“We're a very well sold product upfront,” he said. “We match the customer's needs and deliver when they need us on the service side. It's not very complicated, but damned hard to do on a consistent basis, given the fluctuations in the market. But that's our business plan and we've been very successful at it.”

Liberty's core philosophy, according to Mr. Kelly, boils down to one key value–responsibility–which is the essence of the company's products and services.

That philosophy drove the creation of The Responsibility Project, which started in 2006 with a TV commercial “about people doing things for strangers,” the carrier noted on the program's Web site (www.responsibilityproject.com).

“The response was overwhelming,” Liberty went on to say. “We received thousands of positive e-mails and letters from people all over the country commenting on the ads. We thought, if one TV spot can get people thinking and talking about responsibility, imagine what could happen if we went a step further? So we created a series of short films and this Web site, as an exploration of what it means to do the right thing.”

Mr. Kelly said Liberty Mutual was “looking to launch a new ad and marketing program that we could stick with for a long period of time, to build the reputation of the company and establish a solid brand identity. We wanted people to feel good about associating with Liberty Mutual, whether that meant our own employees, our agency partners, or our current clients, while helping drive growth by drawing new customers.”

He added that Liberty “interviewed hundreds of employees to find a consensus on what people like best about our company. What we kept hearing is that whether it is loss control and safety, or product value and service, we try to do the right thing–the responsible thing. That really resonated with us, so we built the campaign around that.”

However, Mr. Kelly said Liberty Mutual took the concept beyond any traditional marketing or branding initiative, building a wide-ranging multimedia project to spotlight positive behavior as well as promote debate.

“We turned it into more than just an ad campaign,” he said. “We made it into a dialogue, inviting the public to help us evolve the program over time.”

Liberty, on its Web site, noted that “as an insurance company, we like responsible people, because people who believe in doing the right thing don't just make better people, they make better customers.”

However, the company added, “the idea of responsibility can be difficult to define. What does it mean? Why is it important? These aren't questions that can be easily addressed or agreed upon. There are a lot of differing opinions and beliefs involved. And while we may never uncover any definitive answers, we believe the questions are still worth asking.”

The project emphasizes interactivity and public participation. Questions about “responsibility” and “what is the right thing to do?” are posed on the Web site in the form of short films putting people into a wide variety of dilemmas, along with separate sections featuring individual stories, points of view and a blog–all challenging people to weigh in.

Liberty also touts its own public service initiatives on the site, including fire safety, teen and senior driving, as well as programs to support teachers and sports coaches.

The Responsibility Project puts Liberty on the cutting edge in the rapidly emerging virtual world of social media for insurance carriers, while playing right into what the company sees as its strengths, according to Mr. Kelly. It emphasizes the importance of taking responsibility to assure the safety and well-being of all you come in contact with, whether in your day-to-day lives or in your place of business, he added.

The method by which Liberty came up with its Responsibility Project reflects the carrier's approach to branding in general, he explained, noting that the company has three targets in mind when initiating a marketing campaign.

Mr. Kelly said it is no accident that the first target is the company's own employees, with the objective being to “reinforce what they feel makes their work critical to the enterprise. We're sending a message to our own people about what we are all about.”

The second target, he said, is the carrier's current client base and business partners–such as their independent agency force–”so that they will feel they are glad they're doing business with us, that they made the right decision and will want to stick with us.”

Last, but far from least, he noted, is targeting new business prospects by creating a brand image based on quality, concern and performance. “We emphasize who and what we are, and over time we believe that has real value for our partners, our customers and our own people,” according to Mr. Kelly.

This is in sharp contrast to competitors whose advertising is focused solely on price, he lamented, without naming names.

“The industry is commoditizing itself,” he warned. “If your message is that the only reason to do business with you is the price, it is ultimately self-defeating.”

However, he emphasized that doesn't mean Liberty Mutual will surrender the field just because it emphasizes factors other than price in its advertising and marketing.

“We are price-competitive, but we're selling more than just price, and in the long run we're convinced that will pay off in terms of long-term growth and gains in market share,” he said.

