An Insurer Aims At Relevance With Millennials

Jan. 16--A few years ago, drivers began using their personal cars to make a little money on the side through ride-hailing services like Uber and Lyft. But insurance was a problem.

Among the early adapters to solve the problem was Erie Insurance Co.

"With the sharing economy being what it is, Erie Insurance pioneered coverage for Uber and Lyft drivers," said Tim NeCastro, the company's newly appointed president and CEO.

Erie Insurance has been making it a priority to adapt to the needs of people who welcome new technology, embrace the sharing economy, and are driving demand for more renters insurance policies as millennials quickly become the largest population group in the country.

Mr. NeCastro, 56, was in Pittsburgh last week to meet with agents and employees in the region. He pointed out that the Pittsburgh market is a prime example of an urban market with a large millennial population where renters insurance policies are on the rise.

"In urban markets we've seen growth in rental policies over the past five years and we expect that trend to continue," he said.

That reflects the rising number of households occupied by renters in Allegheny County, which has climbed from 33 percent in 2000 to 36.4 percent in 2015, according to the U.S. Census Bureau. National figures reflect a similar trend. The percentage of renters across the country has grown from 33.8 percent in 2000 to 37 percent in 2015.

According to the Census Bureau, millennials have surpassed baby boomers as the nation's largest living generation, which makes them a demographic that insurers like Erie need to pay close attention to.

"Millennials are culprits of the shared economy. They don't own," Mr. NeCastro said, pointing out that Erie came up with a viable solution for ride-hailing companies to address insurance gaps.

"When you are driving for personal use, your auto coverage covers you," he said. "When you are driving a customer, Uber covers you.

"But when you are out there searching for a customer and have an accident, Uber doesn't cover you and your personal policy doesn't always cover you. But Erie does. We closed that hole in 2014."

Erie Insurance is developing a policy to cover properties offered for short-term rental under AirBNB, a home-stay network that enables people to list or rent short-term lodging in their residential properties.

"If we underwrite a home where someone lives, an agent will inspect the house to see how they live and how much pride of ownership they have," Mr. NeCastro said. "The occupant is the No. 1 driver of losses. So, if you rent your home to dozens and dozens of people on the streets, we don't know what kind of people they are. Do they smoke? Do they have vicious dogs?

"We have to determine what risk multiple occupants have that are different from a single occupant."

Erie Insurance was started in 1925 and grew into a Fortune 500 company by 2003 on word-of-mouth referrals, Mr. NeCastro said. The company's business model is to sell insurance products only through independent agents. Customers cannot call the headquarters in Erie and buy a policy.

Mr. NeCastro was named CEO in June after 20 years with the company, starting as an auditor. He took over an insurer earning $6.3 billion in annual premiums, with 5,000 employees and 12,500 licensed insurance agents in 12 states and the District of Columbia.

Erie is the second-largest property and casualty insurer in Pennsylvania. State Farm Insurance Co., headquartered in Bloomington, Ill., is the No. 1 property and casualty insurer in Pennsylvania and the U.S.

Keeping up with technology-driven changes on the other side of the insurance table is also important, Mr. NeCastro said.

Erie piloted a program to use Google Glass in the claims and underwriting process. The eyewear technology is one way to reduce travel needs by enabling supervisors to provide remote guidance to field employees who wear the glasses that allow hands-free live video streaming. The technology is being used in Erie's commercial risk control group, which visits businesses to assess their risks before underwriting.

Erie also was a leader in the insurance industry in using drones to inspect property damage. "We are able to use drones in case of a disaster and to inspect roofs," Mr. NeCastro said. "Drones can fly over and take images of the roof."

A competitor, State Farm, was the first insurer in the U.S. to receive Federal Aviation Authority permission in 2015 to operate unmanned aircraft for commercial use, but it has yet to use drones in the claims process, company spokesman Dave Phillips said.

"We are still in testing mode," Mr. Phillips said. "We are evaluating whether or not we want to utilize this technology for field deployment."

Tim Grant: [email protected] or 412-263-1591.

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