000-application month. American Family had considered disbanding the health lines department. But under Klokner’s direction, the company The following year, at Robinson’s found its niche in the competitive health insurance market. Most people in urban America received health coverage through group urging, American Family became plans offered by their employers. Klokner focused on rural areas, where group coverage was scarce, making the company’s individ- one of the first insurers to sell a ual health policies popular. He also developed a group plan aimed at small businesses. Agents like Silver Everhart in Lindsborg, comprehensive healthcare plan Kansas, found huge markets in small towns. By 1976, health lines — still predominantly a manual operation — handled more than that featured a $10,000 or $20,000 80,000 policies and $23 million in premiums. benefit cap. Sales climbed and NEW LINES FOR A NEW ERA in 1971, the company started a In the mid-1960s, the executive staff began to consider the mass marketing of auto insurance after the RAND Corporation 10-person night shift to service approached American Family about starting a new groupJim Klokner health lines. Still, the department lacked a director.In the early 1970s — as Congress debated a national health-care program — Vice President of Marketing Floyd Deschappointed Jim Klokner as health lines director. Klokner found hisexperience as the first resident underwriter in Milwaukee usefulin his new job. “They had the same problems that Milwaukee hadin auto lines — lack of profit, sporadic production, lack of train-ing and low morale,” he said.BELOW: In 1976, the American Family Mutual Insurance Company board of directors included, (left to right) Allan Gruenisen, RothSchleck, James Underkofler, Richard Renk, Hugh Wallace, Joe Chvala (American Standard board only), James Caskey, Bob Koch,Pete Miller and Irving Maurer. Caskey was the only agent to serve on the board of directors without first moving to executiveemployee status. Schleck, Underkofler and Renk were all Madison area business leaders.128 | Changing With the Times

KEEPING A PROMISE, to have a broader knowledge of As the industry contin-RESTORING DREAMS insurance law and repair costs. ued to move toward lower cost, Sterling Schallert wrote the first more efficient claim handling,T“ he adjuster is the connect- claims technical manual in the American Family needed to find ing link between the insurer late 1950s. Shortly thereafter, new ways to adapt without sacrific- and the insured,” Claims adjusters attended training at Val ing the high customer satisfac- Training Director Frank Horner Technical Institute in Blairsville, tion that set it apart from other told an audience of American Pennsylvania, to learn about the carriers. Improved consistency in Family adjusters in 1974. “The parts of an automobile, how to claim handling ensured custom- adjuster is the personification of read the manuals and to make ers received the same high-cali- the insurance policy created by repair estimates. ber service regardless of location. the underwriter and sold by the And a new claims system began agent.” Quick, friendly service became rolling out in 2017, providing real- In the early days, claims adjust- increasingly important. In 1968, time claim data to adjusters, ers worked from the home office, American Family opened its agents and customers, as well as traveling their territories during first drive-in claims center in enhanced mobile capabilities and the week, returning to Madison on Milwaukee. With free estimates convenient payment options. Friday for paperwork and reports. and on-the-spot payments, To serve far-flung regions, the drive-in centers epitomized the Since that adjuster meeting in company hired local attorneys. fast, caring, professional service 1974, much has changed in how In the early 1940s, Urban people wanted from their insur- American Family handles claims. Schmitz became Farmers Mutual’s ance company. But one thing has remained the first resident claims adjuster. same — an unrelenting focus on During the company’s first three By the early 2000s, increas- the customer. decades, three-fourths of Farmers ingly busy lives meant custom- Mutual claims adjusters held law ers valued time-saving solutions. “Our goal is to be the reason degrees. But in America’s post- American Family responded by customers choose American war economy, attorneys were in giving customers the ability to Family,” Personal Lines Claims high demand. By the end of the report claims 24/7. Service agree- Vice President Marc Castellucci 1950s, less than half of the adjust- ments with contractors and auto told more than 300 claim manag- ers were lawyers. repair facilities streamlined the ers in 2014. “I want customers to The transition coincided with claim process and gave customers hear about our exceptional claim the evolution of package poli- an added level of peace of mind service and choose us, or choose cies, which required adjusters knowing the repairs were backed to stay with us, because they by American Family’s workman- know our adjusting teams will ship guarantee. restore their dreams.” Dare to Dream | 129

