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Matters of Policy

Regina Jasak says local agents can help consumers avoid some “really scary policies.”

Regina Jasak says local agents can help consumers avoid some “really scary policies.”

When Massachusetts opened up its auto-insurance landscape in 2008, switching from a one-price-fits-all approach to the current model known as managed competition, it created more challenges for independent agents, but much more opportunity for customers willing to take the time to examine the many options and credits available to them. The key, these agents say, is putting their expertise to use — a resource not available to those purchasing insurance from direct writers online.

Eileen Bresnahan is always amazed at what people will do for a low insurance rate — like one individual who was covered for $5,000 in property damage for his 2017 Camry.

“If I hit you and do $17,000 worth of damage, my company is going to pay you the five grand, and you’re going to have to try to get the rest out of me,” she said, putting herself in that individual’s shoes for a moment. But such is the world of direct insurance writers — like Progressive and Geico — that market themselves based mainly on price, and wind up skimping on, you know, actual coverage.

“We always say ‘buyer beware,’” Bresnahan, president of Bresnahan Insurance Agency in Holyoke, said of local independent insurance agencies like her own. “We’re all licensed and trained; we can look at a policy and can tell you the things you might not know.”

Regina Jasak, president of Regina Jasak Insurance in Ludlow, has seen the same cases cross her desk.

“Anything you might hit — a guardrail, a car, a house — after that $5,000, you’ll be paying for it as well. You can get a really cheap policy, but you get what you pay for. I’ve seen some really scary policies out there from the direct writers.”

The truth, she added, is that customers can get policies for not much more than the bare-bones pricing of the online marketers, but with much better coverage, explained in detail, simply because of the flexibility Massachusetts insurers have enjoyed over the past decade — flexibility that, for the most part, didn’t exist before.

Indeed, for much of the past century, auto-insurance rates in Massachusetts were set by the state Division of Insurance. Anyone who requested a premium quote for a certain level of coverage would receive the same price from any number of companies, unless they were eligible for a group discount.

Managed competition, which began in 2008, allows insurance companies to offer their own rates. Although these rates may vary, they must still be approved by the Division of Insurance — hence the term ‘managed.’ The result is that Massachusetts drivers are able to compare the different rates, benefits, and services offered by the insurance companies competing for their business.

“There’s a lot of flexibility in auto rates and coverages, and it really needs to be tailored to each client,” Jasak said. “Each company has its own appetites, so we really need to delve into the client to figure out what’s best for them in order to find the best company at the best rates.”

That changed landscape made life more complicated for local agents, but in a good way, Jasak added.

“I find it more entertaining. It used to be that auto insurance was auto insurance, and it didn’t really matter where you were insured, whereas now the consumer can consider things like the company’s billing process, how claims are settled, are their rates good for my circumstances, do they offer me a great bundle option tying the house and car together? Is that the best thing to do, or can I get a better rate if I split things apart?”

Shifting Gears

Trish Vassallo, personal and commercial lines director at Encharter Insurance in Amherst, agreed that managed competition has radically changed the automotive side of the insurance business in Massachusetts.

Trish Vassallo (left, with Tracey Benison) says customers should review their policy every year to make sure they’re taking advantage of all the credits available to them.

Trish Vassallo (left, with Tracey Benison) says customers should review their policy every year to make sure they’re taking advantage of all the credits available to them.

“Carriers have been able to offer add-ons and packages and rider endorsements and enhancements that are specialized per carrier,” she said, “so while the Geicos and Progressives talk about accident forgiveness and gap coverages and reward dollars, those are available with everyone operating in Massachusetts today. Independent agents offer these coverages, but they are an added expense, as they would be with any carrier. As a client, you need to look at your coverage every year to make sure you’re getting the right pricing for the right products.”

That’s where independent agents serve a role the direct writers online cannot, she went on. “Sometimes people aren’t aware of options available or never had them explained to them, or they just don’t care — they want the bottom-line price and don’t understand what they’re missing out on.”

