Dare To Dream

storm losses, nearly a half billion dollars would be added to the and Mary Theilen, vice president of loss reserving and enterprisepolicyholder surplus. risk management. Given the optimistic developments, Chief Financial Officer In his face-to-face meeting with A.M. Best, Kelly’s teamDan Kelly and other executives focused on an aggressive, positive stressed American Family’s successful initiatives to improve prop-presentation for the A.M. Best analysts for their annual meeting erty profitability and loss ratios, its solid reinsurance and enterpriseat Best’s New Jersey offices.The rating’s team included Controller risk management programs and its improved operating results.Kari Grasee, Executive Vice President Bill Westrate representing “We told them when we say we’re going to do something, we do it.”the major product lines, Chief Investment Officer Peter Gunder, Best agreed, and a few months later, confirmed American Family’s A rating and changed the outlook from “negative”to “stable.” A.M. Best isn’t alone in rating ADVANCE GOES LIVE! insurance companies. Three othermajor credit rating agencies (CRAs) provide Advance remained the company’s top priority in 2013.The senioranalysis and ratings as well, including Fitch, leadership team believed American Family’s primary source ofStandard & Poor’s (S&P) and Moody’s. premium would continue to come from its exclusive agencyAmerican Family used Fitch to complement operations, making continued investment in that core businessA.M. Best. Fitch has rated American Family critically important. The rollout of new products and pricingA+ with a stable outlook since 2015. through the Advance project was a key part of that investment. Advance was finally reaching some long-awaited milestones. APEX went live in a first state — Utah — giving agents and callBELOW: Advance went live in its first state — Utah — in 2013. Early results were positive and district sales managers attending the2013 Sales Management Conference in Madison were eager to learn more. A panel presentation led by Associate Vice PresidentBob Andrew responded to many questions from the audience. Dare to Dream | 345

ABOVE: Members of the Personal Lines auto team for Advance included (from left) Julie Saletri, Kyle Zierer, Eric Roethe, JannSamarzja, Tim Grinde, Lori Powers, Scott Cannaday, Ryan Lawler, Amy Anderson, Steve Miller, Patty Riederer, Mark Vilbrandt andDon Bindl.Bob Andrew Kelly Kick program led by Associate Vice President Bob Andrew and Public Relations Manager Kelly Kick. In addition to two days of class-center representatives a common view of most customer inter- room training, agents and employees could work in an onlineactions, no matter the medium. The company said all agents practice environment to familiarize themselves with the newwould have APEX by the end of 2014. And then, Advance’s policy systems. Two agents in each district were trained to assistnew product and online policy and billing systems went live in their colleagues and user support ramped up big-time. SeveralUtah on August 1. The company had proven it could deliver on a technical experts flew to Utah to help quickly resolve issues.big promise, introducing new auto products, pricing and systemssimultaneously! The new Advance auto products were less complicated, supported by systems that were easier to use and maintain. More It was a new world for agents, but the transition went sophisticated pricing better aligned price with risk to improve thesmoothly because of an extensive communications and education company’s long-term competitive position. As an example, under its old system, the company might have 100 large geographic territories composed of multiple zip codes. Each territory had an assigned rate and each year, the company reviewed losses by territory and adjusted rates. For the new products, the company had thousands of territories for each coverage, examining a range of characteristics from traffic density to weather patterns. Those kinds of characteristics allowed the company to break geographic areas into much finer, yet still predictive, territories. Endorsements allowed customers greater flexibility to build346 | Strategy and Transformation

the coverage they wanted for their particular circumstances. Liberty Mutual were generating big gains in personal lines poli-Discounts helped with retention, appealing to distinct market cies through affinity relationships.segments. The Young Volunteer, Generational and Paperlessdiscounts appealed to younger customers. The company knew However, a national direct platform offering both auto andthat many parents shopped for insurance when they added new homeowners insurance is essential for success in the direct affin-drivers to their policies, so the Teen Safe Driver and Good ity market because most insurance customers prefer to buy bothStudent discounts helped connect with them. New payment coverages from the same company. As a result, in February 2013,discounts, such as Customer Full Pay, promoted easy ways to Salzwedel and Schultz asked the board of directors for permissionpay while saving money. And as promised, a single policy now to look at potential direct homeowners companies for acquisition.covered multiple vehicles in one household. And they had a specific target in mind: Homesite, a Boston-based leading direct homeowners insurance writer. The response was immediate and unprecedented! Withinthe first six months, quoting volume and sales in Utah exceeded Homesite was helping GEICO and Progressive andprojections. Utah agents told managers Advance gave them a several other companies overcome their inherent disadvantagechance to recapture customers they lost and hold on to others of offering only auto products to their customers, who gener-they might lose. One agent said, “Compared to the ‘shoe box’ ally preferred bundling auto and homeowners products together.rates we’ve traditionally used, Advance accurately prices the risk Using Homesite products, GEICO and Progressive offeredto ensure further profitability and competitiveness.” And agent their auto customers homeowners and renters insurance asTim Rosendahl of Park City said, “We’ve re-quoted and written part of a bundling discount tactic. The Homesite products wereseveral households that we lost in the quoting process during the marketed to the customer with GEICO or Progressive brands. Ifpast year due to premium.” American Family had Homesite in its portfolio of companies, it could continue those deals and develop other partner and affin- The system also allowed for near-instant changes. Rapid ity relationships. After analyzing the strategic fit of this potentialadjustments were made to increase rates on non-standard risks acquisition, the board gave the plan a green light.and reduce rates for drivers with clean driving records. Otheragents watched from their states and hoped Advance would come A LEAP OF FAITH FORto them as soon as possible. ANOTHER SIGNIFICANT DEALNEXT, A HOMEOWNERS Actually, Homesite had been on American Family’s radar forDIRECT PLATFORM quite some time. Salzwedel had met Homesite CEO FabianMeanwhile, the senior leadership team was strategizing the nextbig step, looking at the current and future marketplace.The team Fondriest at an industry gathering, and Fondriest indicatedrecognized increasing opportunities in the affinity market usinga direct platform. interest in a merger or acquisition should the stars align, visiting In an affinity relationship, insurers gain exclusive access to Salzwedel in Madison in 2012 to discuss possibilities. “Whenmarket their products through other companies or groups, suchas alumni associations, travel clubs, credit unions and so on. In I walked out that door,” Fondriest remembers, “I thought thisreturn, members of those groups receive a discount from theinsurer when they buy its products. Companies like Hartford and could be a company where we could make it happen!” The two stayed in touch and had more conversations. The day after the Permanent General deal was announced, Salzwedel walked into Schultz’s office and said,“Look at this.”It was a note to return a phone call from Fondriest. Salzwedel did return his call and ultimately, Peter Gunder and Bill Greiter’s due diligence team went at it again. The key sticking point in the Homesite explora- tion was carefully investigating Homesite’s contracts to provide homeowners insurance to auto Fabian Fondriest Dare to Dream | 347

OPPOSITE PAGE: Members of American Family’s board of directors gathered for this portrait in February 2017. They include (frontrow from left): Michael Knetter, Ph.D., president, University of Wisconsin Foundation; Rakesh Khurana, dean, Harvard College;Londa Dewey, president, QTI Group; Christine Cumming, first vice president and chief operating officer (retired), Federal ReserveBank of New York; Walter Oliver, senior vice president (retired), Human Resources & Administration, General Dynamics Corpora-tion; Leslie Howard, senior advisor to the CEO, United Way Worldwide; Kathleen Barclay, senior vice president (retired), HumanResources, The Kroger Company; (back row): Jack Salzwedel, chairman, CEO and president, American Family Insurance Group;Thomas Zimbrick, chief executive officer, Zimbrick, Inc.; Eliot Protsch, president, Wapsie Investment & Advisory, LLC; Ted Kellner,CFA, chairman and CEO, Fiduciary Management, Inc.; Jason Goldberger, E-commerce and digital marketing executive; ScottMalmgren, senior partner (retired), Deloitte & Touche, LLP; and Paul Shain, president and CEO, Singlewire Software, LLC.A PROACTIVE BOARD OF DIRECTORSEarly on, the company’s As CEO, Salzwedel contin- Salzwedel believed it is essen- board of directors were ued Anderson’s mission, encour- tial to maintain a balance on the men with connections. Most aging board members to view board between outside and local were prominent farmers who themselves as primary advocates talent. “Our Midwestern roots, could encourage others to sign for customers. His vision was to values, work ethic and community up with Farmers Mutual. Deeply “include a range of talented folks involvement are positive compo- involved in company operations, — entrepreneurs, business and nents of our corporate culture some sold insurance, building academic leaders…each bringing and help ground future lead- the company’s largest agencies. different perspectives to the table.” ers for what’s important for us One was a politician who eventu- He wanted “people who ask the as a mutual company,” he said. ally served a decade in Congress. right questions at the right time, Examples are many, including Another was a respected attor- making sure we do what’s best for Tom Zimbrick, one of the coun- ney and conservationist who our customers and the long-term try’s most successful automobile eventually founded the National viability of the company.” dealers; Mike Knetter, president Wildlife Federation. Over the of the University of Wisconsin years, however, CEOs and their During the decade before the Foundation; Ted Kellner, prom- management teams became company’s 90th anniversary, the inent Milwaukee investment stronger while the board, though board successfully transitioned expert; Londa Dewey, former still important, no longer directly from ceremonial to active to bank president and president of a managed company activities. proactive. Just as he brought in Madison talent-staffing firm; and outside talent for some executive Paul Shain, a seasoned technol- When Dave Anderson became positions, Salzwedel continued to ogy industry executive. CEO, he quickly moved to attract a broad array of accom- strengthen the board so it would plished individuals to the board. Salzwedel said board have greater impact on the Rakesh Khurana, Dean of Harvard members working cohesively company’s strategy and busi- College, was considered one of the with an executive leadership ness plans. To diversify the board, world’s top corporate governance team shaping strategy helped he and President Jack Salzwedel experts. Christine Cumming was a American Family “stay true searched for members from retired chief operating office of the to who we are as a company across the company’s operat- Federal Reserve Bank of New York. and more important, how we ing territory, rather than continu- They were joined by others with deliver results.” ing the tradition of selecting similarly impressive track records mostly local executives. More who follow in the footsteps of Zimbrick, the longest-ten- important, they wanted success- Walter Oliver, who left the board ured board member, believed ful people with specific skill sets in 2017; a former senior executive most members serve not for the to help senior management — in at General Dynamics Corporation, compensation or prestige, but areas such as investments, human he provided valuable counsel on rather because they are invigo- resources, marketing and strate- human resources and compensa- rated by active participation in a gic development. tion issues for many years. Fortune 500 company’s funda- mental transformation.348 | Strategy and Transformation