ABOVE: Women attended the home office sales school for the first time in August 1975. These pioneering womenwere (from left) Sheri Fries, Claudia Allison and Virginia Larimer.NO LONGER After the war, Purdie and other continued its strong recruit-A MAN’S WORLD women who sold for Farmers ment efforts and by 2017, women Mutual relinquished the field comprised nearly one-third of allDuring the company’s early to men. Over the next three American Family agents. years, when Midwest decades, few women picked up farmers were the focus, a Farmers Mutual sales kit. In Olga Purdie the field was comprised exclu- 1970, Margot Hornsey, an agent sively of white males. World War in Alton, Illinois, became the II changed that. With millions of first woman to qualify for the All people called into service over- American agent convention. In seas — most of them men — August, 1975, Claudia Allison from women found opportunity in the Aurora, Colorado, Sheri Fries from workforce, including as agents Denver and Virginia Larimer from for Farmers Mutual. In 1940, Olga Oelwein, Iowa, became the first Purdie, a widow with two young women to attend the home office children, became one of Farmers sales school. They were among Mutual’s first employees in the 25 women pounding the pave- Minnesota claims office. To earn ment for American Family, and by extra money, Purdie sold insur- the mid-1980s, there were nearly ance in the evenings and on week- 200 women among the compa- ends until 1946. ny’s 2,400 agents. The companyauto plan. Citing the success of group health and life insur- Family backed away from the idea, realizing that it was notance, mass marketing advocates envisioned a time when people prepared for such an undertaking.would obtain car insurance — and possibly other personal lines— through their employers. Proponents claimed this approach By 1970, mass marketers had captured 3.5 percent of thecould shave 15 percent off per-policy administrative costs. But auto insurance market. The most successful companies alsoafter more than a year of discussions with RAND, American offered group health and life insurance, raising concerns that an all-in-one package might become a reality. With this in mind,130 | Changing With the Times

Miller decided American Family should develop its own mass the program, converting groupmarketing program as a defensive action. In the spring of 1970,he named Floyd Desch to the newly created position of vice plans to individual policies.president of marketing. With actuary Lyle Sorenson and SalesResearch Director Bill Kleinheinz, Desch began work on a mass Commercial insurance provedmerchandising plan for auto insurance. A year later, when GusKinnamon retired as vice president of the agency department, a more successful venture. In thePresident Pete Miller folded the agency division into marketing. 1970s, several states subjected To take over the mass merchandising project, Desch enlistedColorado State Director Don Mahoney in 1972. Because farmers to workers’ compensa-American Family remained committed to offering productsthrough its field force, Mahoney developed a plan that relied tion laws. To fill the farmer’s needon agents to prospect and make initial contacts; district manag-ers, state directors or mass-marketing specialists would close the for low-cost workers’ compen-sale and agents would service the policies. American Family’sventure into mass marketing began in 1974 with two group auto sation insurance, Miller and Joeplans. Slowly Mahoney added eight more groups. “This wasn’tsomething we intended to do unless we had to,” Mahoney said. Chvala, vice president of American John Scharer“We wanted to be very cautious, go slow.” The cautious approachpaid off. The mass-marketing fad fizzled by the end of 1976, and Standard, opened a commercialAmerican Family, with just $59,000 in premiums, easily shelved lines division. They selected John Scharer, American Standard’s operations manager, to direct the new department. Initially, Scharer focused on workers’ compensation and commercial liabil- ity plans for small- and medium-sized businesses. But after a conference in Milwaukee introduced him to the concept of a business owner’s package policy that combined the most popu- lar coverages in a single, convenient plan, Scharer and his staff changed emphasis. American Family’s commercial lines opened in Wisconsin on July 1, 1975, with a broad array of plans, including a businessBELOW: When Irving Maurer retired, he handed the reins to Pete Miller, his trusted lieutenant. Miller and Maurer were polar-opposites,with Miller’s soft-spoken, pleasant manner a significant change from Maurer’s sometimes-intimidating style of management. Dare to Dream | 131