Under the prior, regulated system, insurance providers were required to apply specific surcharges for certain accidents and traffic violations. Now, insurance companies are permitted to develop their own rules, subject to state approval, for imposing surcharges for at-fault accidents and traffic violations.

They can also include a raft of discounts, such as for students who attend school away from home, making it easier for their parents to carry them on their policies year-round, or for bundling auto and home insurance when both policies are bought from the same carrier.

“Different carriers all have their own model customers,” said Tracey Benison, president of Encharter Insurance. “Our job is to really know the carriers and try to find the right fit for the customer.”

For example, Jasak said, some carriers will look back at driving records over three years, some six, and they also vary in how they incorporate accidents — both at-fault and not at-fault — into their pricing.

Then there are the credits, and they are myriad, Bresnahan said. “There are good-student discounts, so if a student gets a 3.0 GPA or higher, that’s one of the credits on there. Let me tell you, it is a big savings — and it’s an incentive to get good grades, and it also pertains to college.”

She also mentioned the discount for students away at college, as well as low-mileage discounts, which can knock anywhere from 2% to 17% off the cost of a policy. “Just think — the lower the mileage you drive, the less chances there are of getting in an accident or having a moving violation.”

From left, Shelly Chantre, Judy Orlen, Nicole Shibley, Janet Fernandez-Santiago, and Eileen Bresnahan of Bresnahan Insurance.

From left, Shelly Chantre, Judy Orlen, Nicole Shibley, Janet Fernandez-Santiago, and Eileen Bresnahan of Bresnahan Insurance.

Carriers may also offer multi-car discounts, a AAA membership credit — with the discount increasing the longer a customer has been a member — and a discount for individuals who enroll in an advanced driver training course. “There’s also a disappearing deductible that wasn’t in effect before either, so if you don’t have an accident for a certain number of years, each year your deductible builds up.”

With each carrier using such incentives to attract their own version of a model customer, agents need to understand all the nuances and how best to match a driver with a policy, Bresnahan added.

“It’s just training your staff to know which credits to offer,” she said. “We have letters go out with renewals, and we highlight discounts and enhancements they currently have and other ones they don’t, and they can call if they’re interested in knowing more about those.”

More Than 15 Minutes

The direct writers have certainly made an impact on Massachusetts auto-insurance scene, but they’ve also brought some controversy, being fined multiple times by the state’s Division of Insurance for various deceptive or confusing practices.

“Some of the direct writers are very coy with prices or hidden deductibles, which the customer is not aware of until a loss comes into play,” Vassallo said. “It can be difficult to understand your coverage when you’re buying off the rack.”

The benefit of an independent agent representing multiple carriers, she said, is that she can work to generate the best product for each individual — and educate customers on various pitfalls, such as the importance of listing all household members as operators, as failure to do so can lead to a claim not being paid.

“It’s very, very important that parents list their children on their auto-insurance policy as soon they get their license,” Jasak added. “If they have no prior insurance, it’ll be very expensive when they need it. Parents say, ‘oh, they never drive my car,’ but if they kids are never insured, if they’re never listed on their parents’ policy, they’ll be paying an exorbitant amount of money when they get their own insurance.”

It’s all about relationships, Bresnahan said, not just a bottom-line dollar figure on a computer screen.

“When you’re a local, independent agent, you have to look people in the eye. With these direct writers, you’re not looking that gecko in the eye,” she said, noting that she has lost clients to the online companies dangling a cheaper rate. “Buyer beware. If it’s too good to be true, there’s usually something up.”

And also beware, she said, when a direct writer promises to produce a quote in 15 minutes.

“We educate our personnel, and we keep up with the changes in this business — because it’s forever changing. There’s so much information that it’s not possible to get a quote in 15 minutes. You’re not getting proper explanation of the coverage. There’s so much involved in getting a quote. It takes a long time.”

