GROWN IN THE GARDEN STATE [New Jersey Business (NJ)]

By comparison to many others, 1913 was a reasonably uneventful year. Fifty years removed from the Battle of Gettysburg, the world was at relative peace. Unemployment in the United States hovered around 4.4%, a desirable number by today's standards, while "The Great Depression," "D-Day" and "9/11" were terms for events not yet in existence.

In Trenton, New Jersey on June 7, 1913, a Saturday, it was sunny with a high temperature around 68 degrees. "America's Pastime" was closing in on the mid-point of the season with the Philadelphia Phillies holding a four-game lead over the New York Giants in the National League and the Philadelphia Athletics holding a two-game lead over the Cleveland Naps in the Amercian League. The Yankees were in last place with a record of 10 and 34. The Athletics went on to beat the New York Giants later that year four games to one in the World Series.

That evening, on page nine of the Trenton Evening Times, the predecessor to the Times of Trenton, an 86-word story appeared under the headline "Local Men Form Casualty Company." And it is here where the story of New Jersey Manufacturers Insurance Company begins.

On that same day, Woodrow Wilson had just completed his third month in office as the 28th president of the United States. Wilson was a supporter of the Progressive Movement which, at the time, was increasing in popularity due to the expansion of the middle class.

As the United States became more industrialized, and large corporations began dotting the landscape, workplace reform emerged as an important social issue. In 1910, when Wilson campaigned to be governor, New Jersey was largely a manufacturing state. Due to their nature, most manufacturing jobs brought with them the high risk of injury, worsened by safety conditions that, today, would be considered poor.

At the time, a worker injured on the job was not entitled to compensation, including medical care, if their own negligence, or that of a co-worker, contributed in any way to the injury, or if the injury was caused by a natural risk of their employment. In order to receive compensation or medical care as the result of a job-related injury, an employee had no choice but to sue, and in doing so had to provide proof of the employer's negligence. This system benefited no one - injured workers had a very difficult time recovering lost wages and getting treatment, while employers were always at risk of facing costly, drawn-out litigation any time an employee was hurt on the job.

Prior to Wilson taking office as governor, a statutorily established Employers' Liability Commission was appointed by the Legislature to examine the current workplace injury laws and, where they felt appropriate, recommend changes. From that investigation was born the Workers' Compensation Act, which then-Governor Wilson signed into law on April 4, 1911. The Act effectively established a no-fault system of medical care, temporary wage payments, a benefit schedule for permanent disabilities, and payments to dependants if the injury resulted in death. In return, workers gave up the right to sue their employers over workplace injuries.

Adoption of the Act represented a significant victory to workers and Progressives, but was disconcerting for employers who had to fund the system. In response over concerns of its financial impact, a Special Insurance Committee of the Manufacturers Association of New Jersey (known today as the New Jersey Business & Industry Association, or NJBIA) explored different alternatives that could be effective in complying with the law without the excessive costs the employers feared.

The Association was founded in 1910 when a group of mill owners decided to join forces to make sure their collective voices and pro-business agenda were better represented as part of the legislative process. The Special Insurance Committee's recommendation ultimately was that individual employers should capitalize a new insurance carrier that would serve members of the Association, emphasize safety, and operate in the mutual fashion for the benefit of its policyholders. On June 7, 1913, New Jersey Manufacturers Casualty Insurance Company, known today as New Jersey Manufacturers Insurance Group (NJM), was incorporated. Though much has changed in 100 years, the original mission set forth by the founding NJM fathers has not.

Maintaining its commitment to safety and service, existing exclusively to serve its policyholders, returning over $5.3 billion in dividends since its formation, NJM proudly celebrates its Centennial anniversary on June 7, 2013. Though NJM's story is far from over, the pages that follow detail its first 100 years.