ABOVE: Steve Tingley’s desire to test the latest media technologies ensured the Media Center team would con-sistently create high-quality visual communication products.LIGHTS, CAMERA, The media landscape changed producing hundreds of videoINNOVATION quickly in the 1990s, moving from communications each year. That videotape and photographic film studio complemented a state-of-In 1973, Milwaukee Resident to floppy disk, DVD, laser disc and the art video and digital design Underwriter Bob Hinz moved then digital media. Tingley’s team studio built on the National to Madison to coordinate developed a digital infrastruc- Headquarters campus. American Family’s health lines ture to produce and store digi- training. Hinz put his photogra- tal video, photos and graphic files. Media staff helped produce phy and video background to The department created the agent major corporate sales and lead- work, producing slide, video and portrait program, the eGreetings ership events, providing plan- audio training programs. A couple digital greeting card program, ning, design and production of years later, Sales Training video email communications and support for many internal corpo- Director Dick Harmeling created a corporate media assets library. rate projects and presentations. the audio-visual (AV) unit in the The department also worked marketing division and hired Near the end of the 20th with other divisions on corpo- Hinz to staff and manage it. Hinz century, the company developed rate building projects, leveraging provided basic slide shows and the American Family website technology advancements and video programs, using a razor- (amfam.com) and the Compass establishing AV system design blade to splice reel-to-reel audio corporate intranet. A few years standards for conference and and video. later, mobile devices such as training rooms, executive areas, By 1987, Hinz and his staff were the smart phone and web sites town halls and other corporate producing computer graphics and such as YouTube contributed meeting spaces. working with interactive video. to the growth of digital video. One of his young staff members, Everyone, it seemed, had the abil- As of 2017, Media’s award-win- Steve Tingley (pictured above), ity to produce and feature video ning team continued to produce began supporting sales by produc- communications on the internet. compelling content in both digital ing and staging video programs and print formats for an ever-ex- and executive presentations for In 2006, Media introduced panding number of media. A look events, including the All American American Family to webcast- ahead showed some promis- agent convention. Hinz retired in ing, a popular video communica- ing technologies, including drone 1992 and Tingley assumed leader- tions tool to quickly communicate applications, virtual meetings and ship of the Media department. to large audiences with live user-generated media. A culture video. As its popularity grew, of innovation kept Media an indus- Media built a webcasting studio, try leader.132 | Changing With the Times