Joseph Bednar can be reached at [email protected]

Insurance Sections

Seeing Eye to Eye

Bill Grinnell says the Ross Insurance purchase is essentially a match of similar cultures.

Bill Grinnell says the Ross Insurance purchase is essentially a match of similar cultures.

Bill Grinnell says he’s known Kevin Ross for years, both through the region’s insurance industry and socially as well.

“I got to know him better at the Springfield Country Club,” said Grinnell, president of Northampton-based Webber & Grinnell Insurance, recalling the start of conversations leading to his firm’s recent acquisition of Ross Insurance Agency in Holyoke.

“At one point several years ago, I sent him a letter that said, when he’s getting close to retirement, I’d love to talk to him because we’d love to have an office down in Hampden County,” Grinnell went on. “We write a lot of business down there, a lot of commercial business, and several of our salespeople are from that area — and we were interested in expanding and growing the business.”

But the purchase of Ross Insurance — a third-generation family business run for many years by the brother-sister team of Ross and Maureen Ross O’Connell — was also based on what Grinnell called a mutual respect between the firms and similarities in philosophy. As Ross did, in fact, contemplate retirement, he and Ross O’Connell — who is joining the Webber & Grinnell ownership team and will continue to oversee the Holyoke office, which will operate under the name Ross, Webber & Grinnell Insurance — narrowed their list of potential partners to a handful before deciding on whom they wanted to do business with.

“They approached those firms and interviewed them,” Grinnell noted, “and at the end of the day, we submitted an offer to them, went back and forth and ironed out some details, and we all agreed to do it.”

While Ross intends to transition out of the company in the next 18 months, Ross O’Connell will work with the Webber & Grinnell team to merge procedures and operations, Grinnell said, adding that the Northampton office will handle most of the commercial operations in Holyoke.

He added that having two locations will be a benefit to customers based in Hampden County. “If we station salespeople down there, it’s just easier to call on folks in the Springfield area.”

Meanwhile, he added, Webber & Grinnell has a benefits division for group life and group health insurance, “so we’ll be able to offer those services to those [Ross] accounts for those interested. That might provide some opportunities for growth for us.”

Community Ties

Both insurance agencies boast deep local roots, Grinnell noted. Ross Insurance was founded by George Ross in 1925 and has continuously served residents and businesses in Holyoke and surrounding communities for three generations. Meanwhile, Webber & Grinnell’s origin can be traced back to 1849, when E.W. Thayer opened an insurance and real-estate storefront on Pleasant Street in Northampton.

Once the acquisition is complete, the company will employ 41 people and serve more than 6,000 clients.

“They have a great name,” Grinnell said of the Ross family. “They’re as much involved in their community and supporting their community as we are up here. We’ve had a reputation for giving back to the community and helping a number of not-for-profits, and Maureen and Kevin are totally committed to the city of Holyoke, so they have the same kind of value system there. They’ve got some long-time customers, and they have a sort of family culture down there, which meshes well with what we’ve tried to create here as well.”

Both companies have also done extensive outreach to the community through social media, discussing topics of interest to both personal and commercial insurance clients. Ross in particular has developed a robust blog thanks to Jennie Adamczyk, the firm’s receptionist and social-media architect — a niche Grinnell has noticed.

“They’ve got a person down there who really focuses on that, and I think she’s going to be a big asset for us as well,” he said of Adamczyk. “Sometimes we have focused on that, but you get caught up in the day-to-day, and it gets pushed back a little bit, so we’re excited to have someone on our team to keep that going.”

For now, the companies will work to combine their communications, marketing, and other systems, and reconfigure roles, Grinnell said, “so there are some initial hurdles to get over. But it’s going pretty well so far. We’ve had positive comments from competitors who know both of us.”

Added Ross O’Connell, “we feel that we found the perfect partner to continue the Ross family legacy. Webber & Grinnell has a long history of generous community support and exceptional customer service.”