NEW DISTRIBUTORS

Another key development at Liberty over the past few years is the company's evolution to incorporate independent agents into its distribution strategy–which, according to Mr. Kelly, has paid strong dividends by diversifying the carrier's touch points with consumers.

“We made a conscious decision a decade ago to broaden our sales system based on the fact that manufacturers of insurance no longer were in control over distribution–it was consumers who would decide what channel they would buy through,” he said. “We knew we had to have a quality distribution option in every channel, not just in direct sales, but via independent agents as well.”

Mr. Kelly said the move to add independent agents to its distribution chain plays right into Liberty's emphasis on customer service, along with offering not just products but tangible expertise to avoid becoming merely a commodity distributor.

“The independent agent provides real value to the buyer,” he noted. “They understand the buyer's business and their community. They are hands-on, and they engender loyalty on the buyer's behalf.”

But loyalty must be a two-way street for Liberty to succeed–not just with independent agents but with clients as well, according to Mr. Kelly, who cited “commitment” as the critical factor his agent and client “partners” rely on.

“Put yourself in the shoes of an independent agent in a medium-sized city,” he suggested. “The principal has a lot of people depending on him, both in the agency and the business community. They need a predictable business plan and predictable partners to meet those responsibilities–to their own people and their clients. We're prepared to make that commitment. We will not blind-side our agency partners.”

STATE OF THE MARKET

Mr. Kelly is upbeat about his company's prospects, even in a down economy, thanks to growth in auto and homeowners business, as well as its strong international presence in South America, Asia and parts of Europe, “which nobody seems to talk about.”

For example, Liberty insures about one out of every three cars in Venezuela, “even though we are not necessarily the lowest price,” he noted. “We win business with our reputation for good coverage and solid claims service.” He also expects bigger growth abroad–such as in Brazil, and even in Chile, “where reconstruction after the earthquake could be stimulative.”

Here at home, however, he concedes that growth in workers' compensation can be “tough sledding” these days, given the vastly reduced exposure base following millions of layoffs in the past 18 months.

Mr. Kelly does not expect any substantial growth in the economy or significant employment gains over the next 18 months. Indeed, he added, “we don't foresee a big economic recovery or surge in job growth here in the U.S. before the middle of 2011.”

However, asked to discuss the state of the market, Mr. Kelly focused not on pricing and exposure trends, but instead cited a longer-term, macroeconomic concern.

While the economy will rebound at some point, and soft commercial insurance markets come and go, the biggest exposure down the road for Liberty Mutual and the rest of the industry is the heightened risk of inflation, according to Mr. Kelly.

While this threat is not exactly around the corner–Mr. Kelly cited 2013 as a potential tipping point–he said “no single economic factor is more important for the insurance industry than inflation.”

“A large part of the stability of the industry of late has been due to the lack of inflation,” he explained. “Without inflation, insurance becomes a relatively simple business to manage, but that would change if inflation rears its head.”

He warned that “in the meantime, we have to be careful not to write business now that will blow up on us down the road if serious inflation emerges.”

Mr. Kelly added he is surprised there isn't more urgency to deal with the long-term threat of inflation. “I can't understand why so many people are losing sleep over property-catastrophe exposures but not necessarily about inflation risks,” he said, noting that while a disaster may or may not come along, and insurers can reserve for such events, “inflation will eat away at your profits, at your reserves, and undermine your economic viability.”

REGULATORY OUTLOOK

While efforts were ongoing in Washington to rewrite the rules for financial services oversight, Mr. Kelly was emphatic about the need for insurers to keep hammering home the point to Congress that their industry was in no way responsible for bringing the economy to its knees.

“Insurers were the responsible ones,” both in terms of how they do business, as well as the regulations under which they already operate, he said.

Indeed, he reiterated, “we worked hard to be left out of this regulatory reform campaign because insurance didn't cause the problem” in the overall economy. While troubles at the financial products unit of American International Group put the industry in the spotlight on Capitol Hill, he added, “most informed people understand that AIG was not an insurance issue.”