THE HARVARD on two white papers analyzing the insurance industry” andCONNECTION American Family that were valued “being part of a culture dedicated tools for the company’s leadership to helping people in their time ofAfter becoming CEO in and students in the classroom. need.” Khurana was named Dean 2000, Dave Anderson of Harvard College in 2014. read some interesting In 2011, Khurana eagerlyviews about leadership develop- accepted an offer to join the Rakesh Khuranament and succession planning. board of directors. “I reallyHe thought it so compelling that believe in the company’s values,he contacted Rakesh Khurana, its role as a mutual companythe Harvard Business School and its commitment to customerprofessor who authored the service,” he said. He wanted to beresearch. The relationship flour- part of a Fortune 500 company’sished and Khurana soon traveled significant transformation.to Wisconsin to make presenta-tions to the board of directors and Through the years, he sawofficer team on change manage- the board evolve into an “effec-ment and leadership. He and two tive partnership with manage-colleagues later collaborated ment in a governance role.” He delights in “the incredible amount of knowledge I’ve learned about Dare to Dream | 349

insurance customers of two dozen insurance and financial compa- Greiter put it succinctly: “We had to make a leap of faith tonies. The Progressive and GEICO contracts provided Homesite make this deal, and we did.”with most of its revenue, so there was huge risk in the potentialacquisition. If GEICO and Progressive pulled out after American Throughout the process, considering the risk and magni-Family bought Homesite, American Family would find itself tude of the acquisition, the continuing support of the boardowning a shell of a company. of directors was crucial and remarkable. Salzwedel said “the board gave us rope because they saw we had a path. They saw In typical fashion, Salzwedel took the direct route, call- we recognized the need to change, that digital was here, anding Progressive CEO Glenn Renwick, who told Salzwedel that they simply wanted to know how our pricing and productswhile no promises could be made, Progressive was happy with would evolve to meet the changing culture and marketplace.”its arrangement with Homesite. After the phone conversation, Board members bombarded senior executives and GreiterSalzwedel felt the relationship was “solid.” Later he also talked with questions, “but in the end, they had confidence that ourwith GEICO’s CEO, Tony Nicely, who had a long, cordial rela- plan was sound and we were doing what we needed to do,”tionship with American Family leaders, and he, too, said his Salzwedel recalled.company’s relationship with Homesite was positive. Truth-be-told, both competitors were almost certainly pleased that American Family officially closed on its purchase ofHomesite might be sold to American Family, becoming part of Homesite Dec. 31, 2013. The gross acquisition price of $660a much stronger organization, financially. million was reduced by $30 million after transaction-related tax benefits. Homesite had $630 million of written premium and a In the end, Salzwedel and company decided to proceed. net book value of $380 million at the time of purchase.BELOW: Similar to American Family’s long tradition of employees and agents helping their communities, Homesite employees eagerlydo the same. Veda Brown, part of the Homesite claims team in Akron, Ohio, worked at a Habitat for Humanity event in 2016.350 | Strategy and Transformation

Salzwedel described the purchase as “a huge and historic As with Permanent General and Homesite, AssureStart wouldwin” for both companies. American Family would complement operate as a separate entity and brand, relying on targeted adver-its strong agent brand with a well-developed direct channel to sell tising and search engine optimization (SEO) techniques to findhomeowners insurance to customers who wanted to go that route. new customers.Homesite would in turn align with a financially strong insurancecompany to help support its continued growth. A DEFINING TIME FOR AMERICAN FAMILY Beyond the direct sales capabilities, Schultz was pleasedthat the acquisition, like Permanent General, would spread Salzwedel and Schultz had dared to dream, and their dream wasthe company’s catastrophe risk beyond its strong foothold in becoming a reality. American Family had successfully chartedthe Midwest. After all, Homesite was selling its products in 46 its own path in the industry and now possessed key elementsstates and the District of Columbia; The General was provid- for long-term success. The strategy was simple and bold, buting its products in 27 states. At the time of the purchase, only 25 difficult to execute: invest in direct channels to attract more andpercent of American Family’s premium came from outside the different customers, while continuing to strengthen and expandstorm-prone Midwest. After the deal, premium from outside the the powerful agent-based American Family brand.Midwest jumped to 32 percent, with projections it would reach40 percent in five years.AND WHAT ABOUT COMMERCIAL LINES? BELOW: Amid the significant change at the company, employ- Late in 2013, even before the ees and agents continued to enjoy the annual American Cup golf tournament. Winning teams contributed their financial Homesite deal was finalized, the prizes to charities of their choice. Shown are: (from left) Amy Jo Fisher, Joyce Dieter, Melissa Kelliher and Libby Mueller. company announced it would be the primary investor in a new direct commercial lines insurance company — AssureStart, which opened its digital doors for busi- ness in Texas on November 20.The direct writer targeted small busi-Chris Listau nesses with 25 or fewer employees in certain lower-risk categoriessuch as offices and small retail. Its initial product was a bare-bones business-owners package (BOP) policy, with plans to lateroffer workers compensation and commercial auto policies.Commercial-Farm/Ranch Vice President Chris Listautold agents AssureStart would try to reach “only a small sliverof the commercial products American Family offers customers.” Dare to Dream | 351



Imagination is more important than knowledge. — ALBERT EINSTEIN, physicist and Nobel Prize recipient18 BIGGER, BOLDER AND BOOMING!

CHAPTER 18 | BIGGER, BOLDER AND BOOMING!2 014 was a landmark year for American Family as it formally welcomed Homesite to the group and achieved some solid results. Policies-in-force jumped nearly 900,000 with the new acquisitions, revenue grew $578 million and equity rose $384million, primarily from investments. Total premium written for businesses and the new direct companies. Bill Westrate retainedthe group increased 14 percent from 2013, reaching $7.3 billion. senior executive oversight of the American Family product lines in a new role, chief operating officer responsible for the design, Homesite and The General had contributed most of that pricing, sales and service of American Family brand products.increase, with American Family brand companies growing3 percent. American Family would also jump 20 spots in the Four chief officers were assigned enterprise-wide responsi-Fortune 500 ranking to No. 373. bilities. Dave Holman became chief strategy officer, surprising many in the organization because he had spent his career in Salzwedel and his executive team were delighted by the corporate legal; Salzwedel viewed him as “smart, a good thinkerresults, of course, perhaps even a bit surprised. Two years after and a good leader.” Mary Schmoeger became chief administrationthe acquisitions, when asked if he knew the new companies officer, Dan Kelly retained his post as chief financial officer andwould post such strong results, Salzwedel grinned and admitted, Kristin Kirkconnell was named chief information officer.“We sure hoped so!” The leaders of Homesite and The Generalwere happy as well. Late in the year, Fondriest, Homesite’s CEO, The new executive structure provided a president’s title forreflected, “A year ago we were at the closing stages of doing a deal the major product lines. Tim Constien, vice president of claims,with AmFam and things were moving well. Everyone’s saying the became president of personal lines. Chris Listau and Toddright things during these stages, but you wonder how it will play Fancher were named presidents of commercial lines and the lifeout. I can absolutely say with zero hesitation that AmFam has company, respectively. Greg Gisi became president of the reinsur-been better than their word this whole first year and I’m excited ance and brokerage operation. Gerry Benusa became chief salesabout what we can accomplish in the years to come.” officer, Peter Gunder was named chief business development offi- cer, Jerry Rekowski became vice president of field relations, MarkSTREAMLINED EXECUTIVE STRUCTURE Afable moved to the chief legal officer’s role and Rick Fetherston retired. There were other officer-level changes as well through-With the acquisitions in place, Salzwedel knew it was time to out the year. Troy Van Beek became controller, succeeding Karistreamline his dozen-member senior leadership structure into Grasee, who moved to I/S to oversee consolidated data areas.a more compact team. Schultz became enterprise presidentand chief operating officer responsible for American Family Salzwedel’s new senior leadership group determined its No. 1 priority was improving customer options for how they prefer to do business with the company. But to a person, each recognized354 | Bigger, Bolder and Booming

ABOVE: Early in 2014, the new senior leadership team strengthened the company’s mission, vision and values statement to clearlyidentify the customer as the central focus for every company decision and action. Dare to Dream | 355

it was critical to continue significant investments to help agents A WATERSHED MOMENT: ADVANCE PROPERTY GOES LIVEprosper. After all, agents were the face of the company and contin-ued to generate most of the company’s revenue and there would In June, the company launched its new Advance property prod-always be a significant customer segment that preferred dealing uct in Utah. It included four policy types — homeowners,with an agent for important decisions about financial protection. renters, condominium unit owners and manufactured home-Salzwedel and Benusa continued to reinforce the compa- owners. The new products recognized that not everyone neededny’s commitment to the field. Many agents were still struggling a coverage-rich property policy. Advance moved to basic poli-with products and pricing that weren’t as competitive as those of cies that could be customized for each customer. “With moreother companies. Yes, Advance was on the horizon. But until it than 70 endorsements available, customers can tailor the policywas deployed company-wide in their states, many agents would coverage to meet their individual needs,” said Paul Choi, Utahcontinue to swim against the current. Salzwedel told agents he state product director. “This way, our quotes are more competi-understood they were in “hand-to-hand combat in the market- tive and customers can choose to pay for the coverage they want.”place, battling rate increases, underwriting changes, competitive The Advance property products included several new endorse-pressures and new and changing customer needs.” ments, including Pet Coverage, providing up to $1,000 related toBenusa continued to highlight concrete, positive actions injuries to cats, dogs, birds or fishthe company was taking before Advance could be fully imple- resulting from a covered loss, suchmented. APEX, the new agent customer information system, was as a fire. Another new endorse-now in the hands of every agent, providing a single view of most ment provided roof replacementcustomer information and interactions with the company. The cost coverage for windstorms orsystem allowed agents, staff, sales and service care center staff and hail; one of the more significantother business areas to view the same customer information to changes with the new product wasensure everyone accessed consistent, accurate data. For example, the base Advance policy providedif a customer talked with a care center representative during the actual cash value coverage andevening about a billing or policy question, that interaction could replacement cost was only avail-be viewed immediately the next morning when an agent or staff able for eligible customers. Paul Choimember logged onto APEX. “This is a watershed momentAPEX replaced the Agency Data System (ADS), which for American Family and thewas “the largest system we’ve ever shut down at American Advance program,” said KenFamily,” said Kathy Jacobson, I/S business systems transforma- Landolt, personal lines prod-tion manager. The switchover was a massive project involving uct implementation director. Hemore than 300 employees that took six years to complete. Some wasn’t exaggerating. It was the200 million agent notes, accounts, contacts, phone numbers and result of years of difficult work emails were moved from ADS to by hundreds of people, produc- APEX. Jacobson said APEX would ing products that would keep save the company $750,000 annu- American Family competitive. ally in technology support expenses. Like auto, “Advance property Ken Landolt policies feature more sophisti- By 2017, APEX would average between 9 and 10 million hits a cated pricing based on the unique day company-wide. risk of an individual customer,” And AFI Upload debuted, said Dale Riemer, personal lines an application allowing agents pricing director. The Advance to immediately upload photos policies featured 10 peril groups,Kathy Jacobson directly from their mobile phone to each with its own rating structure the Electronic Data Management and premium that aligned withSystem, associating the pictures with a specific policy. Before the location’s unique risk profile.that, agents had to download their phone photos to their office Those perils included thingscomputer and then wait overnight for the system to accept them. like fire, water, hail, wind, theft, Dale Riemer356 | Bigger, Bolder and Booming

liability and others. Individual peril premiums combined to create SimplyProtected term product introduced in 2012. Agents likeda customer’s total premium. For example, in Advance, the loca- it because it was a simple product to explain, had an easy appli-tion of a customer’s washing machine impacted the water peril. cation process and was affordable, especially when the auto/lifeIf one customer had a washing machine in the basement and discount came into play. New business life applications increasedanother customer had the washing machine on the home’s second to 57,000 in 2014, the highest level since the recession began.story, the water peril premium for the first customer was lower.Other dwelling characteristics such as number of bathrooms,number of attached car stalls, solar panels, or the age, slope and A SATISFYING END TO A CAREERshape of the roof impacted a policyholder’s premium. Similarto the Advance auto product, the property products included Salzwedel and company considered 2014 a landmark year forthousands of territories for each peril group, such as hail, popu- American Family because so many strategic initiatives werelation density, average length of residency, and so on, resulting finally bearing fruit. Dan Schultz’s company had achieved thein a more accurate representation of the risk andallowing greater pricing segmentation. In Utah, theAdvance products had 1,700 territories comparedto just five for the old products. BELOW: Dan Schultz retired at the end of 2014, having played a key role in Because the Advance property rates depended defining and executing American Family’s “nearly national” strategy. CEOon so much more information than in the past, Jack Salzwedel credited him for successfully transitioning the companyagents quickly learned quoting Advance took into a new era.longer than before. But they knew more accurateinformation resulted in the most appropriate andfair rates for their customers. Lolly Lawrence, busi-ness systems transformation director, said PolicyCenter would help agents and staff work throughthe complexities of building a customized policyfor each customer.LIFE’S POTENTIALAs a former leader of the Life Company, Salzwedelknew the product line had tremendous potentialbut serious challenges.After all,it provided a steady$100 million contribution to gain from operationsevery year. But it also shared its distribution chan-nel with other product lines. In 2014, only slightlymore than half of the company’s agents were sell-ing even one life policy a month. The average newlife customer had been a personal lines customerfor six or seven years. It was frustrating that thesecustomers, already in house, weren’t approachedsooner for life insurance coverage. To spur sales, the company introducedMyLife Flexible Life Insurance and a third ofthe agency force submitted at least one appli-cation for the product during the year. The LifeCompany also expanded eligibility for the popular Dare to Dream | 357