Perhaps just as important, Grinnell noted, many of his agency’s employees are in their 30s, making it a relatively young agency in an industry where many companies often struggle to replace retiring talent.

“A lot of guys are getting older in this business,” he said. “So I think Kevin and Maureen felt good about having local guys with a local presence be able to perpetuate their agency, because there are a million different options out there now. There are a lot of national players buying up agencies left and right, but they really wanted a local company that had that reputable, similar culture. So it worked out.” u

—Joseph Bednar

Insurance Sections

Avoiding the Winter Blues

policysecartWinter weather brings a host of insurance risks to homes and businesses, from ice dams wreaking havoc on a building’s interior to frozen and burst pipes causing serious water damage, to liability issues if someone falls on the ice on the front sidewalk. Insurance policies help protect property owners against exposure to such events, but just as important are common-sense preparations to minimize such risks in the first place.

John Dowd Jr. remembers 2011 well. That’s the year that brought Western Mass. a tornado in June, a tropical storm in August, and the out-of-nowhere snowstorm in late October. It was, in short, a rough year for insurance claims.

But the first rush of claims arrived in February, recalled Dowd, president and CEO of the Dowd Insurance Agencies in Holyoke. That was when a constant barrage of snows and thaws built up ice dams along countless homeowners’ rooflines, many breaking through the walls and dousing the interior with water.

“Ice dams are nothing new; it’s the confluence between snowfall and warming temperatures that create the backup,” he said. “That year, it was especially bad, coming after heavy snowfalls and creating enormous claims. People had situations where water was literally pouring into their living room.”

That’s especially true of older homes, he added, as many newer houses are built in a way that minimizes the flow of warm air into the cracks that fosters the growth of ice dams. However, while the damming phenomenon is nothing new, what has changed is insurance companies’ tolerance for paying for the damages, he went on.

“There’s a national database of claims histories that insurance companies can access. If you’ve had claims, they ask you what steps you’ve taken to keep this from happening again,” Dowd explained, citing options from professionally installed electrical wiring on the roof to plastic panels designed to prevent dams from forming. “And if you haven’t taken those steps, in some cases, insurance companies are not going to insure you.”

While some of those remedies, like the wiring, aren’t cheap, he added, no one wants to go through an ice-dam experience — not the insurance company, and certainly not the homeowner, who must grapple with interior damage and loss, and perhaps mold issues down the line.

David Matosky, operations director at First American Insurance in Chicopee, noted that standard homeowners’ insurance typically covers damage to a structure as a result of an ice dam, but will not cover the expenses to eliminate or prevent the root cause of the ice dam. It also will not cover water damage to the contents of the structure as a result of the dam, though customers can check with their agent to see if they can add such coverage.

David Matosky

David Matosky says home and business owners can avoid winter-related claims by taking some strategic steps.

And it’s a growing concern at a time when the climate seems to be changing — check out all the leaves still on trees a week into December — and temperatures that fluctuate between freezing and balmy. Those kinds of conditions with snow mixed in are fertile ground for ice dams. “That’s when you get big problems,” Dowd said, “so it’s smart to invest in some kind of protection.”

In fact, ice dams are far from the only winter hazard that concerns homeowners, business owners, and insurance companies alike. And, like the dams, most of those hazards can be anticipated, and steps taken to minimize the risk well in advance.

“Make sure your attic is properly insulated,” Matosky said. “Take the time now to buy a shovel and roof rake, not after you’ve gotten 15 inches of snow. And you have to be consistent and clean snow from the roof on a regular basis, as long as it’s safe — we don’t recommend people going up on a two-story house to clear snow, so maybe bring in a professional who knows how to do it. If you have damaged singles on the roof or the drip guards are in need of repair, take care of that now, before the snow starts falling.”

After all, insurance professionals say, buying coverage is just one element in protecting one’s assets from seasonal damage; the other is simply common sense and preparation.

People Get Ready

Matosky noted that, while it’s good to have insurance, filing a claim is never an enjoyable experience.

