MARKETING 438 PUBLIC RELATIONS MAJOR CASE PRESENTATION 20 TH CENTURY INSURANCE COMPANYBYBranson C. Nicholson Nichelle Cox Rhonda Porter 1 lb 419802/17/99 Instructor: Paula Becker UNIVERSITY OF PHOENIX Long Beach Campus Table of Contents History, Position, Targeted Market, Goals Page 3 Northridge Earthquake, Crisis Page 4 Comeback Kid, Results of PR Campaign Page 6 Developing a Crisis Plan, Page 7 Crisis Team, Milestones for Communication Page 8 Issues Page 9 Plan Approval, Anticipated competitive responses Page 11 Recommended press release Page 14 References Page 15 Appendix A Page 16 History 20 th Century Insurance was established in 1958 and was the first company of its kind to sell automobile insurance without a middleman, known in the industry as a broker or agent. This direct sales approach allowed 20 th to offer insurance at a much lower premium than its competitors. To date, 20 th Century Insurance is still recognized as one of the most economical full service automobile insurers in the California market. Position In terms of market share, 20 th Century is the fifth-largest car insurer in the state.
The company's credit rating was recently upgraded from a B- to BBB+ and its stock is being traded around $21. 50. 20 th Century is also among the Valley's (headquarters office location) largest firms in both market capitalization and employees. The company currently employs in over 2, 000 people.
Targeted market For the first 30 years of the company's existence it enjoyed huge profits from selling only automobile insurance. These large profits were achieved, due in part, to its targeted market which are generally people in the age range of 30-60 who are classified as a low risk 'good drivers'. The company's structure of selling insurance directly to the customer while providing excellent customer service is also a driving force to its success. In 1982 the company began offering homeowner's insurance and this venture also proved to be financially successful for the company. The vast majority of the homes insured by 20 th Century are located in the Valley cites and at one time the homeowner's insurance made up about 10% of the company's business, however, to date it only constitutes about 2%.
Goals In 1994, 20 th Century Insurance was a company on the rise. It was a financially healthy company, reporting a total net of $734. 8 million in the preceding 35 years of operation. They were exploring plans to expand their business by selling insurance in other states such as, Arizona, Nevada and Oregon. The company was also looking at the idea of possibly changing the company's name, in light of the newly approaching 21 st Century.
However, all its plans for growth were immediately put on hold due to the January 17, 1994, magnitude-6. 7, Northridge Earthquake that cost the company over $1, 065 billion. The Northridge Earthquake The Northridge Earthquake was recently characterized as one of this nations' most costly disasters ever, as it has been 20 th Century's most costly and devastating in terms of its finances, reputation and survival. In the past five years since this catastrophic occurrence, 20 th has encountered near financial ruin, class action lawsuits filed by homeowners, name smearing and accusations of illegal business dealings made to the press by their disgruntled claim's manager and a near take-over of the company by their financial savior Automobile Insurance Group (AIG). This series of events could have been described by many as a Public Relations nightmare for the company, instead, 20 th chose to look at it as their biggest opportunity to do PR.
Crisis Physically violent acts of God, such as an earthquake are often times both hard to predict and prepare for. 20 th's, Corporate Relations, Senior Vice President, Ric Hill, stated 'The only way to see if your crisis plan works is to have a crisis.' The mere concept of insurance is in some ways a form of personal crisis management for the individual insured. One must set things / plans in place to be prepared for all types of crisis. Therefore, it stands to reason that an insurance company would have had a crisis plan for this type of occurrence. Though 20 th did have a crisis management plan, there were many things that they had either overlooked or underestimated, such as the possibility that in a catastrophe their computer system might be in-operable thus rendering them incapable of verifying whether or not a claimant was actual covered for the loss, or that the previous estimation of the cost of an earthquake might be underestimated, causing the company to be under insured. Despite these perils, the company was able to make an almost full recovery in two years, which was three years less than the anticipated 5-year recovery plan.
Their speedy recovery can be partly attributed to Chief Executive Officer, Neal Ashley and his team work philosophy. Ashley states that 'During a crisis is when you need people the most, because you need action (s) to be taken'. 20 th's focus throughout this ordeal was customer service. During this period there were few customer complaints. Corporate Relations VP, Ric Hill stated that,' I've seen many companies survive all types of calamities, but very few companies survive poor service'. Comeback Kid-PR Campaign Five years later the company has made a full recovery and is now known as the Comeback Kid.
Therefore their new PR strategy should be to focus on the future. That concept can begin with the re-visiting of the company's name change. It would be important to conduct some cross-section test marketing to assure that the name change will not be perceived by the company's publics as an effort to hide from what has occurred. It is in the company's best interest to legitimately put the past behind it and then move forward. Another PR tactic is to remain focused on the positive, by producing a continuum of information about the company's profit margin, increased credit rating and stock dividends paid to stock holders. This obviously will show the strength of the company, therefore enticing more people to invest.