GROWTH STEEPED IN TRADITION OF SIMPLICITYArmed with a simple, insurance — just as we did in 1958 entity Ward Group as a Top 50 yet strong portfolio of when the doors opened.” life/health insurance company four life products, the nine years in a row also was anAmerican Family Life Insurance GROWTH OVER THE YEARS acknowledgment of the qual-Company (Life Company) posted ity and efforts of Life Company$1.6 million in sales when it While most new life companies employees, internal business part-opened for business July 1, 1958 don’t show a profit until after their ners and American Family agents— the biggest opening day any seventh year, the Life Company and life-licensed staff.life insurance company had ever did it in three, reaching its firstposted at the time. billion dollars of in-force life insur- TECHNOLOGY AND ance in 1972, and then doubling PIMRPORDOUVCETCCUHSATNOGMEESRTO “We made it work for one basic that by 1976. EXPERIENCEreason: Simplicity,” said Bob Koch,who led the Life Company from Even when the industry saw Changes in technology contrib-its first day until he became presi- life applications decrease during uted greatly to the success ofdent of American Family in 1977. the late 1980s and early 1990s the Life Company, making the as investment income and poli- customer purchasing experience Fundamentally, that simplic- cyholder dividends declined, easier. Continuing to update andity continued as a guiding princi- American Family agents increased reprice products, as well as intro-ple for the company as it focused sales, and the Life Company ducing new products, remainedon the relationship between continued to grow. As a multi- critical in helping the businessagents and customers, protect- line insurer with a captive agency keep up with customer demand.ing families, and keeping products force, selling life insurance intoand a sales process that can be existing P&C households contin- Under the leadership of Vicecomplex, simple. ued to be a primary focus. President Joe Tisserand, the Life Company introduced the “At our foundation, we remain To recognize agents for their first electronic life application infocused on taking care of our work and keep them motivated 2000, which paved the way for acustomers,” said President Todd year-round, the Life Company streamlined application process.Fancher, who assumed leader- created the AFLIC program in By 2017, nearly all life applica-ship of the Life Company in 2013. 1960. This incentive program tions were submitted electron-“While we continue to make continued as of 2017, rewarding ically. It was also under Joe tenhancements to products and agents for what are often compli- that the Life Company intro-services based on new technol- cated and emotional conversa- duced variable products throughogy, data and experience, we tions with customers — since no American Family Securities LLC,strive to provide ease and conve- one wants to talk about death. in 2001 (sold through 2009).nience as we help protect and However, many agents also shared Improvements and new productrestore customer dreams with life that nothing is more impactful launches continued when Jack than delivering a death benefit Salzwedel was vice president Todd Fancher check to the loved ones of a bene- of the Life Company in 2003, ficiary to help restore dreams. including the introduction of an automated workflow system for Over the years, the Life life policies. Company remained a dependable and important revenue generator The introduction of for American Family, contribut- SimplyProtected Term life insur- ing $100-plus million to gain from ance in 2010 when Al Meyer operations annually, as of 2017. By was vice president brought the the end of 2016, the Life Company first simplified-issue product, had $95.8 billion of in-force life which agents could write with insurance. Being recognized by the insurance consulting358 | Bigger, Bolder and Booming

the customer over the phone. It Life products. Flexible premi- to transform the life insuranceoffered automated underwrit- ums, along with guarantees and sales process for customers. Othering, express issue and no medical the potential for cash value accu- initiatives, such as Life Direct,exams. It also offered customers mulation and paid-up insurance, offered life insurance through anythe option to sign their applica- made MyLife an innovative life distribution channel.tion via email using e-Signature. insurance solution for AmericanThe Life Company was one of Family customers. The company introduced Lifethe first insurance companies to Cornerstone in 2017, a singleprovide this solution to customers, MEETING THE CHANGING source for agents to quote andand the e-Signature process was NEEDS OF CUSTOMERS write life insurance applications.expanded to all products in 2013. Innovation and increased ways of “As the Life Company cele- When Todd Fancher became using data continued to provide brates its 60th anniversary inleader of the Life Company in a smoother application and 2018, our continued high marks2012, the team was getting ready buying experience for custom- in J.D. Power customer satisfac-to launch MyLife Flexible Life ers. The introduction in 2016 of tion surveys will reinforce weinsurance. MyLife was designed ExpressReview underwriting, are on the right path for contin-to provide an affordable life insur- which determined if an applica- ued success,” said Fancher. “It’sance option to cover short-term tion could be approved without a about keeping it simple—focus-and long-term needs with one medical exam, was one example ing on improving our processes,policy. Pricing was strategically of how the Life Company worked systems and product offerings toplaced between Term and Whole meet the changing needs of our customers.”BELOW: Former CEO Bob Koch, who led creation of American Family’s life company early in his tenure, waswarmly welcomed in 2008 at the 50th anniversary celebration of the product line. Dare to Dream | 359

heart of his five-year vision: The American Family group of with auto production in April up 14 percent compared to thecompanies was, indeed, “nearly national” with high levels of previous yearcustomer satisfaction. He and Salzwedel had set the enterpriseon a new, different path to success. Schultz decided it was the Agents in other states heard about those numbers andright time for him to retire at year’s end, satisfied he had played begged for Advance, wanting it now! But Kelly Lien, personala key role in the company’s ongoing transformation. lines product management vice president, asked for patience. “No other major insurance company has ever accomplished what weADVANCE MEETS ITS PROMISES have on this scale by simultaneously introducing new products, pricing and systems.”As 2015 dawned, it was clear Advance, with its new products,pricing and systems, was critical for meeting growth projections In late August, the company launched auto Advance in— and it was working. Utah, the first auto state in produc- Nebraska, Idaho and Washington. It was the first time thetion, saw total auto premium jump 15 percent during the first company had released an Advance product to more than onefew months of 2015 compared to 2013. In Colorado, auto and state at a time. It showed confidence for meeting faster, larger-property production was up 30 percent through August 2015 scale rollouts.compared to the year before. South Dakota was the same story, To celebrate, District Sales Manager Holly Westervelt and four others from the Nebraska sales operation commemorated the event by skydiving as a team. “I wanted this experience to celebrate a new beginning,” Westervelt said.BELOW: On Sunday, Aug. 9, 2015, Nebraska Sales Director Holly Westervelt and members of her sales state celebrated the launch ofAdvance in their state by going skydiving as a team. Pictured (from left): Jonna Sich, agency sales management assistant; BrianMagiera, sales manager; Holly; Abby Burns, agency sales associate; and Corinna Rudeen, agency sales management assistant.360 | Bigger, Bolder and Booming

In each state, the auto product was rolled out about four For her part, Kristin Kirkconnell was profoundly pleased.months before the property product. The company had learned “70 percent of business transformations that companies under-rolling out both simultaneously didn’t work, based on feedback take across all industries fail,” she said. “I’m extremely impressedfrom agents in Utah. Bob Andrew, who played a lead role in with what we’re doing — from systems to training, changechange management for the rollouts, had learned “a staggered management and support. I couldn’t be more proud of what ourrollout allows agents to better absorb and apply the training while employees have done to get us to this point. Best of all, they’rebalancing needs of their current customers.” working with our agents throughout the rollout process.”BELOW: Oregon and Georgia were the final states to conclude the Advance 14 15 16 17 18 19 20 13 89 10rollout in late 2016. Oregon agents and employees were ecstatic, cele- 11 12brating the arrival. Pictured: 1. Sue Van Meter, 2. Kristi Craig, 3. Sierra 7 2 3 6Kauzlarich, 4. Karlee Foote, 5. Shauna Larson, 6. Shawn Hunter, 7. GregHighnam, 8. Annie Mendoza, 9. Stephanie Jennings, 10. Kayla Hernan- 1 4dez, 11. Ryan Robertson, 12. Michael Hamilton, 13. Nicole Mace, 14. Jessica 5Osborne, 15. Erik Vanderveer, 16. Matt Moffat, 17. Terri Powell, 18. JasonGard, 19. Amy Wragge, 20. Cory Erickson. Dare to Dream | 361

ABOVE: In 2015, the company created a sales agency specialist position for agent offices and encouraged agents to hire peopleto fill that role. In April 2016, the company provided information showing agencies with the sales specialists did better thanthose without.EVOLUTION OF AGENCY — of dollars and negatively impacting customer satisfaction. TheANOTHER TRANSFORMATION agent attrition rate for smaller premium agencies was high and customer retention in those agencies was low.Throughout 2015 and 2016, sales chief Gerry Benusa and hisleadership team implemented an ambitious plan to transform Benusa’s team decided a better approach was to focus onagency at American Family. Throughout most of its history, fewer, larger-scale growing agencies with sufficient staff whothe company had simply added agents wherever and whenever could provide exceptional service. They believed that agents whoit could. The theory: More agents meant more policies, and it were willing to invest in their agencies with staff and solid busi-worked for decades. But there were serious problems. The fail- ness plans were the future. Some agents were already there; othersure rate for new agents was high, costing the company millions needed help.362 | Bigger, Bolder and Booming

JACK C. SALZWEDELA VISIONARY WHO TRANSFORMED THE ENTERPRISEOver nearly a century, thou- President 2006 - 2011 employees and agents to think creatively, sands of employees and agents Chairman and CEO 2011 - 2014 embrace change and stay focused. helped create American Family’s Chairman, CEO and President 2014 - 2017 Passionate about people and their devel-remarkable success. But future histori- opment, he rotated them among differentans will likely credit Jack Salzwedel as Chairman and CEO 2017 - positions to broaden their perspective andthe person whose vision transformed the experience. Over and over, he reiteratedenterprise so it could survive and prosper hard work, loyalty and winning. District his strong belief that people and compa-for a second century in an industry and Manager Paul Swalve taught him the nies encounter defining moments, wheresociety undergoing radical change. basics, including “write more than you lose they either change significantly or falter. and spend money to make money,” advice A realistic visionary, he recognized earlier If any leader was born with American Salzwedel viewed important both as an than most that American Family mustFamily genes, it was Salzwedel, whose agent and CEO. complement agents with digital sales anddad, Tom, was a veteran agent in service capabilities to provide custom-DeForest, Wisconsin. From childhood on, After moving into sales management ers options on their terms. He convincedhe and everyone else in the family pitched in 1988, Salzwedel became Wisconsin his board of directors, agents and employ-in to help the agency grow, answering East sales director in 1995, inheriting the ees the company had to take a differentphones, putting flyers on cars, hang- tension from an NAACP redlining lawsuit and difficult path to survive and prosper. Aing ads on doors, even taking initial claim in Milwaukee. His warm personality helped strong advocate of data-driven outcomes,calls. Salzwedel developed a strong work rebuild bridges in the community as he he would nonetheless occasionally makeethic while seeing firsthand how hard it worked to strengthen field performance. decisions based on his instincts or opin-was to be a successful agent. “Back then, His actions caught the eye of executives ions, without supporting data, if hewe really had to scrape to get by, so I and set him on the path for a meteoric believed it fit his vision for the future.never wanted to go into insurance.” rise to the top of the company in less than a decade. Salzwedel remembered Darnell Moore, After high school, he enrolled at Dave Anderson and Dan Schultz as key roleWartburg College, considering a career Understanding that strategy drives models who guided his development as anin environmental biology or medicine. culture, Salzwedel repeatedly challenged executive, focusing on humility, account-But midway through college, he realized ability and holding himself to a higherhe liked business, so he double-majored standard, ignoring the criticism of others.in biology and business administration,thinking he might land a job with a chem- Through his tenure as CEO, Salzwedelical company. But during the early 1980s proved to be a transformational leader,recession, chemical companies weren’t convincing his board of directors, hishiring, so Salzwedel took a job with the executive team and the entire organiza-Federal Reserve Bank of Kansas City. tion that American Family had to take a different and difficult path to survive and By 1983, insurance was looking better prosper. And he succeeded. His work ethicall the time, so Salzwedel accepted a job was legendary, with subordinates oftenoffer from Don Minter as an American receiving an email sent at 5 in the morn-Family health claim adjuster. A year later, ing. But he continually worked to findhe interviewed with District Manager Joe balance in his life, focusing on his wife,Tisserand for an agency opening, but Sarah, and their four children. Nearlysomeone else got the opportunity. Yet everyone who worked with Salzwedel overTisserand recognized talent and Salzwedel the years described him as intelligent,soon followed in his father’s footsteps passionate, energetic and creative — justbecoming an agent in 1985. the traits a leader needs to transform a Fortune 500 company. Tisserand became a mentor and closefriend, showing him the importance of Dare to Dream | 363