“There’s a distinction between a loss and claim. A loss is when something bad happens; a claim is where you’re able to have the loss paid for,” he said. “In some events, you may have a loss but not have a claim, and you’re left holding the bag.”

That’s why the best way to prepare for winter events is to take the necessary steps to minimize the chances of a loss in the first place, he said. That means not only buying a roof rake before the snow season begins, but also maintaining and testing snow-blowing equipment before a blizzard kicks up. “One of the worst things is getting 12 inches of wet, heavy snow, and you go to start your snowblower, and it doesn’t start.”

Dowd’s agency recommends several steps to prepare for winter, advising clients to insulate the pipes in their crawlspaces and attic, as exposed pipes are most susceptible to freezing, and to seal air leaks, not only to improve the home’s heat efficiency, but to protect the pipes. With severe cold, even a tiny opening can let in enough cold air to cause a pipe to freeze; and

Also, before winter hits, homeowners should disconnect garden hoses and use an indoor valve to shut off water to the outside, then drain water from outside faucets to reduce the chance it will freeze in the short span of pipe just inside the house.

Be Aware of
Indoor Risks, Too

With fires and space heaters for warmth, candles and holiday décor for ambiance, and more indoor cooking and entertaining, the risk for fires in homes increases exponentially in the colder months. The Dowd Insurance Agency in Holyoke offers these helpful tips to keep in mind:
• Be sure your chimney is inspected and cleaned regularly based on how much you use it, and ensure the flue is open before you light a fire.
• Candles should not be left to burn unattended, or within easy reach of children, pets and flammable materials like curtains and holiday decorations. The same goes for space heaters.
• Take care not to overload electrical outlets with holiday decorations or small appliances like space heaters.
• Do not leave items on the stove unattended, and keep towels and other flammable materials away from the cooktop.
• Be sure you have a fire extinguisher easily accessible in your home, and that you know how to use it.

Power loss after a storm is another hazard, which is why Dowd recommends people have a backup generator easily accessible, so they can at least run the heat, their refrigerator, and a few lights. He recalled the freak October 2011 snowstorm that felled trees and power lines throughout Western Mass. and knocked out power in some communities for extended periods.

“We had no lights, no heat for a week in my house, and I didn’t have a generator, so we just lived without power,” he told BusinessWest. “We felt like we were pioneers.”

Loss of power can also cause pipes to freeze up, which is especially dangerous for people who head down south for vacations during the winter. Fortunately, Dowd said, technology is available to alert people remotely when temperatures drop in their home. Even so, he added, it’s a good idea to shut off the water main before leaving for an extended time, so if power shuts off and the pipes freeze and break, the water damage in the home will be minimal.

Other holiday risks may not be so obvious, such as the possibility that thieves are scoping out houses that may be stocked with Christmas gifts. Dowd recommends shutting the curtains at dusk to prevent would-be burglars for scoping out what’s in the house, or using a timer for indoor lights while away so the house doesn’t look empty, or installing motion-sensor lights outdoors as a deterrent. Such a device, or, even better, a complete security system, may qualify for a discount on the homeowner’s insurance policy.

Staying Upright

While water and fires can cause tremendous damage in a home, there are other hazards that increase during the colder months as well. One of the most important is the liability risk from slips and falls on driveways and sidewalks that may not be completely cleared of ice and snow, or properly de-iced or sanded, after a weather event.

“That’s an issue for commercial properties as well as landlords and homeowners,” Matosky said. “Most towns have ordinances that you have to remove snow and ice from your sidewalk at the end of a storm.”

And that means keeping it off, both with additional shoveling or plowing as necessary and with ice-melting agents. “And if the commercial property is hiring someone to do the snow removal, they should make sure they have the correct coverage; if they don’t plow or shovel correctly, and someone falls, they need to make sure they have the coverage to respond to such a claim.”