owner’s package policy (BOPP). By the end of the year, commer- who had served on the association’s board of governors sincecial lines had 1,669 accounts and the following year, more than 1946. Citing his leadership, wisdom and loyalty, the association10,000. Steady growth followed, and by 1980, commercial lines thanked Maurer for his “invaluable contributions to the NAIIhad 32,000 policies. By its 10th anniversary, the division — and to the independent insurance cause.”renamed business lines — had more than 180 employees servicing54,000 policies totaling more than $23 million in premiums. On May 11, 1977 — his 72nd birthday — Maurer stepped down as board chair and retired with Kathryn to their winterNEW LEADERSHIP home in Florida. The board elected Robert Bock, dean of theFOR A NEW HALF CENTURY School of Business at the University of Wisconsin-Madison, to fill his seat on the board and Miller steppedOn March 1, 1972, 67-year-old Irving Maurer retired from his in as board chair and CEO. Theday-to-day duties at American Family. Like Wittwer before him, board eliminated the separateMaurer retained the title of chairman of the board and contin- presidency for Americanued to attend executive staff meetings. But he handed control Family Life, and Kochand the title of CEO to President Pete Miller. For Maurer, who became president andderived his greatest satisfaction from work, retirement was a chief operating officer ofdifficult step. As he had done throughout his career, Maurer the group companies.turned to his wife, Kathryn, for support. “If I find thatless work doesn’t suit me, I can depend on A few months later,my wife to see that I change my attitudes, American Family celebratedbeliefs and behavior,” Maurer joked, quot- its 50th birthday with opening one of his old adages. houses in the home office, its two At the 1972 policyholders’ meeting regional offices, and numerous branch offices and agenciesin March, Miller paid tribute to Maurer across the 11-state area. For American Family, it was a yearas the “surviving member of the of unprecedented growth. Despite declining stock marketsfirst generation of manage- and 12 major storms, the group ended 1977 with a recordment.” He cited Maurer’s 2.3 million policies; revenues of nearly $450 million, andcreative ideas, competitive assets approaching $600 million. The group processeddrive and perseverance a record 690,000 new business applications submittedas a basis for American by 2,360 agents — a far cry from 1927, when FarmersFamily’s success. The Mutual closed its books with 236 agents,National Association of 486 policyholders and $8,100 in premi-Independent Insurers ums. “But two things haven’t changed,”also praised Maurer, Miller emphasized. “Our policyholders are still most preferential to us, and our goal Irving J. Maurer is still to provide them with the best insur- ance at the lowest possible cost.” Dare to Dream | 133



Adversity is a fact of life. It can’t be controlled. What we can control is how we react to it. — UNKNOWN7 MORE THAN A SURVIVOR

CHAPTER 7 | MORE THAN A SURVIVORT he nation’s economic malaise worsened in the late 1970s. Driven by a renewed energy shortage, inflation shot up to 9.6 percent in 1978. Unemployment hovered around 8 percent, and the stock market tumbled. American Family compliedwith President Jimmy Carter’s requests for voluntary wage and policyholder — unaware in advance of what the physician wouldprice controls, holding premium increases in all lines except charge and the insurer would pay — responsible for the unpaidhealth to a two-year limit of 19 percent and cost-of-living salary portion of the bill. “We wouldn’t do that,” said Jim Klokner, thenadjustments to an annual 7 percent. American Family’s health lines director. “We fought for an actualThis came on the heels of two strong growth years for reduction of the bill.”the American Family Group. To improve its balance between American Family’s field commander in this fight was Patpremiums and surplus, the company altered its prices and sales (Snell) Jackson, a former claims adjuster with the San Diegopromotions to slow growth in itsauto business just as other carri- BELOW: While the economic roller coaster of the 1980s took its toll on the insuranceers fired the first tentative volleysin what became another long and industry, American Family was building and growing.devastating price war. AmericanFamily’s fine-tuning pushed annuallife insurance coverage over $1billion for the first time. As a result,new business premiums grew 11percent to $91 million in 1978, andtotal policies increased 10 percentto 2.5 million.Inflation troubled more thanjust President Carter. Large insur-ance companies, tired of annualdouble-digit increases in healthcare costs, began challenging medi-cal bills. Many insurers agreed topay only a set amount for someprocedures. This often left the136 | More Than a Survivor