PAUL YOUNG, SUPER AGENTIf anyone in American Family’s “got into the insurance busi- be “the saw guy,” cutting, another history deserved the title of ness because of a bunch of he’d be packing, and another he’d Super Agent, it would be Paul turkeys.” After he graduated from arrange the counter display. But Young. The St. Louis area native high school in 1959, he went to one thing eventually got to him: spent nearly a half century build- work as a meat-cutter. That was The store would often purchase ing one of the company’s larg- almost expected, considering his vast amounts of turkeys and he est agencies, reaching nearly $25 dad, brother, two aunts and an had to find space to offer them million in premium in 2016. He was uncle were already in that line of to customers. “Beef always filled the first agent to reach 10,000 work. He liked the job because it up everything, and I was putting policies and some years earned required time management and those turkeys all over the place in the most compensation of anyone organization to successfully sell a the store, even in produce, and I in the company, including the CEO. perishable product. Every day his got sick and tired of it because we Young liked to joke that he job was different — one day he’d never had enough room.”BELOW: Agent Paul Young believed in close, consistent customer contact, on the phone but preferably in person.Many of his customers were with him for several decades.364 | Bigger, Bolder and Booming

As a result, when District at 6:30 a.m., spending his time patiently listened to his regu-Manager Don Hughes had to “retaining business.” His wife, lar phone calls. It almost cost himquickly hire a couple of agents in Kay, a former bank executive, his job once. When Harvey Pierce1967, Young signed on part-time, “reviewed” most of his emails was selected as Midland Regionstill working as a meat-cutter. Ten and handled human resource vice president in 1983, then-CEOmonths later he went full-time, responsibilities, interviewing and Bob Koch told him that one ofchuckling that Hughes hadn’t hiring new employees. Young the first things he needed to dohidden his belief that Young prob- also offered advice to his daugh- was “fire Paul Young,” who hadably wouldn’t cut it as an agent ter, Kelli, also an American Family written Koch a lengthy memo(pun intended). agent in the area. outlining company deficiencies and suggested improvements. Young approached his new job Throughout his career, Young Fortunately, Pierce didn’t listen;with the strict organization he was famous for freely offering he simply met with Young andwas used to, working six or seven his candid advice about what offered ideas to make his agencydays a week. Mondays were spent the company could do better more successful.on the phone making cold calls or differently. Many executivesto set up appointments. Tuesdayswere for distributing door handleflyers, with a goal of 1,000 a week.Wednesdays were appointmentsand so on. Same for evenings.Early on, he’d hand-deliver everysingle policy he sold. “I learnedthe harder you work the luckieryou get.” By 1977, his agency had5,000 policies. “Meat cutting made me betterat dealing with customers,”Young said. Just as he’d chat withsomeone from behind the meatcounter, he found it easy to talkwith policyholders. “We’re still arelationship business,” he insisted,“and even with all the computersand technology, it’s important totalk face-to-face with people.” Young kept a sign in his officethat said, “Every Family Has aStory.” He believed that everyperson, every family, has a uniqueset of life experiences, creat-ing a personal story. “If you canfind out what that story is, youcan make a strong connectionwith that customer and build arelationship.” After turning 75, Youngimplemented the first step of asuccession plan in 2016, turn-ing leadership of the Young andAssociates Agency over to hisson, Jeff. As he pulled back, hewas still showing up at the office Dare to Dream | 365

demonstrating a likelihood to grow, the policies from the retir- ing agent go to those agents most likely to succeed. Scale matters. Gradually, through natural attrition, the company’s sales operation started to transition to fewer agents and more sales specialists in agencies. In 2014, 92 percent of agents who left the company were replaced with new agents; that dropped to 32 percent in 2015. The remaining open agencies were taken over by agents who had submitted business plans to show how they would grow the business profitably in the future. While the number of agents decreased by more than 500 between 2014 and 2016, the number of licensed sales special- ists in existing agencies increased by around 1,200. “We want sales capacity,” Benusa said, “and we’re realizing it works well with a better balance among agents, licensed agency staff and the support of our call centers as we take care of our customers how and when they prefer.” Early results were favorable, showing that agencies with sales specialists increased sales significantly more than agencies with- out them. New business applications increased 9 percent between 2014 and 2015 and jumped more than 10 percent between 2015 and 2016, strong evidence the new approach was working.ABOVE: Gerry Benusa played a key role in successfully transi- CUSTOMER RETENTION — THE BATTLE NEVER ENDStioning the company’s sales operation to include the agencymodel and direct options for customers. Amid all the promising developments, Bill Westrate was disap- The Evolution of Agency program was designed to help pointed with the 2015 J.D. Power insurance shopping studyagents improve their business acumen and business manage-ment abilities in a fast-changing environment. Steve Tjugum, results released in May. After ranking among the best in thevice president of agency strategy, led a team that designed toolsand training to help agents grow profitably. Benusa found many industry for years, American Family fell from the high satisfac-agents were eager and appreciated the help. “They wanted toknow how they could get a return on investment for adding staff tion tier in 2014 to below average in the 2015 rankings. Yes, theor how they could use tools to better understand their marketsand run their business.” company had added 50,000 new As agents left the company, Benusa’s team would ask households during the first quar-“What’s the best solution?” Was it a new agent, a satellite officeor could an existing agent take care of customer needs? This was a ter. But internal research showedbreak from the past. Often, if an agent with a significant numberof policies retired, those policies would be divvied up among “a 51 percent of new customers werecouple of new agents, splitting the rest with a few existing agents,”Benusa recalled. “But inheriting a book of business isn’t a growth leaving American Family withinstrategy!” Under Evolution of Agency, if an agency operation isparticularly successful or if an agent can produce a business plan the first three years, most of them under the age of 50. While better than the indus- try average, Westrate still found those numbers unacceptable. He Rich Steffen asked marketing analysts to figure out who was leaving, why and what could be done about it. The result was a new customer experience initiative. Led by Central Region Sales Vice President Rich Steffen, an offi- cer team focused on improving the online sales experience, since 83 percent of customers were starting their shopping process366 | Bigger, Bolder and Booming

ABOVE: Professional golfer Steve Stricker, one of American Family’s brand communities,” said Jim Buchheim, communications vice president.ambassadors, visited patients and families at the American Family Chil- “The foundation allows us todren’s Hospital in 2016 during inaugural festivities for the first Ameri- increase our support at the corpo-can Family Championship golf tournament. rate, agent and employee levels.”GIVING BACK IN A BIG WAY In its first year, the foundation rolled out academic scholarshipsSince the very begin- Family pledged $40 million over for the children of employ- ning, American Family has 10 years to support the universi- ees, agents and agent staff. The supported the communi- ty’s academic, research, athletic competitive program for help-ties it serves. From helping start and charitable activities, includ- ing young people achieve theirthe Madison Civic Symphony ing funding of the American dream of a two- or four-yearOrchestra — in which company Family Distinguished Chair of Risk college education awarded 91founder Herman Wittwer played Management and Insurance. This scholarships.clarinet — to granting thousands partnership culminated decadesof requests for charitable funding, of collaboration with the univer- The American Family Insurancethe company supported hundreds sity, Herman Wittwer’s alma mater. Championship, a PGA Championsof organizations focused on Tour event, premiered in Madisonhuman services, education, health, In December 2015, the in June 2016. The event raisedarts and culture. In fact, giving company launched the American more than $1 million for Americanmodest donations to many causes Family Dreams Foundation, Inc. Family Children’s Hospital and 33was American Family’s overriding Focusing on causes that inspire, other organizations supportedphilanthropic philosophy for much protect and restore dreams, the by the Steve Stricker Americanof its history. foundation matched employee Family Insurance Foundation. In and agent donations to eligible additional to charitable funds, In August 2015, though, the causes, increasing the compa-company’s approach to charita- ny’s philanthropic reach into the Jim Buchheimble giving took on a significantly communities it served. “Researchlarger scope, starting with a major shows that customers, particularly the inaugural championship eventpartnership with the University Millennials, want to do business boosted the regional economy byof Wisconsin-Madison. American with companies that support their an estimated $15-20 million, drew 56,000 fans and provided coach- ing tips to 300 young golfers invited in by a local charity. Dare to Dream | 367

OUR ONEAMFAM CULTURE on a digital platform. Agents were urged to increase interaction with their policyholders, especially early on, providing a personalIt’s about customer, company reminder of why they chose American Family. Special empha-and community. sis was placed on training customer sales and service call center reps to respond more quickly to a broader range of customerOUR CUSTOMERS questions and pressing agents to offer personal insurance reviews. The never-ending challenge to improve the clarity and tone ofWe do what’s right for our customers. customer communication continued.Innovating. Creating the future. Steffen acknowledged the priorities were similar to those in the first Customer Experience initiative seven years earlier.Imagining what could be. “Sound familiar?” he asked. “They are. This is all about action andThen making it happen. execution. We don’t need to take six months to analyze things, we need to get after this and start making a difference for ourHumbled by the trust our customers customers.”place in us. Some good news arrived in June when American Family’sHonoring this trust with a long-term ranking tied for 16th among 45 companies in the J.D. Powercommitment to financial strength. auto insurance study, an improvement from an overall ranking of 19th the year before.Ensuring we will be here whencustomers need us most. BIGGER AND BOLD, NO LONGER REACTIVEOUR COMPANY As Salzwedel looked around the organization in 2015, he wasHow we treat people is just as pleased with what he saw. The company was rolling out newimportant as what we deliver. products and pricing options for customers. The group of companies was in the midst of double-digit growth in appli-Employees and agents, working cations and new customers, powered by agents and the newtogether to put our customers first. affiliates. The Dreams advertising campaign was more powerful than ever, featuring new celebrities like professional athletes J.J.Humility. Integrity. Sincerity. Watt and Kevin Durant.Driven by an ethical foundation. Most satisfying of all, perhaps, was that the organization finally had proven it could overcome its traditional tendencyWe’re different today than we were to be too cautious and slow, reactive instead of proactive. The5 years ago. We’ll be different 5 yearsfrom now. American Family earned the top spot in the J.D. Power 2016 SmallChallenging the status quo. Commercial Insurance Study customer expe- rience index. The study examined commercialFull of curiosity. Courage. Passion. customers’ satisfaction with interaction, price, policy offerings, billing and claims.Celebrating the strength of diversity.Bringing our best. Every day.OUR COMMUNITIESWe’re focused on doing what’s right.For now. For the future.Supporting entrepreneurs. Improving theenvironment. Investing in communities.Bringing people together to understandhow our differences can make us stronger.We are a catalyst for change.So people will say: “This is a bettercommunity because American Familyis part of it.”368 | Bigger, Bolder and Booming