The Story of NJM

The formation of NJM was intended to satisfy the pressing need in New Jersey for a low-cost, reliable workmen's compensation insurer. Incorporated under the General Insurance Law of the State of New Jersey as a stock company, NJM's founders established a business model with the vision that all profits would be returned to policyholders, not stockholders. After only five years, that vision was realized when NJM returned its first dividend of 20% on all workmen's compensation policies issued in 1917. NJM's tradition of paying dividends to policyholders continues today ... 95 years and counting.

In addition to its increasingly popular line of workmen's compensation insurance, which would soon be known as "workers' compensation insurance" to better reflect the growing number of women in the workforce, NJM expanded its products and services to meet the additional needs of its customers. In 1921, New Jersey Manufacturers Association Fire Insurance Company was established to cover property loss or damage to commercial automobiles and private passenger automobiles and homes to accommodate individuals working for the member companies of the Association. By 1922, NJM had become one of the state's largest writers of workers' compensation insurance. Those four lines still make up the majority of NJM's business, though the portfolio has expanded over the years to include personal umbrella insurance, flood insurance, and banking services through its subsidiary, NJM Bank.

NJM's early success was aided by its proactive approach to offering the lowest premiums possible by emphasizing the importance of employee education and the promotion of safety in the workplace. Because NJM existed exclusively to serve policyholders, the Company worked very closely with its insureds to help them help themselves through inventive and aggressive accident prevention and reduction plans. The concept was simple: the fewer people that were injured at work and the less extensive the injuries, the lower the premiums the policyholders paid.

NJM has followed that same model for 10 decades, with its hallmark safety-oriented underwriting approach having been applied to all lines of business. Though it has evolved over the years to accommodate the changing landscape of the businesses that call New Jersey home, NJM still writes over 98% of its business in the Garden State, having never closed its doors to the consumers of the state - even during times when writing insurance in New Jersey was perceived by many insurers to be a major regulatory and operational challenge, and during periods in which many national insurers openly contemplated or opted to leave the state.

Although NJM is a membership based insurer available only to companies belonging to the NJBIA and their employees, and employees of the State of New Jersey, the Company insures more personal vehicles and writes more workers' compensation insurance in the Garden State than any other carrier. NJM President & CEO Bernie Flynn attributes that fact to the Company's high customer-retention rates, which he believes are driven in part by what he calls a "service gene" that exists within the Company's employees, a cultural phenomena passed down from generation to generation, engendering policyholder loyalty.

On April 17, 1963, as NJM was celebrating its 50th anniversary, the president of the Company at the time, George Wislar, reported that "it has been said repeatedly that our Organization's reason for being is to serve faithfully and efficiently those who comprise New Jersey's industry and commerce - and that principle has always been the guide of those charged with the duty of rendering that service."

Flynn says that sentiment is as true today as it was at any time in history. "Though we work our hardest every day to honor that tradition, we know that our greatest accolades can't be found in what we say about ourselves, but rather what our customers and peers say about us." In 2006 and again in 2010, NJM was rated the No. 1 personal auto insurer in the United States for overall customer satisfaction by a top national consumer magazine.

Dating as far back as 1977, that same publication gave NJM high ratings in surveys conducted when it rated the Company among the top four carriers nationwide in terms of overall customer satisfaction. NJM has also consistently ranked at or near the top of surveys conducted by other leading national consumer publications. Additionally, NJM is a perennial top performer on the New Jersey Department of Banking and Insurance's list of fewest valid consumer complaints since it began publishing annual figures in 1987.

In 2006 and again in 2010, NJM generated zero valid complaints, a rare event for such a large carrier. Former NJM President & CEO Tony Dickson says the 2006 report will long be remembered as one of the proudest moments of his 32-year NJM career, 17 of which were spent as President. "To me, NJM operates as a service organization that happens to be in the business of insurance. If I've seen one thing that's constant for [NJM], it's our focus on policyholders and doing the right thing," says Dickson. "I'd like to think that commitment is even stronger today than it's been in the past."

"As one generation of employees moves on, another is there to take their place, having first inherited the belief that the service we provide is what separates us from our competition," says Flynn. "As long as there is an NJM, so too will there be a firm commitment to providing our customers with the very best in terms of the service we strive to offer each and every day."