ABOVE: Fire set by an arsonist left only the skeleton of this policyholder’s home in 1995. Expert analysis by American Family’s specialinvestigations unit helped identify the cause of the fire, which was set by a man ultimately convicted of murder.(California) County Medical Society. American Family hired department — with a staff of seven — began reviewing medi-Jackson as a senior health adjuster in 1976 to review medical fees cal bills from all lines and the company’s own employee benefitsand negotiate reductions. “Jawboning” — the practice of negotiat- program. In 1983, annual savings amounted to $1.3 million.ing lower fees — wasn’t new to American Family, whose adjusterswere experienced with parts-and-labor manuals and evaluation Arson represented another hot-button issue for insurers inguides for auto and property claims. But telling doctors and the late 1970s. The fastest growing crime in the nation, arson-hospitals that their charges were too high was a new battlefield. for-profit, cost insurance companies — and their policyholdersJackson developed guidelines to help adjusters recognize more — $1.6 billion a year, with total costs from arson reaching $15than 40 common overcharges and to negotiate lower fees. billion in the U.S. Ralph Arnold, American Family’s vice pres- ident of claims, responded with an arson loss-control program As health line sales grew and claims costs spiraled, American to help claims staff recognize and report possible arson cases.Family needed a more focused approach to jawboning. In 1980, Two years later, American Family became one of the first insur-the company established a medical services department under ance carriers in the nation to form its own special investigationJackson to investigate questionable health claims. During the unit (SIU) under Stan Davenport, retired captain of detectivesfirst three months, Jackson saved policyholders $155,000 in over- for the city of Madison. By the close of 1979, after less than acharges. When the company added two more people to the staff, year in operation, Davenport supervised investigators in Madison,medical services began reviewing 700 claims a month, cutting Minneapolis, Kansas City and St. Louis, saving the company$467,000 of overcharges in 1980 — well beyond its $250,000 $40,000. Among Davenport’s first investigators was Bill Lundy,goal. Originally limited to evaluating charges submitted under a fire marshal, former Madison police detective and investigatorAmerican Family’s health care policies, the medical services with the Wisconsin Department of Justice. “As a fire marshal, I Dare to Dream | 137

SPECIAL INVESTIGATIONSIn 1982, Bill Lundy (right), American Family’s special investigations unit manager, was instrumental in creating the International Association of Special Investigations Units to promote information sharing and education among insur- ance company investigators and to combat insurance fraud. By 2017, the associa- tion had more than 3,800 members representing more than 600 companies.constantly fought with insurance companies to give me infor- supervisors and saved the company $2.75 million annually inmation,” Lundy said. “Here was an insurance company that fraudulent-claims costs. Regional investigators, who workedwas actually going to do something about it. I thought it was from their homes, handled five to six cases each month, coveringa great idea.” all forms of insurance fraud, including inflated claims, suspicious workers’ compensation cases, false stolen-property claims and When Davenport died in 1982, Lundy took over the unit. “choreographed” auto accidents. The goal was not to deny legiti-The new manager’s staff included 12 investigators and two field mate claims. “Our company has a very strong ethic. We’re going to pay the claims we should pay,” Lundy said. “But it’s our respon-BELOW: Health Services Director Pat (Snell) Jackson (seated), sibility to policyholders to keep their rates down by making sure we don’t pay fraudulent claims.”Claims Coordinator Sandie Nimocks, and Senior HealthClaims Adjuster Fred Frenczak reviewed a health claim for By 2017, Special Investigations Unit Manager Jack Deverovercharges. led a 45-member team that investigated thousands of claims and saved American Family more than $10 million a year. The SIU team included desk, field and vendor investigators. Spread across the company’s operating territory, six people focused on fire investigations and one specialized in event data recorder (EDRs or automobile black box) analysis. In 2017, the Insurance Information Institute estimated that fraudulent claims accounted for 10 percent of the cost of all claims paid, an amount exceeding $40 billion annually, according to the FBI. Common types of fraud include “padding” or inflating actual claims, misrepresenting facts on an insurance application or submitting claims for injuries or damages that never occurred.138 | More Than a Survivor