REINSURANCE RECOVERY WINS ALL 4 ONEAMFAM AWARDPart of building a custom- accident year had to be exam- Morrow didn’t initially have er-driven culture is recog- ined “because there were a lot of access to the personal lines nizing and rewarding water-related losses that didn’t claims data, but she knew where employees who display passion show up until the summer months to find it: the new Data Science for customers and the company. because the homeowner didn’t and Analytics Lab. She linked up The All 4 OneAmFam Award was notice the damage until they went with Jeanne Chartrand in that created to recognize champion- to their summer homes.” area, working the next three ship performance for delivering weeks to discover the best data results, living American Family’s In addition, claims data source. They found a data discov- values or having a OneAmFam had to be pulled from multi- ery tool and the team used it to spirit. Peter Manke, Jeanne ple sources. Peter Manke, a examine information for both Chartrand and Michelle Morrow senior risk management special- commercial and personal lines. were among the ist on Morrow’s team, collected They calculated the impact on a winners in 2015. claim-by-claim basis and submit- commercial claims data from ted the results to the company’s In 2015, the company’s payment reinsurers. Michelle system, the property esti- Morrow, loss mator database and But they weren’t done yet. reserving actu- the integrated claims Believing even more recov- arial manager, system. Then, he used eries were possible, the team took a look at a data mining tool and manually identified other losses the reserves set applied key search terms beyond what the tool could iden- aside to pay for such as “freeze,” “freezing,” tify. Bottom line? They identi- claims associated with the fied a total of $120 million for 2014 polar vortex. She realized “storm,” and “ice dam.” The the company from this event, there were many more claims result? Manke was able to iden- resulting in a recovery of more out there resulting from the cold tify $30 million in commercial than $85 million in additional weather phenomenon than first claims that were incurred but not covered losses from reinsurers to appeared. She knew getting a reported as polar vortex losses American Family. good handle on the true amount that would be covered by the was important because those company’s reinsurance program. losses were covered under American Family’s aggregate BELOW: Peter Manke, Jeanne Chartrand and Michelle Morrow won an All 4 catastrophe reinsurance program, which provided coverage when OneAmFam award for their work in recovering millions of dollars related the accumulation of losses from to claims associated with the 2014 polar vortex. specific loss categories, including weather-related events, exceeded $900 million. But because “polar vortex” wasn’t a way the company labeled or tracked claims, Morrow and her team had to get creative to mine the data. The chal- lenge was to take a closer look at claims adjuster notes to link reported claim losses to the event and determine if adjusters had entered the proper peril codes. Easier said than done. For start- ers, claims for the entire 2014 Dare to Dream | 369

AMFAM, THE GENERAL THE GENERAL & HOMESITE ONLY THE GENERAL ONLY& HOMESITE HOMESITEABOVE: By 2017, American Family’s group of companies had achieved what Irv Maurer first dreamed of in the late 1950s — anational presence. The dream became reality when Jack Salzwedel and Dan Schultz, with their leadership team, devised a strat-egy to reach the goal.company’s strategic investments were mapping a different, ambi- town hall meetings, he stressed the need for everyone to “chal-tious course, but Salzwedel cautioned employees and agents it lenge traditional ways of thinking and embrace the change we’rewould require courage and agility. “We need everyone to work seeking.” He was convinced a culture of creativity and flexibilitytoward beating the competition, not by their rules but by our was essential. And he wanted employees to think of themselvesrules,” he said. “Instead of being a big fish in a small pond or a as agile solution-makers and problem-solvers.small fish in a big pond, I want us to become a big fish in thepond of our own making.” He also worked hard to create a single corporate culture — OneAmFam. In truth, throughout its history, American Family The CEO realized that the company’s culture, while strong had two cultures, one for employees and another for agents.and decent, needed to change. He was adamant that strategy During some periods in the company’s history, there was a lackshould drive culture, not the other way around. In blogs and of understanding and division between the two.370 | Bigger, Bolder and Booming

Salzwedel believed strongly that *The General joined the enterprise in 2013, Homesite in 2014every employee and agent in the enter-prise ought to understand, believe andact with an overriding, tangible philoso-phy that would bridge gaps and establishleadership attributes. He wanted evidenceof things like goal-setting and planning,understanding the customer, perfor-mance indicators and common language.To embed a passion for exceptionalcustomer service into its corporate culture,at year’s end, the company announcedthat “customer driven” would be addedto every job description, with competen-cy-based questions on this skill becomingpart of every employee interview. Other“core competencies” included accountabil-ity, living the company’s values, teamworkand courage to tackle difficult challengesand embracing and leading change. Year-end 2015 results were strongand balanced. New business applications,policies in force and premium written allshowed year-over-year growth. Customersatisfaction and retention increased, andthe American Family brand combinedratio of 95.5 percent was the lowestin a decade.“WE’RE JUST agency, capital management and the employee experience. OthersGETTING STARTED” were relatively new: American Family Insurance | connect was introduced in January. The branded partnership model offeredAmerican Family’s senior leadership team had good reason to insurance products directly to potential customers affiliated with celebrate the 2016 New Year. The enterprise was growing in other organizations. While most consumers still preferred to deal new business applications, policies in force and direct written with an agent, Bill Westrate said there were two clear and grow- premium — much of it fueled by The General and Homesite. ing customer preferences in the marketplace — buying insuranceThe affiliates had made bold moves entering additional states in through direct channels and purchasing through non-insur-2015, so that American Family could boast of at least one entity ance companies. “It’s our intention to create an industry-leading,licensed and selling in all 50 states. “We are nationwide!” Jack multi-product platform for partner-based distribution, enablingSalzwedel told employees and agents in a message titled, “We’re us to expand more rapidly into new states and reach customersjust getting started,” adding that “with our assumed reinsurance in our current states who would otherwise pass us by.” business, we are, in some respects — global.” Wells Fargo, a national diversified financial services company, The company celebrated a genuine milestone mid-year: 10 was the first major partner to sign up. Launched in the second million policies in force. As it had for years, the senior lead- quarter of the year, auto, homeowners and renters policies became ership team focused on critical strategic initiatives. Some were available to Wells Fargo customers in Arizona, Colorado, Southlongstanding, like Advance, customer excellence, evolution of Dare to Dream | 371

When disaster strikes, American Family’s catastrophe teams respond immediately to thedevastated area. Claims unveiled its new catastrophe vans in 2017. The vehicles offeredmobile communication and claim processing capabilities and they enabled the CAT teamsto respond quickly to provide immediate assistance.372 | Bigger, Bolder and Booming

Carolina and New Mexico. The pilot program aimed to offer a meets the road, the true test of the company’s commitment andbest-in-class digital solution for customers interested in buying care. Research consistently showed that providing a fast and fairdirect.The program continued to expand to more states and prod- settlement is essential for customer retention.ucts. Other partners, such as college and university alumni groups,continued to join. The Claims Catalyst strategic initiative included a new web-based system and reporting tool that started rolling out inCLAIMS CATALYST FOR THE FUTURE early 2017, eventually replacing the Integrated Claim System (ICS). It integrated 50 systems and replaced three others. SomeOther than bills, claims are the most common interaction 343 employees spent more than 500,000 hours on the project inbetween customers and the company. In 2016, more than 2016, delivering the project in just 18 months from inception to1 million claims were filed, 556,000 through the claim care release. Claims Catalyst promised to provide significant bene-centers alone. For most customers, a claim is where the rubber fits, including saving $15 per claims check issued from Catalyst’s centralized printing, compared to previous procedures.BELOW: The Claims Catalyst initiative in 2017 unveiled a new web-based system and reporting tool that improved claims handlingefficiency and reduced operating costs. Pictured below: 1. Sabari Kasetti, 2. Tanya Ryan, 3. Bhupendra Grewal, 4. Kimberly Vecchi,5. Kate Collier, 6. Angie Bastian, 7. Lynn Schweiger, 8. Shally Kumar, 9. Jennifer Mash, 10. Ryan Jacobi, 11. Paul Choi, 12. MarianneKalina, 13. Rose Kraemer, 14. Luke Hirschy, 15. Paul Freeland, 16. Carrie Grubanowitch, 17. Rajita Garg, 18. Sara Birky, 19. SameerShaik, 20. Tammy Sinden, 21. Todd Weis, 22. Dan Wang. Missing from photo: Connie Wilhelm, Barbara Majewski, Rob Young, PamLockstein, Jim Hinner, Paul Lee, Ray Lunder, Paul Masnica, Wendy Dickson, Tracy Beck, Sherry Anderson, Harshita Reddyreddy. 7 19 20 21 11 223 46 89 12 14 15 5 10 16 13 17 18 1 2 Dare to Dream | 373

The new system was designed to give agents and adjusters assigned claims to employees with the necessary experienceaccurate claim information more efficiently, eliminating some and skill set.manual processes, and allowing adjusters to spend more time withcustomers. Better online and mobile capabilities were created to ADVANCE IS JUST THE BEGINNINGmeet customer expectations of how and when they choose tointeract with the company. Claims Catalyst included an intel- Throughout 2016, the Advance rollout of new products andligent, computerized assessment system so that instead of unit pricing continued, eventually reaching every American Familymanagers assigning claims to adjusters, the system automatically operating state. The only exception was Minnesota, where regu- lators had not approved Advance property. Chief InformationBELOW: The Claim Care Centers proved to be a popular, effi- Officer Kristin Kirkconnell was ecstatic: “Talk about an auda- cious goal — a business transformation that no other largecient way for customers to report claims. In 2016, more than insurance company had successfully completed!”a half million people used the option. And it was successful indeed: Many states were seeing double-digit percentage sales increases year over year. It was a genuine customer-focused solution because current customers were given a choice of staying with existing products or moving to the new Advance ones. “Not only was this the right decision for existing customers,” said Kirkconnell, “but it enabled us to introduce our new products to new customers in our existing states sooner, leading to growth.” ANTICIPATING CLAIMS In 2016, the company’s enterprise catastrophe management director, Joe Gates, worked with members of the company’s innovation team to begin building tools to connect American Family’s risk exposure with real-time weather and claims data. The goal was to better anticipate customer impacts across the country for wind and hail storms. A pilot showed the company could develop the ability days in advance of actual events to identify areas poten- tially at risk by using weather forecasts. Detailed, interactive maps of tornado paths, hail swaths or wind speed maps were matched to property locations. Eventually, the data could indicate how customer counts in an impacted area translate into claims filed, allowing the calculation of loss estimates based on specific storm characteristics.374 | Bigger, Bolder and Booming

ABOVE: American Family reached a milestone in 2016, completing both the auto and property roll-outs of the new Advance prod-ucts and pricing. It was the most expensive, complex initiative in the company’s history. Advance cost nearly $600 million andinvolved more than 2,000 employees according to Greg Pfluger — the vice president and chief architect of the initiative. The Advance rollout wasn’t an ending, she stressed. “Advance Work continued on commercial products in 2017 for an even-gave us the capabilities and confidence to move forward and tual phased rollout.improve how we do business across the enterprise with effortssuch as Commercial-Farm/Ranch Fusion (CFR-Fusion), another A MUTUAL HOLDING COMPANYstrategic initiative. CFR-Fusion is designed to modernizeAmerican Family’s commercial and farm/ranch products, pric- In May 2016, American Family’s board of directors approveding and systems. Updated products to meet the changing needs a plan to create a mutual holding company (MHC) — a majorof customers’ growing farm operations would replace 25-year-old corporate structure change subject to approval by the Wisconsinproducts designed for small Midwestern farms. insurance commissioner and 75 percent of policyholders. “This new structure is about the future and our customers,” said CEO In October, agents started quoting the new products in Jack Salzwedel, stressing that it upheld the concept of mutualColorado, Idaho, Nebraska and South Dakota. All operatingstates would see the new farm/ranch products in 12 to 15 months. Dare to Dream | 375