Social Impact

Today, NJM insures more than 800,000 automobiles and 280,000 homes in New Jersey and provides workers' compensation insurance to more than 350,000 employees of NJBIA member companies. Direct premiums written exceed $1.6 billion, making it one of the 50 largest property/casualty insurers in the United States and one of the 65 largest employers in New Jersey.

While the pages of NJM's history could be written wholly about insurance, doing so would leave out significant pieces of NJM's other contributions to the State of New Jersey, and its businesses and residents. As referenced earlier, the full story of NJM goes far beyond insurance; rather it's a story about the vision to be a part of a solution, and a century of dedication to the welfare of the society in which the Company exists, as evidenced by its original by-laws. Its primary product, insurance, was the tool it employed to facilitate that effort.

NJM has always taken seriously its role in helping to strengthen the social and economic fabric of the state of its origin. Following are some of the contributions NJM has made during its first 10 decades to help implement positive change for the Garden State.

Promoting Safety

To an insurer, there are obvious benefits to insuring policyholders with a keen understanding and awareness of risk management practices. However, as a company that exists exclusively for policyholders, NJM's attention to accident prevention wasn't intended as a tool for increasing its own profitability.

The original intent of promoting safety was, as reflected in the 1913 bylaws, "to improve manufacturing and industrial conditions" and "to raise the standard of factory equipment [so] that it will reduce accidents." NJM has continued on this mission in each year of service since its founding. Through its innovative, methodical loss prevention programs, NJM staff works with business owners to establish and implement plans that help reduce the frequency and severity of workplace injuries. The end result is a healthier workforce and lower overall costs to the insureds.

As NJM has evolved into a leading writer of auto insurance, so too have its safety initiatives. While NJM is still a strong advocate for workplace safety, the Company is very involved in driver safety, particularly among teens. Part of NJM's Centennial celebration includes the introduction of several special initiatives that NJM's 100th Anniversary Chairwoman, Tracy McManimon, says are "intended not only to benefit NJM policyholders, but all New Jersey residents."

Improving Medical Care

Workplace injuries were common in the early part of the 20th century; safety standards were not nearly as rigorous as they are today; and quality medical care was, to some extent, still in its infancy. Those ingredients made a good recipe for an abundance of on-the-job injuries, increased time away from work and, oftentimes, long-term disabilities for many injured workers.

NJM recognized early on the need for quick, efficient medical care for injured workers. In 1921, NJM began treating injured workers directly through a network of medical clinics that it established in the state's most highly industrialized areas. The efficiency and speed in which the clinics operated cut through the red tape involved with a typical hospital visit. Clinics were staffed by medical experts trained in treating workplace injuries and rehabilitating injured workers.

The benefits of the medical clinics went two ways. First, the employer and insurer could play an important role in treating an injured worker to help ensure the best medical care was being provided in the quickest period of time, thus reducing the employee's time away from work. Secondly, quick, expert medical care helped ensure that the injury to the employee did not worsen due to poor, or absent, treatment. The societal impact of this system cannot be fully measured, but the obvious benefit was that it helped reduce the severity of many injuries, again aiding in the economic welfare of society and its labor force.

Fighting Fraud

As the insurance industry grew, so too did the challenges involved in operating one of the largest insurers in the state. By the mid-1950s, NJM began to see a rise in fraud allegations. Today, it is estimated that workers' compensation fraud costs Americans over $5 billion a year. Even sixty years ago, NJM knew that fraudulent claims would equate to increased premiums for all policyholders, even for the vast majority who never thought to submit one.

To combat the potential for fraud, NJM established a Special Investigations Unit (SIU) in 1954, which was made up of experienced claims adjusters dedicated to ferreting out fraud. NJM was one of the first companies in the state to employ such measures to help control insurance costs -- a tactic that helped mitigate overall premiums, which is a benefit to all policyholders.