Property owners with steeply pitched roofs often have to worry about snow constantly falling as the weather warms after a storm, and they could be liable if snow or ice falls on a passerby, so they need to take a combination of steps, from clearing snow regularly, if possible, to simply posting signs or barricades to keep people out of danger spots.

Meanwhile, with more homes and businesses installing solar panels on the roof these days, there’s also the danger of sheets of snow sliding off those panels onto the ground below.

A lot to think about? Sure, but planning ahead for the winter weather — and responding quickly after a storm — can go a long way toward avoiding the types of losses and claims that cause headaches for property owners and insurers alike.

“We’re conditioned in our business to think of the worst-case scenario — what could happen? — and then develop a disaster plan,” Dowd said. “These things probably won’t happen, but they may happen, and you want to do all you can to mitigate the damage.”

Joseph Bednar can be reached at [email protected]

Insurance Sections

Risk and Reward

The Encharter management team

The Encharter management team, from left: Trish Vassallo, personal lines director; Beth Pearson, commercial lines director; Tracey Benison, president; and Sue Henry, vice president of finance and administration.

Tracey Benison, president of Encharter Insurance in Amherst, says she deals in what some people may consider a dry topic, or ‘white noise.’ But to her and her team, it’s actually a vibrant, highly personalized process of helping people recognize the risks in their home and work lives, reduce those exposures, and make sure they’re well-covered when the unthinkable happens.

Trish Vassallo says there’s a certain gratification in matching insurance clients to the right coverage, especially when the worst — anything from a destructive hurricane to a violent car crash — happens.

“The best thing we can tell them is, ‘you’re covered for that,’” said Vassallo, personal lines director at Encharter Insurance in Amherst, and a 25-year veteran with the agency. But getting to that point takes time and communication, because each client is different.

“It’s really important to talk to the customer and understand what risks might be hidden, what they might be unaware of,” she told BusinessWest. “They may say, ‘I don’t drive for work, but I drop the kids off on the way to work, and do the same for my neighbors.’ That opens the door to further questioning, and we make sure they have the right coverage.”

Tracey Benison, who came on board as Encharter’s president two years ago, agreed, noting that the firm’s customers range from individuals with $500 policies to business owners whose premiums reach eight digits. “Basically, everyone who walks through the door has unique exposures we need to address. So we learn what’s unique about them and make sure they’re absolutely covered. A lot of people underestimate what their insurance needs are, and underestimate the need to get guidance from an experienced adviser. A lot of people are focused on prices and don’t purchase the right coverages.”

She said real-life examples are plentiful, including one individual she knows who had $20,000 in liability coverage on his auto insurance, and hit a pedestrian in a crosswalk; the victim racked up $350,000 in medical care.

“People say, ‘give me the best price,’ but they’re being penny wise and pound foolish,” Benison added. “And it’s not just the financial impact, but the stress. We want people to understand what their exposures are and what the best products are for it, and have them make a decision from there.”

The agency, formerly known as Blair, Cutting & Smith, traces its roots in Amherst back to 1879. In 1999, the firm was purchased by Plymouth Rock Assurance Corp. and changed its name to Encharter.

“But we remain independent, and we write as independent agents, but we work under the guise of Plymouth Rock, and we represent multiple carriers,” Vassallo said. “We don’t feed clients specific companies, but we look for the best product at the best price.”

Benison noted that many of Encharter’s 25 employees have been with the agency for many years, but plenty of new blood has come on board, including eight hires in the past year alone.

“It’s a growing office, and we want to keep growing,” she said, noting that 17 team members are licensed insurance agents. “That’s the majority of our staff, and to me, that’s a big part of what we do. When people walk through the door, anyone can help them with their insurance needs.”

What’s the Risk?

Encharter has long been a multi-pronged agency, offering a raft of products in both personal and commercial lines. On the personal side, customers cover everything from home and condo insurance to life insurance; from auto coverage to boats, motorcycles, even golf carts.

“We’re partnered with more than 50 carriers, which allows our customers to have access to a broad range of choices,” said Beth Pearson, commercial lines director.