AN AUDACIOUS STRATEGIC GOAL:In August 2016, American (RFO) and $3.3 billion in cumula- — we’ve had in the past 30 years. Family’s CEO Jack Salzwedel tive gain from operations (GFO) While I want us to have a lot announced “an audacious and by 2021 through an engaged more success as we work toward energizing strategic goal as part of workforce and higher customer this strategic goal, I expect we’ll the company’s 2017-2021 strategic satisfaction. have more failures as well. And plan.” It was both simple and bold. I look forward to them, because The plan called for American Salzwedel told employees they will show we are trying new Family Enterprise to reach: $12 and agents the goal was “defi- things and stretching ourselves to billion in revenue from operations nitely achievable because it builds achieve this goal.” on the successes — and failurescompany ownership by American Family Mutual Insurance of directors and officers of the holding company would be the same as those prior to the change. No officer, board member orCompany (AFMIC) policyholders. employee would receive any additional compensation, stock or benefits as the result of the change. Policyholders of AmericanThe board and executive team strongly supported the move. Family Mutual Insurance Company would exchange their current mutual insurance company membership rights for substantiallyAn MHC structure would create additional flexibility to invest similar membership rights in the mutual holding company. An overwhelming majority of policyholders — 84.5 percent fromin or acquire non-insurance companies that provide customer votes cast by proxy or in person — approved the change at a special Policyholders Meeting at the national headquartersproducts and services to complement the company’s insurance on Dec. 7, 2016. The mutual holding project was led by Scott Seymour, government affairs and compliance vice president.business. “This change would position American Family to meet LOYALTY VS. SATISFACTIONcustomer needs in an age of automated cars, smart homes and The company’s continued emphasis on a customer-driven cultureother advanced technologies that are already improving lives and and superb customer experience began to emphasize building customer loyalty. After all, a satisfied customer isn’t necessarilychanging the insurance industry.” American Family installed nearly 4,500 solarAn MHC structure would also better position the company panels on its National Headquarters building in 2016. The installation was expected to produce 1.26for future potential mergers and acquisitions of other mutual million kilowatt hours of electricity annually.insurance companies. The Wisconsin insurance commissionerapproved the plan late in the year, and the company immediatelybegan sending information to policyholders who would have toapprove the change.The company mailed an information packet and voting proxies to 3.7 million policyhold- ers eligible to vote, urging them to vote for the change. A website and call center answered customer questions. The company’s commu- nication stressed that conversion to an MHC structure would not affect the enterprise’s total capi- tal, and no plans were currently in place to raise capital through theScott Seymour sale of stock to investors.The board376 | Bigger, Bolder and Booming

a loyal customer. In fact, surveys showed some customers who Jim Nicksaid they were satisfied with American Family were nonethe-less leaving the company. Some satisfied customers, for example, AN AGENT WITH A BIG HEARTwould change carriers because of price or convenience. Loyalcustomers, however, might stay despite a premium increase or an One of the reasons so manyoccasional disappointment. In essence, satisfaction is an attitude American Family agents arewhile loyalty is a behavior. respected and admired in their communities is their culture of caring. “As we examined our changing market and customer research, Across the country, they work hard to helpwe learned customers want to interact with us differently depend- others and build strong neighborhoods.ing upon their specific needs and situations, so we need to work Jim Nick, one of the company’s mostwith our business partners and the field force to learn how we successful agents, became the epitomecan gain their loyalty,” said Jeff Swalve, then-customer excellence of the caring agent. He earned the Citizenprogram director. of the Year award in Wausau, Wisconsin, twice for his incredible impact on his city. Customer excellence team members concluded loyalty can Through the years, he donated and helpedbe developed by delivering products and services customers raise hundreds of thousands of dollars forwant, when and how they want them. Meaningful, personalized groups helping people in need.communication was essential, as well as providing superior value— both in cost and perception. In 2016, he raised $70,000 in six weeks to help local homeless children.DATA HELPS MAXIMIZE Previously, a large number of children hadTHE CUSTOMER EXPERIENCE been denied bus passes, due to out-of- date addresses the school district hadAnyone who’s purchased something on Amazon usually gets a on file. They only received cold luncheslist of additional products labeled “customers who bought this at school because of their overdue lunchitem also bought.” To generate those recommendations, Amazon bills. After meeting with several schooluses customer data and predictive modeling. American Family’s officials and collecting enough moneyStrategic Data and Analytics (SDA) division began working to pay all of the overdue lunch accounts,with business areas inside the company to tailor products and Nick was able to guarantee that everyservices for American Family customers’ needs. child would receive a bus pass and hot lunches. “At the end of the day, it’s all Like Amazon, SDA built a system that combines customer about helping the community,” he said.and household data, such as current insurance products, coverages “The reason we’re here is to help people.”and discounts, with demographic characteristics such as house-hold size, home ownership status and purchase behavior. It thensuggests the “next best product or coverage” that a customermight be interested in, based on product portfolios of customerswho share similar characteristics. Information from the system, called Recommender, is inte-grated into APEX. Agents in Ohio, Utah and Nebraska beganpiloting the system in November 2016.The initial phase incorpo-rated Classic and Advance auto, home, umbrella and life products.STRONG, BALANCED RESULTS investment gains and customer satisfaction. Policyholder equity increased by $397 million, ending at $7.8 billion on DecemberThe insurance group ended 2016 with solid increases in policy- 31. Direct premium written for the group increased 8 percent, reaching $8.3 billion. The group reported a property-casualtyholder equity, premium growth across the operating companies, Dare to Dream | 377

combined ratio of 100.7, which translated into nearly $1.01 in business models as customer needs and expectations change.”claims and expenses for every dollar in earned premium. Net Jessie Stauffacher, chief administration officer, succeededincome for the year ended at $325.6 million. Westrate as American Family’s agency chief operating offi-NEXT GENERATION LEADERS cer. Fabian Fondriest, direct chief operating officer, was named American Family direct president and CEO of Homesite. TheFrom day one, succession planning had always been one of CEO moves came soon after the promotion of Chief Marketing OfficerJack Salzwedel’s key priorities to ensure company leaders were Telisa Yancy to the senior leadership team (SLT).the best people to develop and execute strategies for AmericanFamily’s continued transformation and success. Salzwedel described the four as “strategic, collaborative and results-oriented,” adding “these folks understand when a leader In June 2017, he announced the board of directors had needs to be out front and when a leader needs to follow.”approved his recommendation that Bill Westrate be namedAmerican Family’s enterprise president. Salzwedel had assumed “With the advent of new and emerging technologies and thethe president’s role after Dan Schultz retired in 2014, and impact it might have on the company, we need to ensure that ourretained the CEO and Chairman roles in the new structure. top leaders have the capabilities and skills to drive us in whatever direction we need to go,” he said. “Bill has a full grasp of our products, sales and operations,”said Salzwedel, adding “he’s built terrific relationships with our Westrate pledged he would “do all I can in this new rolefield force and demonstrated the ability to lead change in our to support an innovative and agile culture” to keep the compa- ny’s future bright. Stauffacher, too, stressed innovative change, commenting “I’m committed to continuing to infuse our culture with a bias toward action to keep us moving forward.”BELOW: American Family’s creative urban marketing programs attracted customers in its largest metropolitan markets. In 2016,the company sponsored a CultureFest Family Day near the historic home of Martin Luther King, Jr. in Atlanta. Brand ambassa-dors signed up consumers to win a trip to the White House, Martin Luther King, Jr. monument and the National Museum of Afri-can-American History and Culture in Washington, D.C.378 | Bigger, Bolder and Booming

To accentuate the critical by long-time Georgia State importance of continued growth Sales Director Michael Riggs. and evolution of the compa- After Yancy was promoted ny’s agency business, Salzwedel to her chief marketing offi- promoted Chief Sales Officer cer role, she selected Talent Gerry Benusa to the senior Development Director Rob leadership team. Jim St. Vincent Quesnel as vice president of became chief human resources marketing. Mary Theilen, viceJessie Stauffacher officer, reporting directly president of risk management, Brenda Koenig to Salzwedel. was named chief risk officer. The changes were the culmi- Candy Embray was appointednation of several executive-level changes the CEO had announced vice president of sales and service operations. Brenda Koenig,beginning in 2016. He had previously moved Stauffacher to the Salzwedel’s chief of staff vice president, was selected to leadSLT as chief administration officer, succeeding Mary Schmoeger, Ignite, a customer-centric initiative that focused on threewho became president of personal lines. She succeeded Tim areas: always putting the customer first through empathy andConstien, who was named chief customer officer, charged with experimentation; empowering people closest to customers toaccelerating customer experience improvements. make decisions; and using evidence-based decision-makingCentral Region Sales Vice President Rich Steffen became to innovate. Koenig was succeeded by Jeff Swalve as chief ofsales strategy and support vice president, and was succeeded staff vice president.BELOW: In 2017, Fabian Fondriest, Homesite’s CEO, was named American Family direct president. He’s shown at a company meetingwith Bill Westrate, who was named enterprise president. On the right is Peter Settel, Homesite’s chief information officer. Dare to Dream | 379

The Spark, American Family’s entrepreneurial hub onEast Washington Avenue in Madison, fosters innova-tion teams — for American Family and other compa-nies and individuals as well.

If you’re competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering. — JEFF BEZOS, founder, Chairman and CEO of amazon.com19 INVENTING THE FUTURE

CHAPTER 19 | INVENTING THE FUTURET“ rying to predict the future is like driving down a country road at night with no lights, while looking out the back window,” said Peter Drucker, the world- renowned management consultant. So, he concluded, “The best way to predictthe future is to create it.” In 2017, with that confident attitude, as change were significant and complex; competitors were on a newthe American Family enterprise celebrated 90 years of extraordi- playing field, and only those with foresight, creativity and adapt-nary success, the company’s senior leadership team’s overarching ability would survive.strategic goals were crystallizing: AUTONOMOUS VEHICLES N urture the best-in-class multi-line exclu- sive agents and By 2017, more than two dozen companies were investing G row a best-in-class consortium of direct mono- billions of dollars to develop self-driving cars. Google and Tesla line companies creating a multi-line offering that were, perhaps, best known, but other potent competitors were could be privately labeled and sold through part- involved in the chase. Apple reportedly had more than 1,000 ners, or sold through a closely-affiliated sub-brand employees developing an autonomous driver system, rather than — American Family | Connect. the car itself. In May 2017, there was even speculation that cash- rich Apple might buy Tesla, creating a powerhouse for the future. No other company in the industry possessed those capa- Microsoft and Toyota had also announced they were workingbilities. Jack Salzwedel’s dream was becoming reality: American together, while most of the major automobile manufacturers hadFamily was no longer chasing market leaders, but rather, chang- their own research and development operations.ing the rules of the game and striking out on a different path. The consensus in the automotive and insurance industries A bold new strategy was essential because the insurance was that autonomous vehicles would eventually become part ofindustry and society were facing unprecedented change, perhaps every-day life and, the Boston Consulting Group was predictingthe most significant since the Industrial Revolution. Technology, as many as 12 million autonomous vehicles would be on the roadchanging customer demographics and powerful customer expec-tations were disrupting the traditional marketplace. The forces of382 | Inventing the Future

