BEHIND THE LIST WITH KEN SHUTTS

Q: What do you feel sets Penn National apart from other insurance companies?

A: Penn National was formed in 1919 by a group in Pennsylvania that formed us as a mutual company. As a mutual company, we are owned by our policyholders. We have always had - and I've been with the company 35 years - a philosophy that our business decisions are made with a policy-holder-first focus.

A couple other factors that I would clearly mention as distinguishing factors or giving us an advantage is we've been managing risk for 95 years at Penn National, so we clearly know risk and how it should best be mitigated, managed and transferred through the insurance mechanism.

We deal only through independent agents. We have about 770 independent agents that represent Penn National in our 11-state operating territory, and while the policyholder is our owner, the agent is the one who brings that policyholder to Penn National. We've always looked at the agent as our point of sale and as being essentially who we define as our customer.

I'd also say we, as a company, compete on analytics. We believe firmly the insurance companies that are going to be the most successful in the future and offer their policyholders the best insurance protection as far as coverage, terms and price will be the ones that had superior analytics.

What changes has your industry experienced in the past 10 years?

First, I would say the 'commercialization' of insurance, particularly in personal automobile insurance. The insurance industry has gone from being a marginal player in television and radio advertising to, today, one of the biggest television, radio and media advertisers, with all the major companies really saturating the airwaves with ads and commercials. (It) has really forced companies to get their name out, what they stand for and what differentiates them from their competitors in the industry.

I'd say another (thing) is the comparative capabilities of policyholders to shop and get quotes from companies. Today, with the Internet and the many sources on the Internet, individuals and small businesses can really get on and shop for competitive quotes from many companies, and they can very quickly get five, six or eight quotes determining the pricing range for their particular circumstances. Another significant change is the significant yields companies used to be able to make in the insurance industry - I'm going back 15 years ago, when investment yields were 9 or 10 percent - (when) today, over the last eight years, returns on investments are down to the 2 to 3 percent range. What that does is force companies to make sure they have the pricing correct on their policies, because there is no cushion anymore afforded by higher investment returns off your investment portfolio.

Lastly, the other change we really see is increased customer expectations, which we really feel is appropriate. Customers today want real-time information.

What types of insurance should a new small-business owner consider?

They definitely would be best served talking with their local independent agent, who really is their trusted adviser. Once the professional agent understands their business model and business scope, they can fashion coverages to include what is called a BOP, a business owners policy. That business owners policy will have property coverages for their building and their bricks and mortar. It'll have personal property coverage for assets the business has, like inventory or equipment. It'll also provide them coverage for liability.

Along with that, if they have employees, they clearly need to have workers' compensation. That is mandatory coverage.

Lastly, they want two things, (one of which is) a general liability policy ... that protects the business in the event somebody sues and says, "Based on a product you made or a service you provided, we have a claim against you." That general liability policy provides a safety net for the business, and the company that issued that (general liability) policy will represent the insured and take on the defense of that claim. If there is any liability or obligation, the company will pay that, so the business doesn't suffer a loss.

I would advise small-business owners to have an umbrella policy. Think of an umbrella policy as an excess protection layer above the underlying policies.

ABOUT KEN SHUTTS AND PENN NATIONAL INSURANCE

Ken Shutts is a Harrisburg-area native who lives in Lower Paxton Township with his wife, Linda. They have two children, Colleen and Robert, and one grandchild, with another due in September.

Shutts described himself as a "history fanatic" who enjoys reading. He also plays tennis, hikes and walks regularly.

Penn National Insurance started writing insurance in 1919 as Pennsylvania Threshermen and Farmers' Mutual Insurance Companies, changing to its current name in 1961. Shutts started as an associate counsel in the corporate legal department of the Harrisburg-based company in 1979.

-Jennifer A. Fitch, contributing writer

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