RCIS Head outlines crop insurance role in Zurich's new plan

Shortly after writing the check for Zurich to acquire the RCIS crop insurance business in 2016, Dalynn Hoch left her role as Zurich North America Chief Financial Officer to take the role of Group Head of Mergers and Acquisitions at Zurich’s global headquarters in Switzerland. Earlier this year, she moved back to the U.S. to become Head of RCIS — a move that made sense for many reasons.

“As the person who actually wrote the check for the crop insurance business back in 2016 when I was our CFO for North America, I am as convinced today as I was then that RCIS is a great business for Zurich,” Hoch said at Zurich Investor Day 2024 in London. “After serving as our Head of Group Mergers and Acquisitions for the last five years, I can say it’s an acquisition that has more than paid back its $700 million purchase price.”

At Investor Day, she joined Zurich North America CEO Kristof Terryn and Head of U.S. Middle Market Alex Wells, in addition to global leadership, in the unveiling of Zurich Insurance Group’s new three-year plan for 2025-2027. The new plan was announced a year ahead of schedule, because the Group is on track to exceed all of its 2023-2025 targets, in part because of a better-than-anticipated market environment. Hoch, Wells and Terryn represented the Zurich North America region at Investor Day, highlighting how work in the U.S. and Canada over the past three years has helped the Group build on its financial strength, setting the stage for Zurich’s most ambitious targets in its 152-year history for the 2025-2027 cycle.

We followed up with the three leaders to learn more about the business developments they spoke about in London. This is the third in a three-part Q&A series with Terryn, Wells and now Hoch.

Q: First, what does RCIS stand for, in terms of the acronym, and then what does it stand for in terms of its place within Zurich globally?

Hoch: RCIS stands for Rural Community Insurance Services, and we’re a top three crop insurance provider to American farmers. Crop insurance in the U.S. is provided through a system in which the federal government and Approved Insurance Providers (AIPs) share in the risk of the policies. RCIS is one of 12 AIPs. Key crop insurance risks for farms are related to weather such as drought, wind and hail that can damage crops, causing losses that could put farmers out of business if they didn’t have insurance. The federal crop insurance program is viewed as one of the most successful public-private partnerships in government.

In terms of RCIS’s place in the Zurich family, it’s a great diversifier, because it’s unique. RCIS’ $3 billion of premium is uncorrelated to the rest of Zurich North America's property-casualty business, and that generates an important capital diversification benefit for the Group. Also, the majority of our business, in its design, is less volatile because it's written through a public-private partnership with the federal government and a reinsurance program with them as well.

And while profit in this line of business is influenced by many dynamics, including the rise and fall of commodity prices and evolving weather events, this partnership contributes to our ability to deliver consistency in our business operating profit.

Q: You mention that business outcomes are significantly influenced by weather and commodity prices. What are some of the headwinds RCIS has seen related to managing those increasingly unpredictable variables?

Hoch: About 85% of our portfolio today comes from the Federal Crop Insurance Program’s Multi-Peril Crop Insurance (MPCI) coverage, which has been profitable and produced favorable combined ratios, in the low 90s, the past four years. (A 93 combined ratio means that for every dollar an insurer collects in premiums, it pays out 93 cents in expense and claims payments. The remainder represents profit.)

But we experienced some significant losses in 2023 in our private product offerings. These are products outside of the Federal Crop Insurance Program that provide additional protections against focused perils such as hail. They are designed to complement the federal program’s multi-peril products, which often are not adequate for each farmer’s risk protection plan, particularly in certain states and areas where specific weather risks are elevated. That is why we also offer private products for farmers to consider based on their individual needs.

What we are doing is taking actions to right-size our market share geographically in the private products and to decrease our liabilities. It's clear to me that we overgrew our market share in certain areas. We will bring the private products offering into profitability so that it does not detract from our profitable multi-peril business, but it really does enable the growth of it.

The key is having good balanced books of business with our crop agents. Offering both will help us as we continue to grow, particularly into a number of states where we have a lot of room for growth.

Q: How do you set about achieving that mix that you seek?

Hoch: Over the last nine months, the team has conducted a deep profitability analysis at a crop, county and product level, and that has generated granular data insights that we haven't had before. Those insights are powerful. We're equipping our frontline staff with a new dashboard that takes the sales field insights that we already had and combines them with this new enhanced underwriting data.

This will support them in driving discussions with the crop insurance agents we work with in our distribution network. It will help us improve the efficiency and effectiveness of our agency servicing model.

And for 2025, we will be adjusting our private product mix, such as by separating our wind endorsement from our hail coverage and adjusting deductibles on that. And we will be filing for rate adjustments in certain states. (Insurance rates are regulated at the state level.)

Q: You have some personal connections to farming. Can you talk about that and how it feels to be back in it in this new capacity as Head of RCIS?

Hoch: I grew up on our family farm in Minnesota, which is where RCIS is based, and in the agricultural industry. And it’s awesome to be back. I understand the government program, the products, and I know personally how important crop insurance is to the flow of capital for our customers. It secures the operating loans that farmers need to take at the beginning of the year before they have any crops to sell. Crop insurance secures those loans for the banks to be willing to give those to our customers for seed and other needs.

Crop insurance is a product that helps ensure food security for all of us, and it's something that Zurich is really proud to be a part of.

Q: Since taking this role, you’ve been visiting farmers and agents who help sell RCIS products. What do you hear from them?

Hoch: Over the last nine months, I have spent significant time out in the field, sometimes literally, with the agents. As I listen, the feedback is really consistent. They love our people, our sales team, our underwriters, our Claims staff, and that's great to hear.

And I also hear that we have to become easier to do business with. RCIS has the opportunity to be the preferred crop insurer in this industry. To do that, we will be relentless on the review of our end-to-end processes and improving that ease of doing business with us.

As an example, the transfer-in process is an agent’s first experience with us when they move their business to RCIS. Our transfer-in process takes some time. It's complicated. So in January we will roll out a new, improved transfer-in process, which will require fewer steps and take less time for our agents.

We also continue to invest in our technology, especially in our agent-facing systems. We've just rolled out an enhanced quoting system for our agents and also a beta version of our new policy administration system, which brings an enhanced user experience for our agents, better interfaces and speed for them to enter their acreage reporting.

We've assessed our talent and we made a number of changes in our management team in 2024. We have the right team. We have a family-style culture. We're focused on skill development of our team, and we have strength in the RCIS brand that will lead us to grow this crop insurance business to deliver increasing business operating profits and continue those strong diversification benefits for the group and to continue to reduce the volatility of this business.