The time appears to be right for new ventures including program managers, wholesaler brokers and retail agencies, despite uncertainty with the economy and insurance market.
Why are these companies starting these endeavors now?
“Buy low, and sell high,” says Robin Stough, chief executive officer of the new LevelFirst Wholesale Brokerage and MGA in Dallas. “The market isn’t the best and neither is the economy, but it is a great opportunity to get started as the insurance marketplace and economy improve. If we can do it [successfully] now, we can do it anytime.”
Stough is not alone in his sentiment. Since July 2011, a number of entrepreneurs have launched small ventures focusing on different niches.
Glenn Clark, president of Rockwood Programs in Wilmington, Del., says he wanted to get his new Public Servants Defense Agency (PSDA) up and running before the end of 2011 so in 2012 they could focus on growth.
“We are trying to make [the bad economy] work for us,” says Clark.
Clark says this means highlighting the fact that his new company, which targets police, firefighters and emergency medical technicians (EMTs) individually and in groups, doesn’t appear to have any direct competitors. He is also taking advantage of cost-saving marketing techniques, such as social media, the Internet in general and e-marketing.
So far, so good.
“In the first month, we had over 100 inquiries and [as of the end of March] have had a total of 472 inquiries,” says Clark. “There is very good acceptance because there is no product like this out there.”
Martin Jones and Parker Hix, who started PentaRisk, a retail agency in Atlanta, Ga., say they were ready to leave the big agency environment and go “back to basics.” They have found that this is also true of many agents and this philosophy has helped the company attract talent.
“There are a lot of agents that aren’t happy where they are at,” says Jones. “They want to go to different places and to a smaller broker but are scared to do it so it keeps people pinned down. We are going to give people an opportunity to move somewhere.”
Stough agrees, “Recruiting people into a new environment is a challenge, but I think there is an allure of leaving big corporations for a smaller environment.”
Flexibility Essential to Success
Starting a new venture in this market isn’t without its challenges. One particular difficulty has been getting buyers to commit, according to Clark.
“A new sale means the money must come from other budgets,” he says. “There are very cautious buyers who take a long time to decide.”
New agencies also have to be willing to make changes when it’s clear they could improve their way of operating.
Clark says his company has already reevaluated how it brings in business, including refocusing its efforts on larger group leads. The company is also retooling its website to allow one-off individual submissions and provide better e-services so that it can be more effective at working with agents.
Stough says it has been easier than he expected to get markets, but harder to break relationships between customers and their current companies.
“A lot of the first year is getting good staff, getting markets in place, getting your name out there,” he says. “I don’t think we expected a ton of money in the first year but you have to hang in there and get in a position where we can take the next step forward.”
Market Knowledge Gives New Ventures Competitive Advantage
The new MGA and wholesale broker in Dallas, Texas, is focusing on a few niches right now, including apartments, transportation, professional liability and janitorial services. Stough says the company is also starting to write energy business and wants to develop that into an energy practice going forward.
“We want to be a generalist, but also focus on a few areas,” says Stough. “With E&S business, you have to go with the flow and what’s up and coming in the marketplace.”
The company has put together 10 binding authorities and more than 60 brokerage markets so far and can offer general liability, property, professional liability, auto, physical damage and cargo. It can also offer environmental and umbrella coverage to excess business.
LevelFirst’s strategy has been to hire people with experience to start and lead the new company’s segments. He is also actively looking for people with established relationships and expertise to come in and develop new practices.
“We have already had a lot of interest,” he says. “You have to be a different person and confident you can produce in this kind of environment, but it can be more fulfilling.”
Jones and Hix are also going the route of hiring experienced people to concentrate on a few niches for their new retail agency, including most recently someone to specialize in energy.
Hix and Jones have pooled their experience in the construction and real estate industries, respectively, to make their new venture a full-service provider for insurance and surety products. The company will also offer employee benefits and health insurance. Their target business is $500,000 to $10 million in premium.
Although the construction market has been slow to rebound, Hix says getting their firm established will give them an advantage when things get better.
“When it comes back around in 2013 or 2014, we will be in a position to handle it. We don’t want to be starting then, we want to be already running and fully operational,” he says.
PentaRisk is making customer service a cornerstone of their agency, which they say the big companies are lacking.
“As you get bigger, you lose touch with your clients and carriers,” says Jones. “At larger agencies the focus is on the bottom line, rather than the customers themselves.”
The company has secured over 35 carriers so far, and Jones and Hix have an aggressive growth plan for PentaRisk, with a goal of $350 million in premium by the end of 2013. They plan to open additional offices in California, Texas, and Florida, and potentially the Midwest and Nevada. The company will also make agency acquisitions if the right opportunities come along.
Public Servants Defense Agency
PSDA, the new subsidiary company from Rockwood Programs Inc., was started because of the success of Rockwood’s other insurance agency WrightUSA, which provides errors and omissions (E&O) coverage to federal government employees.