As technology evolved, so too did NJM's SIU. Today, state-of-the-art tools and surveillance techniques are used by the department, which is made up of expert claims adjusters and former law enforcement officers and headed by a former assistant prosecutor and deputy attorney general. In diligently fighting fraud, NJM plays a key role in helping to keep insurance costs down for consumers.

Supporting Competition

Consumers want choices. They all have different needs and different budgets, and without competition, a company's incentive to offer favorable terms to a buyer, regardless of the product, vanishes. The New Jersey automobile insurance marketplace has historically been a challenging environment in which to conduct business.

Throughout the 1990s and into the early 2000s, New Jersey was one of the priciest markets - if not the priciest - in the country, one in which some national carriers were reluctant to enter and others left or threatened to leave. Many drivers were finding it difficult to secure coverage in the voluntary market, regardless of premium level, because of the troubling availability issues.

Recognizing the need to develop a healthy, competitive marketplace, NJM helped spearhead lobbying efforts in the early part of the 2000s that attracted national carriers to enter the New Jersey market, effectively giving consumers more power when buying insurance. In 2003, the New Jersey Automobile Insurance Competition & Choice Act was signed into law to address those concerns.

The role NJM played and the steps taken to help bring competition to the New Jersey insurance marketplace have had a positive impact on consumers. Today's New Jersey auto insurance landscape is far healthier than in years past, and the real winners are the customers.

NJM as an Employer

During its first 100 years, NJM has served as a source of employment for more than 12,500 employees. Even during difficult economic times, including the Great Depression and Great Recession, NJM was a beacon for talented, service-oriented individuals looking for employment. NJM values its employees and encourages long-term relationships. In its 100-year history, NJM has had more than 800 employees reach 25 years or more of service with the Company. The benefit to policyholders is the special expertise possessed by long-tenured employees which translates to better overall service.

NJM encourages employee wellness and sponsors numerous initiatives to engage employees in living healthier lifestyles. The Company was honored with the Governor's Health and Safety Award in 2010, 2011 and 2012, and the "Fit Friendly Gold Achievement" Award by the American Heart Association in 2011 and 2012. Most recently, NJM was awarded the CEO Gold Standard Designation by the CEO Roundtable on Cancer. Organizations that are awarded the Gold Standard have to effectively demonstrate a sustained commitment to improving the health and lives of their employees and their family members by maintaining a culture that fosters a healthy quality of life.

Economic Development

Without businesses to serve, NJM could not exist. The founders realized that, and recognized the importance of strong economic development within the state. Today, NJM continues to work closely with the NJBIA to keep a careful eye on legislation affecting businesses, proactively supporting potential laws that would make doing business in New Jersey easier and less expensive so jobs can be maintained and created.

NJM is a founding member of Choose New Jersey, Inc., an independently funded 501(c)(3) organization chartered by New Jersey business leaders to help position the state as a leading destination for businesses from all over the world. One of four entities that make up New Jersey'sPartnership for Action (the other three being the Business Action Center, the Secretary of Higher Education, and the Economic Development Authority), the overall mission is to help create jobs and grow a stronger economy.

The Choose New Jersey board is comprised of representatives from 17 of the state's largest employers, all working together to promote New Jersey as a great place to do business.

Community Development

Part of being a good New Jersey neighbor means giving back to the state through human and financial resources. Supporting the communities in which it serves is a philosophy and practice that's fully embraced at NJM. The Company has been an active participant in the betterment of the Garden State for many years, partnering with organizations like Junior Achievement, Isles Inc., The New Jersey State Museum, The American Cancer Society and Special Olympics, to name a few.

NJM's community contributions over the years affirm the Company's belief that being a reliable, responsible corporate citizen isn't just about selling quality products and services; it's about social responsibility, and a commitment to the many communities that make up the Garden State.