But insurance isn’t just about making sure risk exposures are covered; the process begins with lessening those exposures to begin with, a process known as risk avoidance. “Insurance should be the last stop in the process,” Benison noted.

“One of the great things we do is educate people on exposures they might not be aware of,” Pearson added, noting, for example, that many commercial clients don’t comprehend the scope of today’s cyberthreats and the possibility of data breaches.

Tracey Benison

Tracey Benison says people who shop online for insurance, focusing only on price, are missing out on the personalized advice that could save them major headaches later.

“That’s a very interesting phenomenon in the marketplace. Cybercrime and ransomware and stealing data are becoming more sophisticated, and our client base does not necessarily know how to protect their business from these cybercriminals and hackers. In the fall, we offer a cyber presentation in conjunction with the chamber of commerce because people don’t always understand what’s involved in cyber risk and ransomware.”

As for insuring personal property, everyone is different, Benison said. “You can put two identical homes side by side, but the risk for each of them is different. It could be because someone is working from home, or it could be a piece of jewelry or an antique. That’s why purchasing insurance online is a problem. There isn’t someone going to the next stage, giving them advice on exposure. Instead, it’s ‘get the minimum possible, get the sale, and move on.’

“Commercial insurance is the same,” she went on. “You could have two electricians side by side, but one does commercial work and one does residential, or one has employees, and one doesn’t. You have to look at what they do, where they do it, and how they do it, and help them find ways to protect themselves and their assets.”

That said, Pearson noted, it’s gratifying to become a trusted adviser to someone taking a risk and starting a business. “We see a lot of new business owners, people starting a contracting business, a day care, a restaurant, and we have the opportunity to help all those folks open doors and help them as their business grows. We become their partner for a long period of time.”

Clearly, matching a client with an insurance product isn’t just a numbers game at Encharter.

“Insurance is a contract — very specialized, hard to read, and a lot to understand, and customers need to have it interpreted for them,” Benison said. “You can buy a policy from X and a policy from Y, and they cover very different things. People sometimes don’t spend the amount of time they need to really know what’s being covered or not.”

With an eye on further growth, Benison has also led a push to forge affinity agreements with area educational institutions, banks, credit unions, and nonprofits.

“Essentially, we find groups of people with a need for insurance and deliver that,” she said. “We’re finding a lot of employers aren’t addressing the insurance needs of their employees. So that’s an easy way for us to grow our business as well as meet a need on their behalf.”

Meanwhile, Encharter has also ramped up its continuing-education efforts for employees. “A lot of agencies won’t pay for that, but we do encourage and support it,” she told BusinessWest. “I want people continuously learning. Ten years ago, cyber wasn’t even an issue. Drones — that’s a new thing. And driverless cars will be the next thing we’re talking about. The exposures are forever changing, and we need to be on top of it.”

Community Ties

It’s not surprising that an agency whose hometown roots go back 138 years makes a priority of community involvement. Encharter does so through support of organizations like the Boys and Girls Clubs of Amherst and Springfield, Hitchcock Center in Amherst, Family Outreach of Amherst, and the Amherst Block Party. It will sponsor an Amherst Survival Center event this fall, and will be the lead sponsor on the 2017 Festival of Trees in Springfield. And a couple of weeks ago, at a new-teacher orientation at a local middle school, agency employees handed out backpacks filled with coffee cups, Dunkin’ Donuts cards, pencils, and other items to welcome the educators.

Some of those efforts are management decisions, but the agency also boasts an employee-run committee that meets once a month and targets organizations to support with fund-raisers like dress-down days; Plymouth Rock matches the donations.

“We’ve sponsored swimming lessons for students, the MSCPA, the Survival Center, and this month, Berkshire Children and Families,” Vassallo said. “They’re empowered to come up with that list for the whole year, not the corporation or management.”

Encharter traces its roots in Amherst back to 1879.