With more investments the company can push forward with its previous plans to expand its business in the states of Nevada, Arizona and Oregon. Regular marketing and advertisement can now be resume. Through a demographics study, it has been proven that many people from California have re-located to these targeted states and therefore 20 th's advertisement should be increased to provide name recognition for those individuals who are or will be re-locating. Results to be achieved from PR Campaign 1. Show growth 2. Increase name recognition as a solid company 3.
Rebuild reputation as a fair insurance carrier Developing a crisis planA crisis plan provides an organization with a systematic, orderly response to crisis situations. This response permits the organization to continue its day-to-day business of making a profit or providing service while the crisis is being managed. The plan goes into a binder, which is distinctively marked Crisis Plan, and gets distributed to all members of the crisis team. By itself, a crisis plan won't help your organization out of a crisis. The team and the organization must be capable of following team lead instructions and must practice over and over the skills needed to handle a crisis. The organization must run drills and simulate crisis situations, in order to be their best when the time comes.
Depending on the nature of the crisis, the public scrutiny generated by the media coverage also may have a political, legal, financial and governmental impact on the business. Hence, a crisis will have a substantial effect on sales / revenues /funding, stock price, market share and other criteria that measure the viability of your organization. The crisis plan is an organic document, there are always elements that are being modified or added. Crisis planning should be an ongoing process. An organization should be flexible in the creation and life of a crisis plan. Some of the things one must look at when making plans are whether to relocate temporarily or out-source to other locations, how we will handle equipment that is not accessible or equipment that has been damaged all together.
How to handle media coverage, is also something we should very carefully. Also, we want to take a look at what effect the crisis will have on the company on a whole. These along with many other issues should be addressed. Crisis Team We have selected a crisis team to develop our crisis plan in the event of another earthquake. The crisis team should be looked at as the crisis 'board of directors'. The team will have a crisis team manager.
The team manager must have the ability to delegate. Delegation is basic to effective team management. It is primarily up to the crisis team manager to delegate to individuals tasks that are within their particular specialty. A strong crisis team manager will delegate, coordinate, and control. The crisis manager will report directly to the CEO (pp. 1-51 Littlejohn).
When delegation is well planned and carefully thought out, the personnel selectively assigned feel more comfortable in their roles. This allows a feeling of trust to develop. Trust, in turn, opens up avenues of communication, both vertically and horizontally, throughout the organization. This brings us to our next important characteristic of a crisis manager: He or she must be a good communicator.
Milestones for communication The following are three milestones for common cation in a crisis: Within 60 minutes of being notified of an incident, especially a natural or environmental disaster, an initial communication should be distributed denoting what facts are available and what steps are being taken. Wall Street and the media were contacted with information that 20 th Century was still in business. This was done in order to save the company's stocks from plummeting. Within three hours, a crisis communication organization should be in place. By the end of day one, a short-term communication plan needs to be in place.
This short-term communication will specify key messages, key facts, identify spokespersons and indicate the next day's needs (Kramer). Because our team had already gone through a major crisis with the Northridge Earthquake, we were better prepared for working out details in the event of a crisis. When the Northridge quake hit, 20 th Century's headquarters was badly damaged. Phones, Electricity and computers were shut down.
A worker borrowed a tent, and the company set up a makeshift operation. Within hours, electricity was restored but computers remained inoperable. The company had a makeshift tent city in the parking lot to serve its policyholders (Sanders). Issues The following are only a few of the questions the crisis team will address: 1. Where would we relocate? Can we relocate? How long would it take to set up a temporary facility? We knew that if need be we could set-up makeshift sites for our policyholders. We also knew from previous experience that this could be accomplished almost immediately.
We would have equipment on hand or easily accessible to save time and money. 2. Would we need extra help? Would be establish a special claims handling unit? 20 th Century hired 400 full-time outside adjusters for the Northridge quake. Since we had already experienced hiring 400 full-time adjusters, we were more prepared for a 2 nd crisis. We had names and phone numbers easily accessible. 3.
How quickly could you resume business as usual? What would the costs be? Having experienced Northridge, business as usual would be much easier to attain. The costs maybe less due to being more prepared and having more information to choose from. 4. How long would you be out of business? During the Northridge quake, only hours were lost due to makeshift tent operations. Phone lines were set-up very quickly. Computers were a problem due to lack of water pressure.
Since we have already experienced this situation, which was handled by a group of managers putting their heads together to resolve the problem. If need be, a tank truck filled with water would have to be pumped up to the roof, in order, to get the computers back into operation. Although, this was not necessary engineers found another method for getting the water pressure back. 5. How would you deal with your customers? Customers could either call another office for temporary help or as they did in the Northridge case they drove into the office. 6.
How will the communications and media be handled? Respond promptly; do not stonewall the media. Respond to all queries. Communication is very important during a crisis. 7. Will we use the company hot-sites for computer? The company could use its hot-site that is a computer facility contracted by 20 th Century to be on standby as a last resort. Although this would be more costly to the company and the customer would experience delays in service (Gross).