Historic Challenge, Historic Opportunity

Flynn recognizes that being in the insurance business isn't without its challenges. In addition to settling claims, the Company has entire departments dedicated to customer service, underwriting, loss prevention, rate making, information technology, accounting, communications, investments, and compliance, along with many others. "Our infrastructure is sizable, but our commitment to careful stewardship of policyholder resources requires expertise in many areas." Flynn says he feels a great sense of pride in managing the NJM team. "Each of our employees is equally important; each has a specific job that they know very well. But, working together is the key, that's how we get things done around here."

While examples of great teamwork can be found by looking back 20 years, 60 years or 100 years, Flynn says the best example of NJM teamwork can be found by looking back only a few months.

Never in its history has the NJM family been impacted by such an intense, unpredictable weather cycle as it has over the last few years. From March 2010 to October 2012, NJM experienced its four largest claim events in the Company's 100-year existence: a sizable Nor'easter in March 2010, Tropical Storm Irene in August 2011, a rare snow event following Irene on October 29, 2011 and then, remarkably, one year later to the day, Superstorm Sandy. For just those four events, NJM processed nearly 94,000 claims with total payments to policyholders in excess of $370 million, and counting.

For perspective, in a typical year NJM receives about 18,000 homeowner claims; Tropical Storm Irene alone produced approximately 22,000 claims, which resulted in $75 million in losses. Superstorm Sandy generated almost 55,000 claims with a payout, so far, of $258 million. Those totals do not include flood losses, which are covered under the National Flood Insurance Program.

On Monday, October 29, 2012, the day the storm made landfall, NJM offices were open until approximately 3 p.m., at which time the remaining employees made their way home for their own safety. At that point, the phone lines were turned over to NJM's afterhours call service provider so policyholders could submit claims round the clock. By 7 a.m. the next morning, staff started arriving to all three of NJM's offices, which were powered by generators, and by 9:30 a.m. more than 350 employees were in the offices ready to address the needs of their policyholders.

The calls continued for weeks at a rapid pace, but careful planning ensured that policyholders in need of service received it. In all, NJM handled three years worth of claims in a two month timeframe. From a financial perspective, NJM's balance sheet was built to absorb the effects of just such a catastrophe, and the Company remains very well capitalized and fully prepared for the future, whatever it may bring.

It seems ironic that a 1-in-100-year storm event tore through New Jersey just as NJM was preparing to celebrate its 1-in-100-year milestone. Though the damage was enormous and the costs high, NJM was proud to be able to serve policyholders during their time of greatest need. While its Centennial is a very special occasion and rare accomplishment, NJM's top priority remains its continued assistance in the state's recovery and rebuilding efforts. "We want New Jersey back on its feet, stronger than ever, as soon as possible," Flynn says.

Flynn also notes that while NJM's policyholders ultimately have the final say in how well the Company responded to Sandy, he believes "the effort put forth by NJM staff in the days and weeks following the storm will long be remembered as one of our finest moments as an insurance company." Though the laughs have been few and far between since October 29th, Flynn smiles when he says, "I hope another century passes before we see a storm again like Sandy, but if that's not the case, our policyholders can rest assured that we'll be here for them. That's what we do."

With offices in West Trenton, Parsippany and Hammonton, NJM's 2,500 employees remain dedicated to serving policyholders. Flynn, the Company's eighth president, says it's an honor to lead such a storied organization and such a talented group of people. He explains how fortunate he is to have such a committed and invested staff, and such a highly engaged and accessible Board of Directors. Board Chairman Doug Kuiken, whose company, Kuiken Brothers Company, Inc., coincidentally celebrated its Centennial anniversary in 2012, says he understands the challenges that NJM's commercial and personal policyholders are faced with each day. "Our intrinsic value as a board is that we can offer a perspective that is representative of NJM's constituency. We are the voice of the policyholder, an honor and responsibility to which we fully devote ourselves," says Kuiken.

In describing the NJM team, Flynn says that "it is our employees throughout all levels of this company that make this place work. They're doing our most important job here at NJM: serving the needs of our policyholders. That single-minded focus reflects the culture of our organization and remains as strong today as ever before. It is also the foundation upon which we prepare for the next 100 years."