ABOVE: In 2013, like most of its competitors, Mercedes-Benz began designing the F 015 luxury sedan, a driverless vehicle. Thecompany said the car would have “a fuel cell plug-in hybrid drivetrain that gives it an entirely green autonomy of 684 miles.”by 2025 worldwide. American Family and other auto insurers Salzwedel described it. Certainly, strikingly new consumer trendswere preparing for this transition in stages, anticipating at least supported that theory. Among Millennials in 2017, those withfour distinct market segments: driver licenses were at the lowest rate in 50 years. Increasingly, consumers of all ages were attracted to the convenience and S hared mobility services with drivers providing cost-savings of ride-sharing, since they could get around easily ride-sharing options with less hassle and expense than owning a car. While taxi D riverless cars providing ride-sharing services services had been around for a century, new players like Uber P rivately owned driverless vehicles and Lyft were increasingly popular options; individuals using P rivately owned driver-driven vehicles their personal vehicles provided these services, transporting people for a night on the town or taking kids to a soccer match. CEO Jack Salzwedel and Chief Strategy Officer DaveHolman believed the transition to a mostly-driverless car soci- Some who studied this new phenomenon believed most of theety could take up to 30 years. “And in the meantime,” Salzwedel first driverless cars would likely be used by commercial businesses,said, “car manufacturers will continue to make safer vehicles with such as trucking companies, taxi services and ride-sharing servicestechnology to assist drivers.” in urban areas, as mobility management companies developed their industry and market. But it wouldn’t be an easy transition. Uber,THE SHARING ECONOMY for example, started testing driverless cars in San Francisco, but California regulators temporarily halted the tests after some UberBoth leaders thought the sharing economy would evolve more autonomous vehicles were caught running red lights.rapidly than driverless cars — “car-pooling on steroids” is how Privately owned driverless cars were also expected to become more common eventually, though manufacturers faced huge chal- lenges. Anyone purchasing a driverless car would expect it to Dare to Dream | 383

ABOVE: The Lyft and Uber ride-sharing companies signed up individuals to provide rides for people who could use their smart-phone apps to hail a ride. In 2016, Lyft booked 163 million trips in the United States, a distant second to Uber, which booked 78million trips in December alone.operate flawlessly everywhere in the country under every weather governments would eventually ban human drivers; they predictedcondition. However, achieving this feat would require complex and closed tracks would be made available for thrill-seeking drivers.expensive work to create and maintain detailed highway and streetmaps, to say nothing of the technological algorithms needed to SO, HOW WOULD THISsupport operation in every kind of environment — wind, heavy rain, NEW WORLD IMPACT INSURERS?snow, ice, glaring sun, temporary construction barriers and so on. Many industry analysts predicted auto insurance revenue would But, even with the advent of autonomous vehicles, many still drop over a period of decades. With safety technology, both driv-believed there would always be a market for those who prefer to er-driven and driverless vehicles were expected to experiencedrive their own vehicles. These individuals were expected to take fewer accidents, resulting in fewer deaths and injuries, so claimadvantage of technology that assists the driver, while maintain- frequency and severity would decline. Over a period of time,ing independence and control. By 2017, some futurists predicteddriverless technology would prove to be so much safer that384 | Inventing the Future

FLYING HIGHIn 2015, American Family’s potential for adjusters to privacy claims division began research- conduct roof inspections concerns ing drones as a business tool. and complete loss esti- would custom- Because it was illegal to fly mates more efficiently, ers have regarding the images unmanned aircraft systems for providing customers with captured by drone cameras over commercial use, the company the claim coverage evalua- their properties? What govern- received federal government tion needed to start roof repairs ment regulations would lawmak- approval to begin testing drones more quickly. The unmanned ers and regulators develop? for business applications. aircraft provided image-capture What skills would be essen- Drones will likely become valu- technologies that adjusters do tial for adjusters in the future? able for property review and not possess — including infrared Researchers hoped drones might inspection. After a severe storm and multi-spectral vision. someday help the company roars through, drones could fly obtain accurate, current informa- over the impacted area providing In 2017, much research tion about the condition of every detailed views of roof and struc- remained to be done before roof insured. tural damage. In the first years drones could become common- of the 21st century, American place tools in the industry, but Family received between 70,000 American Family considered and 140,000 reported hail claims issues including: Who would annually. Drones offered the safely operate the aircraft and interpret results? What type ofbecause of lower loss costs, insurers expected they would likely For driverless cars, insurance strategists focused on threereduce auto premiums. And with increased use of ride-shar- primary coverage possibilities: the owner, the car manufacturering, fewer cars might be owned or on the road. The amount of and the company that produced the technology operating system.driver liability and collision coverage would decrease, negatively The owner would likely need comprehensive coverage, but thatimpacting auto premium. coverage could change because, for example, self-driving cars were expected to be harder to steal. And yet, driverless cars could The emerging auto customer segments were also expected be hit by hail or fallen tree limbs. The operating system providersto have different needs, requiring new products, technology and would likely need product liability coverages for protection whensystems. For ride-sharing services with a driver behind the wheel, systems malfunctioned.the industry might need to provide separate policies for the ownerof the vehicle and the operator, if they were not the same. Fleet All of this challenged auto insurers as they considered theowners would need all-inclusive commercial coverages. future, primarily because of the unknowns. As driverless cars were developed, different companies would have different operating Some insurers were already offering ride-share coverage on systems, so there would not be a single probability of error, fail-a per-trip basis instead of blanket coverage. In 2017, Metromile ure rate or performance. Cars might perform differently in thehad such a partnership with Uber. Other insurers were consid- northern frozen tundra and the Arizona desert. Insurers knewering providing an instant-quote capability to insure car-sharing they had to develop much more sophisticated underwriting toolsdrivers/owners on individual trips. New policies might cover a with specialized knowledge of the new car operating systems.ride-sharing vehicle with multiple drivers. Drivers of ride-sharingvehicles would also require specialized coverage for those peri- Late in 2016, American Family announced it would test aods of time between fare-paying trips. Some insurers might also semi-autonomous vehicle endorsement. “We’ll be leading thespecialize as a mobility management insurance provider. industry as no U.S.-based company currently offers this coverage,” Dare to Dream | 385

said Mary Schmoeger, personal Insurers also believed their claim operations would be chal- lenged in years to come. Adjusters would have to develop new lines president. “We want to expertise, and insurers would need to develop new systems to accept data from different car operating systems to obtain infor- provide a product to our customers mation regarding accident causes. Would that data be readily shared if the operating system was at fault? Many liability issues that sets us apart from the compe- remained unresolved. tition while allowing us to learn CULTURE AND CONSUMER EXPECTATIONS CHANGE more about this emerging market.” Throughout most of its history, particularly after the company The strategy for personal lines moved into small towns and urban areas, American Family’s customer demographics, preferences and expectations were rela- focused on continuous product tively stable. No more. The rise of Millennials, GenXers and Generation Y — and their use of incredibly powerful technol-Mary Schmoeger updates. There was one constant ogy — had dramatically changed the insurance marketplace. in the midst of this anticipated Smartphones, mobile devices and apps, the pervasive power change: For privately owned driv- of the internet and social media fostered an expectation of “every- thing at my fingertips right now.” Customers universally expecteder-driven vehicles, coverage would probably be much like the and demanded immediate attention, efficiency and speed whenall-in-one bundled coverages sold for decades. However, if fewerdrivers continued to operate their own vehicles, coverage wouldlikely become increasingly expensive.Insurers like American Family also faced impacts on theirsales channels in the face of these anticipated changes. Forprivately owned driver-driven cars and privately owned driver-less cars, it seemed likely customers would need certain coveragesoffered by agents or direct channels. But, if auto premium levelsdeclined, agents with bigger, stronger and more diversified agen-cies would be the ones most likely to thrive.BELOW: In June, 2016, American Family released a short film on Father’s Day, telling the story of a dad who thoughtfully consideredthe best way to insure his son against doubt so he could fearlessly achieve his dreams. The non-traditional approach receivedmore than 10 million views on YouTube. The digital-only advertisement expanded the company’s social media reach.386 | Inventing the Future

In December, 1995, an estimated 16 customers. The Wall Street Journal reported insured million people were using the Internet. damage from natural disasters during the first By March, 2017, that number grew to 3.7 billion three months of 2017 approached $7 billion, people, nearly half of the world’s population. an all-time record. There were 425 tornadoes in the first quarter, compared to 205 in 2016.dealing with their insurance provider. Whether it was researching Homeowner insurance claims and premiums wereor buying insurance, or filing a claim, excellent service and seam- headed upward.less interaction became essential factors for success. R egulatory pressures and the growing problem Customers of all ages, but particularly the young, continued of cyber security issues also provided signifi-to prefer digital media for both personal and business interaction. cant additional challenges and opportunities forSocial media and digital advertisers demonstrated a much greater American Family in its second century.impact on some customer segments than traditional advertis-ing. American Family’s television advertising became increasingly A I — artificial intelligence — and robotics weretargeted, primarily because young consumers could be reached developing rapidly, creating the prospect of somemore efficiently (and often less expensively) through social media. jobs being replaced by these forms of automation.“We developed a three minute commercial with a Father’s Day Artificial intelligence describes computer systemstheme,” said Salzwedel, “and it got 10 million YouTube hits, and technology that perform activities that tradi-people who were seeking it out rather than us having to reach tionally have involved human intelligence andthem on traditional TV.” perception. AI was already highly prevalent in 2017 society, ranging from Siri, the voice of the American Family’s senior leadership team had realized that Apple iPhone, to Google algorithms.reaching customers and meeting their expectations in this newmarketplace would make the difference between flourishing LEADING THE WAYand failure. IN THE NEW WORLDAND THAT’S NOT ALL The rapidly-changing insurance world wasn’t a surprise to Salzwedel and his leadership team. In fact, company leaders,Many other major potential disrupters were on the horizon for including former President Dan Schultz, had recognized theAmerican Family and its competitors by mid-2017: inevitable evolution years ago and had made significant changes to the company’s strategy in preparation. As the collection and use of data became more sophisticated, traditional insurers worried that First, understanding that auto premium would likely decline, powerful companies like Google or Tesla might the company reduced its historical reliance on auto for revenue. enter the insurance marketplace. Consider “Auto used to be about two thirds of our premium,” said Salzwedel. Google: Financially dominant, it was now design- “Preferred auto has already been reduced to less than half in 2017,” ing self-driving cars, knowing the routes and though overall auto remained more than half. Enterprise strategy speed limits of every road in America and possess- emphasized homeowners now becoming a lead line. “We’re now ing incredible amounts of customer information. committed to becoming a leader in property pricing and under- Might the company decide to compete with tradi- writing sophistication,” said Chief Strategy Officer Dave Holman. tional auto insurers? In 2012, Google had started Google Compare, an auto insurance rate compar- Second, the enterprise had expanded its geographic cover- ison site, but ended the experiment in 2016. Tesla age and created a national presence, spreading risk and increasing might also prove to be a formidable insurance its customer base, primarily through acquiring The General competitor in the future with its solid driver data and Homesite. and telematics. The growing frequency of catastrophic weather Third, anticipating the desire of some customers to purchase events was also worrying insurers and their insurance in different ways, American Family developed strong online and call center options to complement the agency channel. By 2017, 20 percent of customer purchases from the enterprise were through direct channels. Part of the incredible challenge American Family faced by 2017 was managing this transformation while still nurtur- ing the legacy insurance business. “Strong evidence indicates Dare to Dream | 387

In 2017, the company constructed its Spark building in downtownMadison to house its innovation work, as well as Starting Block, anentrepreneurial hub for Wisconsin innovators.388 | Inventing the Future