Plan Approval The plan must be approved. This approval should encompass all personnel who are affected by the plan. The plan must be reviewed. The review must be performed regularly to prevent obsolesce. The plan must be tested.
This will ensure that all players understand their respective roles. All of these things are an ongoing (Gross). 20 th had already experienced what a huge crisis means to a company. Therefore, the corporate headquarters immediately found monies for a crisis campaign. Because William Mel lick, now CEO, had experienced the 1994 quake first-hand, crisis plans were immediately being updated. 20 th Century has stopped coverage of homes and condominiums.
They will begin selling insurance in Neveda, Oregon and Washington. Standard & Poor's is planning to raise the company's credit level. Before the earthquake the company maintained an AA, or excellent rating. The company was also OK'd for a rate reduction which will help 20 th get back into the competition. These issues along with many other issues were handled so well by 20 th that they are already on the come back (Yoshitake). Anticipated competitive responses In the area of competitive response, we at 20 th century feel that before you can get serious about any uncorrected public relations problem you must first research.
To often the failure of public relations messages are toward exposures to message, rather than towards the message impact. The areas of public relations practice that we will concentrate on are listed below: Employee relations 1. How to maintain a strong public relation front line 2. How to get volunteer readers / listeners / viewers to review communications Investors relations 1. How to make investors understand long term benefits 2. How to involve individual investors who are buying shares indirectly 3.
How to encourage employee investment 4. How to capture and sustain analysts' attention Media relations 1. How to develop continuity of coverage 2. How to use specialized media more successfully to communicate Organizational counsel (Social/Competition) 1. Social responsibility a. How to communicate the good climate of goodwill b.
How to coordinate all communications so the areas don't destroy credibility 1. Competition a. How to issue challenges without engaging in negative attacks. How to communicate advantages without exceeding the limits Recommended press release and media to be utilized To make effective use of the media, you must know enough about the mechanics and technology of each medium to prepare the copy properly. The recommended media to be utilized in the 20 th century public relation department is television commercials and newspapers. 20 th century is selecting these two medias because the advantages are best suited for the 20 th century needs.
We sorted through controlled media and uncontrolled media and felt the best way to utilize the medias within 20 th Century. Our first step was to asked three questions: 1. What audience are we trying to reach? 2. When do we need to reach this audience? 3. How much do you need to spend, and how much can you afford to spend? After we answered the three questions the television commercials and newspapers still fit the requirements for 20 th century. We then asked four more question to assure this is the right audience communication fit for 20 th century.
The next question are listed below: 1. Which medium reaches the broadest segment of your audience at the lowest cost? 2. Which one has the highest credibility, and what is its cost? 3. Which medium can you count on to deliver the message within the necessary time constraints for the message to be effective? 4. Should a single medium be used? After carefully the advantages and disadvantages of medias, the selection is still the television commercials and newspapers medias. The advantages of these medias far out weigh the disadvantages and are tailored to 20 th century needs.
Listed below are the advantages for both medias which produced the final decision: . Television advantages 1. Hugh Audience 2. Good product identification 3. Popular medium 4. Combines sight, sound and motion attributes 5.
High impact of message 6. Permits physical demonstration of product 7. Believability due to immediacy of message Newspapers advantages 1. Relatively low cost 2. Selectivity of geographical 3. Ease of changing advertising copy 4.
Reaches all income groups 5. Ease of scheduling advertisements 6. Good medium for manufacturing/ dealer advertising Press release The type of press release 20 th century will utilize is the news release. We choose the news release as our main media over the interview and event coverage because the information is release in a timely matter and more often is sent electronically. Attached in the appendix (A.
) is a copy of the news release used for communication with the media. The utilization of the television commercials and newspapers factors in 20 th Century's ability to regain the cutting edge in the auto and homeowner insurance business. References Gross, A. (1998). Catastrophe planning: An essential part of comprehensive risk management.
Insurance Advocate Kamer, L. (1997). Crisis planning's most important implement: The Drill. Communication World Littlejohn, F.
Robert (1983). Crisis Management a Team Approach New York: AMA Management Briefing. Newsom, D. , Turk-Vans lyke, J.
, & Druckeberg, D. (1996). This is PR: The realities of public relations 6 ed. United States: Wadsworth Publishing Sanders, E. (1994). Some hard lessons in survival: Insurer faces own problems during quake.
Daily NewsSchnaible, R. (1994) 20 th Century Times: Earthquake! , JanuaryShinkman, R. (1996) 20 th Century bounces back to solid profitability: Insurer's 1996 net income may hit $100 million. , Los Angeles Business Journal April 29-May 5 Sparks, D.
(1995) On the Road Again. Financial World, December 5 St avro, B. (1995) 20 th Century on the Rebound After Settling Quake Claims. Los Angles Times September 12 Sullivan, B.
(1999) Daily News: Comeback for 20 th Century Insurance, January 13 Yoshitake, D. 20 th Century puts quake trials behind. Daily News.