Rockwood bought WrightUSA two years ago and saw that police, firefighters and EMTs have similar exposures to those of federal employees and they need coverage.
“Federal employees don’t own their business but they own their career,” says Clark. “Anything that threatens their career is a threat to them.”
The company offers personal liability coverage against exposures that these workers may encounter because of their careers, even if they are off duty. The exposures include sexual harassment, improper touching, or improper use of a firearm.
“An EMT [for example] has a Good Samaritan exposure just because they are an EMT; they are held to a higher degree of standard as a passerby that is helping out,” says Clark. “They can be accused of practicing medicine because they are EMTs.”
Clark says with employer cutbacks in services and benefits, employees can’t rely on their work to buy coverage that protects them from these exposures. For that reason, PSDA is targeting unions, benevolent organizations, paternal organizations, employer groups and associations. PSDA will market to individuals through its new website. The company also plans to add two new products: a group life policy designed to payout the beneficiary within 48 hours of a death notification; and a self-defense policy for retired law enforcement officers who are permitted to carry a gun.
Premiums start at about $250. Limits for individuals are $100,000 but people can buy $250,000; PSDA can go up to $1 million for groups. The coverage is available nationwide and is written through Markel, but PSDA has the authority to bind and settle claims.
Clark says the company has been seeking a strategic partner and has been approached by three firms. It will do an official re-launch in May, once the new website is finished.
“We want to work with agents and brokers who can bring us high-level contacts in this space,” says Clark.
Glatfelter Program Managers
The formation of Glatfelter Program Managers is more of a rebranding of Glatfelter Insurance Group’s internal wholesale specialty products, according to Art Seifert, the new president of Glatfelter Program Managers in York, Pa.
It is a division of Glatfelter Insurance Group but has its own employees and is a separate business unit with four divisions targeting separate insurance segments:
- Volunteer Fire Insurance Services (VFIS), which writes both property and casualty, and accident and sickness for about 18,000 emergency service organizations.
- Glatfelter Public Practice, which covers educational institutions; municipalities; independent school bus contractors and water/sewer entities for towns or cities with less than 75,000 people.
- Glatfelter Religious Practice, which specializes in large churches, synagogues and other religious institutions.
- Glatfelter Healthcare Practice, which provides coverage for senior living facilties, hospice and home health care agencies.
Seifert joined Glatfelter in June last year and saw that outside of the company, Glatfelter’s program business was relatively unknown.
“To create a new brand for program business made a lot of sense,” he says. “I like to say we are one of the largest program managers that people have never heard of.”
The company would like to grow through mergers and acquisitions as well as expand into social services. In January, it acquired senior living and religious organizations programs from Bunker Hill Underwriters Agency in Houston. It also plans to expand its healthcare business and appointed Bruce Williams as president of the newly formed Glatfelter Healthcare Practice division. Most recently, Glatfelter Public Practice introduced cyber liability and privacy crisis management expense coverage for municipalities and water-related entities nationwide. It is also planning to announce a significant new product within an existing practice area very soon.
Seifert says their challenge is to try and stand out in the competitive market, but one thing that does separate the company from other program managers is it handles all the underwriting and claims. It also spends a lot of time on educating and consulting with its insureds.
“The whole program segment has become pretty popular so there is a lot of competition out there trying to get eyeballs to pay attention,” says Seifert. “Our biggest challenge is making sure we work with agents selling value versus selling price.”
Sports Insurance Specialists
Jeff Ladd, president of the new Sports Insurance Specialists in Fort Wayne, Ind., also thought the timing and his 20 years of experience in the sports and entertainment insurance business would set him up for success in this market.
“I had a group of strong investors behind me, I had knowledge, resources in the markets and lots of customers that I had dealt with in the sports industry,” he says. “The time seemed right so away we go.”
The company is focusing on the sports arena, including professional and amateur sporting events. On their Web site (sportsinsurancespecialists.com) an applications page has been set up for certain events such as basketball, softball, or golf clinics, youth baseball or little league, and tournaments or other types of short term events. For bigger events, more underwriting may be needed. The company can also cover concerts that are part of these events, or standalone concerts if they are big enough, as well as festivals.
Coverage can include participant accident, general liability, participant legal liability, and some medical products for conferences. Limits are typically around $5 million on the liability side, depending on the type of event. The main carriers so far are Western World, CNA and Chubb. The company can operate in all 50 states.
Ladd says they hope to expand into more entertainment events down the road, but their three- to- five year plan for now is to get these products up and running and profitable within a year or two.
He says this class doesn’t have a lot of competition, but he thinks relationships will be essential to making the company work.
“It’s a small community when you get into business administration for events and if you do it for a while, you get to know a lot of people and fortunately that is where I am at,” says Ladd.