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many customers will continue would continue to evolve their businesses to provide value to customers seeking their advice. to seek the personal advice they But the guiding star for every major decision remained the receive from agents,” said Holman. customer-centric mission and vision for the enterprise: What does the customer need, what does the customer want and how At every opportunity, company do we provide it best? leaders emphasized the American A DIFFERENT FOCUS FOR THE ADVANCE INITIATIVE Family’s continued strong commit- To achieve the customer-first vision for the enterprise, lead- ment to agents. ers of the Advance initiative had also changed their focus by 2017. “Through 2016, Advance was catch-up,” said Kelly Lien, And, the company’s five-year personal lines product management vice president. “We were developing more sophisticated products and pricing to match or strategic plan for the enterprise exceed those of many of our competitors.” David Holman was now crystal clear: “We will continue to offer a robust, multi-line product suite through agents (the channel controlling themajority of premium). We’ll invest in our agents to help themmeet the needs of an evolving marketplace and help their busi-nesses thrive. Our agents will sell the best products available— including brokered products — depending on what is bestfor our customers, agents and the enterprise.” In addition, agentsBELOW: Hundreds of people worked on the Advance initiative. Greg Pfluger, vice president and lead architect of the complexproject (red coat, front row) is shown with a few of the people who contributed. Pictured: 1. Lolly Lawrence, 2. Greg Pfluger,3. Julie Rupert, 4. Jane Kostka, 5. Sue Skalski, 6. Sue Van Meter, 7. Melissa Kelliher, 8. Erin Kempfer, 9. Amanda Severson,10. Mike Shedesky, 11. Duane Ives, 12. Cathy Schulz, 13. Barbara Rashke, 14. Tom Chubaty, 15. Ray Lunder, 16. Sreenivas Gouraram,17. Kimberly Evans, 18. Kathy Jacobson, 19. Joel Underwood, 20. Bob Andrew, 21. Amy Keelty, 22. Jim Hinner, 23. John Freeman,24. Theresa Peachey, 25. Angie Bastian, 26. Chad Christianson, 27. Ken Robertson, 28. Keith Loppnow, 29. Jim St. Vincent, 30. KenLandolt, 31. Chris Spierings, 32. Karl Lofgren. 21 29 23 30 31 32 2712 13 22 5 24 25 26 9 15 16 7 17 18 19 28 14 4 68 20 11 10 1 23390 | Inventing the Future

“But now, we need to make sure we have continuous inno- just enough features to attract customers initially, followed by vali-vation and delivery of what our customers value in products and dated learning about the product and its continued development.pricing. With Advance, we have a discipline and a process; it’s “You have customers react to it,” he said, “and then you iterate andbecome what we do.” Lien and his team developed a product further develop, get more feedback, iterate some more. We shouldroadmap for each line of business, laying out the key deliverables be able to develop new products faster and less expensively, andthey anticipated implementing over time. discontinue products that don’t resonate with customers.” Greg Pfluger, the vice president and chief architect of INNOVATING FOR THE FUTUREAdvance, said, “We’re shifting in I/S from delivering the massiveprojects in Advance to working differently to make smaller, incre- Innovation is the first of American Family’s seven enterprise values.mental changes through many more smaller projects.” While other companies may treat that as nothing more than a Both Lien and Pfluger agreed that the company wouldcontinue to improve customer self-service capabilities, particularly buzzword, Salzwedel, Holman and Chief Business Developmentwith amfam.com and mobile apps. “Some of our customers inter-act with us with their smartphones,”said Lien,“so how can we use Officer Peter Gunder insisted it was critical for American Family.that connection to generate customer loyalty and more interaction?” By 2017, the company’s most visible commitment to inno- Significant work also continued in 2017 on telematics, thecompany’s usage-based insurance program. “We want to focus vation was found at an office one block from Wisconsin’s stateon loss prediction, loss avoidance and modifying driver behavior,”said Lien. Telematics describes a process where devices in vehi- capitol — home of American Family Ventures (AFV ), thecles record speed, braking, miles driven and driver behavior. Theinformation is collected, analyzed and ultimately can be used to Innovation Department and the Data Science and Analyticsdetermine premium and discounts. Lab (DSAL). At that office, small teams focused on three prior- Pfluger’s teams were also working with others in thecompany to improve Customer 360, technology that helped ities: new insurance business models, connectivity and analytics.agents and call center staff proactively deal with customers. “Wepull together all the data we use to know about our customers The concept began in 2010 when Gunder, then vice pres-and their preferences,” Pfluger said, “and 360 prompts the agentor call center to take the next best course of action.” For exam- ident and chief investmentple, the technology might prompt an agent to call a particularcustomer, based on predictive analysis of that customer’s likely officer, took an equity position inreaction to a price change. Shoutlet, a firm providing socialPOSITIONING THE ENTERPRISE media management platformSalzwedel recognized “We don’t know precisely how things willreally look even five years down the road. What we need to do services for the company. It was ais position the company so we’re prepared for future disrup-tion and to take advantage of opportunities. We’re only in the classic venture capital investment,first 100 yards of a mile run.” He believed American Family wasbetter positioned for change because “We’re big, but not as big connecting entrepreneurs whoand unwieldy as State Farm or Allstate.” had cutting-edge ideas with the Recognizing the need for new or improved products,Salzwedel also wanted the enterprise to “go the route of the funding they needed to furtherMinimum Viable Product (MVP).” That was a change in philos-ophy from the company’s past. Instead of trying to produce the develop them. Gunder quicklynear-perfect product before release, MVP would develop it with realized the value of getting an Peter Gunder early look at tech startups, and thought investing in some of them would give American Family strategic options for the future. He soon would become chief business development officer for the enterprise. In 2013, Salzwedel had approved Gunder’s proposal to create American Family Ventures (AFV), becoming the second major insurer to invest venture capital in emerging technology business models that could benefit the company and its policy- holders. Gunder’s passion for innovation and credibility in the financial world made him the perfect leader for the initiative. “We live in an exponential era,” he would tell anyone who would listen, quoting the book Bold: How to Go Big, Create Wealth and Impact the World, by Peter H. Diamandis “Either disrupt yourself or be disrupted by someone else.” Salzwedel “instinctively understood the strategic value Dare to Dream | 391

ABOVE: American Family Ventures invests in companies offering products and services that increase American Family’s value to itscustomers. Pictured above (seated from left): Drew Aldrich, Dan Reed, (standing from left:) Molly Lahr, Patrick Klas, Peter Gunderand Joann Martin. Missing from photo: Shrey Gosalia, Vik Sasi and Josh Aycock.of nascent growth and the potential of embryonic companies,” venture capital funds.These individual company investments gave management direct visibility into the startups’ growth plans andGunder said. The CEO proposed putting $200 million into the progress. New Ventures typically aimed to be a co-investor with other nationally-recognized capital investment firms.initiative. Gunder counter-offered telling Salzwedel, “Let me “By taking minority equity positions in promising early stageprove I can build institutional capacity and then we can add companies, we expect those investments will generate both strate- gic advantages and financial returns,” said Reed. One of the firstmore.”They settled on $50 million to start and the board of direc- investments was an 8 percent stake in Coverhound, an insur- ance-related startup providing online rate comparisons amongtors later upped that to $150 million. major insurers for property casualty and business coverage.Through an entity known as New Ventures LLC, AFV PROACTIVE PROTECTION BEYOND INSURANCE invested in startups developing The innovation team’s work was directly linked to American products and services that increase Family’s proactive protection branding, embedded in its culture and enterprise strategy. Leaders developed a simple, yet stunning American Family’s value to its customers. Gunder selected Dan Reed to lead AFV, and between 2013 and 2017, he and his staff of five analyzed thousands of companies, investing in 41. Those investments — typically ranging from $100,000 to $2 million —Dan Reed were in individual companies, not392 | Inventing the Future

10 12 13 14 15 17 19 21 22 7 11 16 18 20 6 8 9 34 1 25ABOVE: American Family’s innovation team develops opportunities forthe company to provide proactive protection to its customers. Pictured:1. Lee Shanahan, 2. Peter Gunder, 3. Ryan Rist, 4. Heather Johnston,5. Jamie Denlinger, 6. Sarah Pettit, 7. Dan Sarbacker, 8. Kris Karsten, 9. Bex Laird,10. Laura Portz, 11. Karyn Schubert, 12. Xiaoming Gu, 13. Janet Anthon, 14. Dean Koch, 15. EricOrthey, 16. Eric Harrison, 17. Randy Westbrook, 18. Reggie Cheatham, 19. Andrew Mullvain, 20. Lynn King, 21. Nathan Dau-Schmidt and 22. Bill Greiter. Missing from photo: Sherry Eckholm, Mike Gardon, Jim O’Brien, Shaun Wilson and Ben Zimmerman.strategy: American Family will provide customers with innovative, innovation director. His team determined how and whether to commercialize some of the partnerships into American Family’sproactive protection that goes beyond traditional insurance products. business. “We test out their technology; how does it work?” Rist said. “How can we use it to have regular, positive engagementThe 2017-2021 strategic plan stated, “We will seek new ways with our customers?”to improve our customers’ experience. This includes helping our JUST THE BEGINNINGcustomers proactively lower their losses and sharing the benefits By 2017, the innovators were analyzing many other companies that offered connected home technology:with them. It also means finding new services that customers For instance, smart home sensors could identifywant and are willing to pay for. This also could include moving the precise location of a problem from smoke, fire or carbon monoxide, alerting homeowners and into adjacent markets.” renters on their smartphones. Costly water damage claims could be miti- To make that strategy real, gated when water detectors alerted a smartphone about slow leaks or standing water. Damage from AFV targeted firms developing emerging technologies for home connectivity, a part of the global trend called the Internet of Things. Once Reed’s team pulled the trigger and invested, the selected compa- nies’ business model, products and services were analyzed by the inno-Ryan Rist vation department, led by Ryan Rist, Dare to Dream | 393

RING!American Family’s invest- existing wiring. Motion triggered like Ring® ment in Ring® was an alerts sent via the free Ring app became eligi- early, successful example notified the homeowner of arriv- ble for the compa-of the strategy. The partnership ing guests, deliveries or intruders. ny’s Proactive Homefeatured the Ring Video Doorbell, Ring® research had shown many Protection discounta do-it-yourself, Wi-Fi-enabled burglars rang the doorbell before (up to 5 percent) on breaking into a home, to check their homeowners, home security system. It allowed for alarm systems, dogs and other condo or renters policies. users to view an HD video and surveillance equipment. answer a door remotely if “We’re committed to someone rang their doorbell, Ring® was so confident in its providing value to our customers whether the homeowner was doorbell system that if a home beyond just helping them recover upstairs, across town or a with the Ring Video Doorbell was from tragedies and accidents,” thousand miles away. burglarized, Ring® offered to reim- said Ryan Rist. “We want to lever- A built-in recharge- burse the customer up to the age technology and partner with able battery let homeown- amount of their insurance deduct- companies equally committed ers install the doorbell on ible. American Family custom- to preventing those events from the door or connect it to ers who used smart home devices happening.” moisture, mold, bursting pipes and flooding could office. The Data Science and Analytics Lab (DSAL) advanced be significantly reduced. Installing simple window and door sensors research into data analysis concepts. A small group of data scien- or motion detectors that communicate through a smartphone could alert a homeowner about tists, led by Business Development Director Marty Buchheim, possible break-ins. Smart electrical plugs could give homeowners and researched, tested and developed innovative business models, renters the ability to turn lights on and off, connect devices to timers and track energy usage. concepts and technologies to improve American Family prod- Sensors could alert a customer if an appliance was left on. ucts and services. AFV and DSAL sometimes worked together Home inspection services could spot issues before they became serious problems. to review venture capital opportunities, assessing whether the Beyond providing protection, investments in smart home startup company being considered could provide data and othertechnology companies could potentially save customers and thecompany significant money.“Investing in products or services that results of interest to the enterprise.help prevent burglaries, detect or suppress fires, mitigate waterdamage and more, the company will reduce risk and claims by AFV and DSAL had collaborated in 2013 to invest inhundreds of millions of dollars,” said Holman. Networked Insights, a Chicago firm that reviewed an entire day’sDATA ANALYTICS FOR THE FUTURE comments on Twitter and other social media platforms, analyzingAnother important innovation team was working side-by-sidewith American Family Ventures in the downtown Madison what people were talking about; the data could focus on chatter about American Family, insurance in general or other trending topics and consumer preferences. That data offered the potential to help American Family better connect with current and poten- tial customers. And the data potential was staggering. Gunder noted, “We are a digital company; we have no inventory, but we have a digi- tal contract. Our raw materials are digital.” Those raw materials Marty Buchheim394 | Inventing the Future