“The majority of frauds we handle involve people taking advertising program — particularly television advertising — andadvantage of an event to collect money they’re not legally due, the co-op office program created a more professional image thatincluding inflating the cost of the damages; including pre-existing helped attract new agents. As a result, the field force grew fromdamages as loss-related, and adding passengers to a collision loss 1,755 in 1964 to 2,360 in 1977. With more agents, better train-after the fact,” said Dever. “The more serious frauds involve prop- ing and improved products, American Family’s policy count shoterty and auto arsons and organized fraud rings such as staged/ up from 680,000 in 1964 to 2.3 million at the end of 1977.caused accidents or medical provider billing schemes.” From the 1960s to the mid-1990s, the company’s regionalREGIONAL DEVELOPMENT — vice presidents knew their primary job was to grow the company.MOVING UP AND OUT In 1974, Ramiker, who had built the Northwest Region to nearly half a million policyholders in Minnesota, Iowa and the Dakotas,In the 1960s and 1970s, American Family needed to bulk up its was named senior vice president of underwriting. To succeedfield force to increase sales. Prodded by Regional Vice Presidents Ramiker, Pete Miller selected Kansas State Director ClaytonAl Gruenisen and Joe Nicolay in Wisconsin, Les Ramiker in Nelson. Rather than move to Madison, where the NorthwestNorthwest and Dale Eikenberry in Midland, state directors hit operating unit resided, Nelson went to Minneapolis and ran thethe recruiting trail. Drawing on the pool of managers created by region from the regional claims office. A year later, he proposedthe management development program, state directors opened building a $2 million regional headquarters in suburban Edenmore than 50 new districts between 1964 and 1977, raising Prairie, Minnesota.the total to 128. The success of American Family’s cooperative To prepare for the 300-mile move, Northwest Regional Service Manager Dick Haas relocated the Northwest operatingBELOW: With more than a half a million policies in the Northwest Region, in 1977 American Family built a regional office in EdenPrairie, Minnesota, a Minneapolis suburb. Dare to Dream | 139

ABOVE: In 2015, the marketing, design and real estate teams began infusing the company’s brand into its corporate offices, startingwith Eden Prairie. Interior design elements featured images that align with the company’s mission and customer focus.unit to the old A&P building across the street from the home happy in Windom and had turned down several promotions. Butoffice. For several months, the unit functioned as though it was Nelson wouldn’t take no for an answer. “We’re going to need lead-hundreds of miles from Madison, conducting business with the ers and I think you have the ability to be one of them” Nelson toldhome office almost exclusively by mail and phone. In the spring Pierce. “I’ll help you as much as I can.”of 1978, nearly 40 employees moved to the Twin Cities. In July,Haas and company loaded 500,000 policies onto trucks and drove Reluctantly, Pierce accepted the promotion and, after 12them to the new three-story, 60,000-square-foot regional office. years in Windom, moved his family to Minneapolis. “It was one“We unloaded them and were ready to work Monday morn- of the most difficult moves we ever made,” Pierce said. Nelsoning,” Haas said. remained Pierce’s ally and advocate, pushing and prodding him, as the two men advanced through the company. But the computer system wasn’t ready. The week-longcomputer failure created a backlog of work that took months to Further south, Eikenberry’s Midland Region also wasget through. “We had paper piled up everywhere,” Nelson recalled. expanding. By 1977, Eikenberry had more than 700 agents serv-“Some people quit in the middle of the afternoon because they ing 732,000 policyholders in Missouri, Kansas, Nebraska andcouldn’t take it anymore.” Low wages added to the frustration. Colorado. Regional staff numbered nearly 600, with more thanAmerican Family based wage scales on Madison’s market, which 400 employees working in the St. Joseph, Missouri, regionalpaid less than the Twin Cities. A retention program focusingon benefits and the new office environment improved the situa- Clayton Nelson Harvey Piercetion, but nearly two years passed before the regional office gainedits footing. As an insurance industry veteran, Nelson didn’t let the build-ing project distract him from his primary mission — increasingsales. In 1977, he split the region’s anchor state into two oper-ating territories, Minnesota North and Minnesota South. StateDirector Noel Warren took over Minnesota South and helpedNelson convince Harvey Pierce to lead Minnesota North. Pierce,a district manager in southwestern Minnesota since 1966, was140 | More Than a Survivor

ABOVE: More than 400 people worked for American Family in the St. Joseph, Missouri, area when the company replaced the 1958regional headquarters with this 100,000 sq. ft. office in 1979. Regional Services Manager Derril Jones oversaw the move.headquarters. To make room for continued expansion, in 1979 the home office building, leaving the office to the corporateAmerican Family constructed a three-story, 100,000-square-foot staff. No need for a dress rehearsal on this move. The $7 million,building across from Missouri Western College. 145,000-square-foot regional headquarters settled at the inter-In Joe Nicolay’s Wisconsin region, Illinois was the rising star. section of Highway 30 and Stoughton Road, just a mile east ofUnder State Director Dale Mathwich, the number of American home base. Wisconsin Services Manager Phil Strand coordinatedFamily districts grew from seven to 13; agents quadrupled to the relocation of nearly 500 employees. Besides the Wisconsin164, new business applications increased fivefold to 50,000, and regional operation and the computer system, the regional officeannual premiums jumped from $2.7 million to $34.9 million also housed the Madison branch of American Family Financial— a portion of that growth coming from Mathwich’s pioneer- Services, and the Madison-area claims office.ing efforts in the suburbanChicago market. In 1979, Mathwich con- BELOW: The Wisconsin Region moved into this new 145,000 sq. ft. building in 1980.vinced Nicolay and MarketingVice President Floyd Desch todivide Illinois into two sales states— Illinois North and IllinoisCentral. Mathwich directedIllinois North from his Rockfordoffice, and Bill Ihnow, a districtmanager from Peoria, opened theIllinois Central office. Six monthsafter the split, Desch broughtMathwich to Madison as market-ing director.In 1980, Wisconsin becamethe last region to move out of Dare to Dream | 141

ABOVE: Catastrophic storms battered the nation in 1984, contributing to a record $3.5 billion operating loss for the insurance industry.CASH-FLOW SUICIDE Multimillion-dollar judgments convinced still more people to file lawsuits. By the middle of the 1980s, a glut of civil suitsAttracted by double-digit interest rates and skyrocketing land jammed the nation’s court systems, with one private suit for everyvalues, the insurance industry’s periodic flirtation with cash- 15 Americans. Insurers picked up most of the tab. In 1978, theflow underwriting blossomed into a torrid romance in the 1980s. amount of money insurance companies spent to defend theirInflation — which fueled the high interest rates — intensi- policyholders accounted for 9.6 percent of all claims losses.fied the industry’s down-cycle by driving up claim costs. “I’d Ten years later, defense costs were nearly 15 percent of losses.gladly trade the investment increase for a decrease in inflation,” Unprepared for the trial lawyers’ aggressive attitude, many insur-American Family President Bob Koch said in 1981. ance companies failed to establish adequate reserves for liability cases, eventually leading to capacity and solvency problems. The nation’s economic engines obliged Koch the followingyear, when a sharp recession drove down both inflation and the Pushed by lawsuits, cash-flow underwriting and catastrophicreal estate market, and pushed unemployment over 10 percent. storms, the industry’s combined ratio — the measure of claimsCash-conscious consumers flattened insurance industry revenues and operating costs against premiums — increased for sevenby raising their deductibles, reducing their liability limits and consecutive years. By 1985, for every premium dollar insurersdropping some coverages altogether. collected, they paid out $1.18 in claims and expenses. The result was a record $5.5 billion operating loss in 1985. Scores of carriers An explosion of liability suits — sparked by a series of declared bankruptcy — 40 in 1985 alone. Survivors retrenched.highly publicized product-liability cases in the late 1970s — Companies sharply increased premiums, restricted new busi-compounded the industry’s troubles. A U.S. Supreme Court ness, abandoned entire regions, eliminated agencies and laid offdecision allowing attorneys to advertise fueled the tort frenzy employees — drawing more venom from an already hostile public.as lawyers took to the airwaves and newspapers, appealing topeople injured not just by faulty products but in everyday mishaps.142 | More Than a Survivor

PEACE OF MIND AFTER THE STORMAmbulances weaved their way A long-time veteran of American a claim. In the late 1990s, American through the streets of Udall, Family’s claims division, Mundt preferred Family began exploring the integra- Kansas, as Farmers Mutual to act rather than wait. By April, he’d tion of real-time weather data withadjusters Robert Caplinger and Bob organized 60 of the company’s 300 mapping policy locations to determineLamb surveyed the remains of the property adjusters into seven CAT teams customer impact from storms.town. Earlier that morning, May 25, with members from all regions.1955, a tornado destroyed all but one In 2012, American Family washouse, killing 77 people and hospital- In the mid-1990s, catastrophe one of the first insurers to overlayizing 200 of the town’s 566 residents. response hit the road. In August policy information from the in-houseWith no disaster plan, Caplinger and 1994, American Family unveiled its Claims Analysis Tool with near real-Lamb put everything else on hold and CAT trailer, the first of its kind in the time weather data from The Weatherhunkered down for a string of 18-hour insurance industry. It contained five Company (formerly Weather Central).days. With the help of agent Bill Near, computer workstations, two printers, Minutes after a hailstorm or otherDistrict Manager Bob Fullinwider, and telephones and a fax/copy machine, all weather event blew threw, the CATa few outside adjusters, this makeshift linked to the home office via satellite. department received data to easilycatastrophe team processed claims Its maiden voyage was to Dubuque, identify locations of impacted custom-totaling $60,000. Iowa, after a hailstorm caused millions ers. In 2017 American Family was using of dollars in damage. weather forecasts to identify customers Over the next 30 years, rising cata- potentially at risk of weather-relatedstrophic losses compelled American As other insurers scrambled to damage, days before a storm hit.Family to devise a centralized catastro- set up temporary centers, Americanphe (CAT) response program. In Family’s CAT team, led by Kansas City Methods and technology changedDecember 1986, the company’s disas- Property Claim Manager Calvin Cole, significantly over the years, but theter response planning committee asked processed more than 1,000 claims in purpose driving American Family’sProperty Claims Director Marv Mundt three days. CAT team remained the same: restoreto implement a CAT program for 1988. customers’ dreams when the unthink- Catastrophe response became more able happens. than helping customers after they file Dare to Dream | 143

CAUTION AND CREATIVITY rating system with an accident surcharge plan and ZIP-code- based rating. American Family Life also developed severalWith more than $1 billion in assets at the beginning of the innovative products, including the L-95 life insurance policy1980s, the American Family Group was among a handful of for nonsmokers. Introduced in 1981, the L-95 won instantinsurance companies that rode out the stormy insurance cycle favor, accounting for 22 percent of the life insurance company’sby resisting the lure of cash-flow underwriting. Rather than cut 400,000 policies in force by 1984. American Family’s universalrates to attract business, American Family implemented modest life policy — with its flexible premium — met with equal enthu-price increases where possible and trimmed back promotional siasm in October 1984. After just eight months, American Familyefforts. Total policies in force grew slowly but steadily from 3.05 Life had more than $1 billion of universal life insurance in force.million in 1981 to 3.4 million in 1985. “We laid low during theprice-war days,” Koch said. In 1982, American Family Mutual introduced the Gold Star Homeowners policy, bundling several of its most popular cover- To compensate for its less competitive prices, American ages together. The company followed this with a combined farm/Family’s actuarial division under Jim Pfefferle refined the autoFISHURANCE food, drink and good times. sales directors began creating As the field force transitioned different events and get-to-Starting in the 1950s, to more women and people of gethers for their agents. In this when the field force different ethnicities, the events 1988 photo from the Wiscon- was mostly men, some evolved into Summer Holidays, sin North Summer Holiday,district sales managers set up featuring more options for agents (from left) Barry Timm,Fishurance summer outings for agents with varying interests. Jack Hines, Jim Fitzgerald andtheir agents to build camara- The events lasted into the Chuck DeSmet got an earlyderie. The events had a “guys mid-90s when managers and start fishing on Lake Michigan.night out” focus, featuring fish-ing, golf, softball games, cards,144 | More Than a Survivor