Encharter traces its roots in Amherst back to 1879.

The company also tries to tie its community offerings back into its core business; a good example is Distractology, a week-long program created by Arbella Insurance. “We’re bringing it to Amherst High School — essentially, they will be training high-school seniors on defensive driving for a whole week.”

It’s one way to stress that concept of risk avoidance in an era when 25% of all car accidents involve a smartphone, Benison said. “I drive around, and I see a lot of accidents, and I have to think it’s highly likely that some of them are because someone was looking at their phone — and it’s avoidable.”

Encharter will also be offering educational seminars in the community on risk-exposure topics, she said. “We’ll try to find a way to make it interesting. Most people think of insurance like white noise. We want to provide information in a way that resonates, is meaningful, and prompts people to take action.”

It’s the kind of material the firm already shares on its blog, another way it continually reaches out into the community to help people make the kind of changes that will make insurance claims less likely. “There’s a lot of good information in there, as simple as changing the batteries in the smoke detector, or clearing snow from the gutters and off the roof. Hurricane season can be a scary time as well; we want people to be out in front of it, so they understand what they should be doing now.”

Pearson was quick to add that making connections extends to the Encharter team itself, which enjoys many employee-appreciation programs throughout the year for going above and beyond in their work.

“There are a lot of benefits of working here at Encharter,” she said. “I’ve had the opportunity to work at several other agencies, and Encharter is not only very generous, but thinks more about driving business toward the future, not just resting on its laurels.”

Such efforts will certainly help ensure its continued success in the town it has called home for almost 150 years.

Joseph Bednar can be reached at [email protected]

Insurance Sections

Culture of Safety

riskmanagementMention insurance to someone, and chances are they’ll think of buying a certain level of coverage against loss, damage, or other adverse events. But when it comes to business insurance, that’s just one aspect of protecting a company. Just as important is risk management, which is essentially the process of implementing steps to reduce the probability of such dangers. It’s a win-win effort that saves money for both insurance companies and their clients — and often saves lives, too.

Insurance, Bill Grinnell noted, is a transfer of risk, an investment a business makes in protecting itself from the costs of accidents, fraud, theft, and any number of other occurrences.

“You can manage risk in different ways,” said Grinnell, president of Webber & Grinnell Insurance in Northampton. “You can buy insurance to protect against exposures, but you can also reduce the risk of exposures — and your costs will be lower.”

He was talking about risk management, which can take many shapes, but typically refers to the mitigation of risk to avoid an accident or other incident that could trigger a costly insurance claim.

Risk management is big business for insurance carriers, who employ professionals with industry-specific expertise to help businesses cut down on their exposure to risk, thereby saving both the insurer and client money.

Bill Grinnell

Bill Grinnell says reducing risks is the best way to lower the cost of insuring against exposures.

“Some of it is common sense. But sometimes it takes paid professionals to come in and make recommendations to help devise solutions,” said Timm Marini, president of HUB International New England in East Longmeadow. “The larger employers have their own safety officers and risk-management officers, but even they often rely on people like us.”

He said one of HUB’s calling cards is its network of individuals around the country who develop and help implement industry-specific workplace strategies to reduce risk, from driver training to hazardous-materials edcuation. “Within each discipline, there are very specific types of expertise available.”

Shellye Archambeau, CEO of MetricStream, a provider of governance, risk, and compliance software solutions, recently wrote that the hallmark of a good risk-management program is a pervasive risk-assessment culture that starts at the top, and is built on sound policies, training programs, and incentives.

“For organizations to not only survive, but thrive in this new landscape, they will need to build better resilience. That means gathering, analyzing, and learning from the past, so that decision makers can take measured steps to deal with the next major volatility or stress,” Archambeau noted. “It also means having the right risk data at the right time to understand how to diversify or disperse risks, so that no single risk has a major impact.”

The exposures that HUB works with companies to mitigate, Marini told BusinessWest, are diverse and always changing. For instance, while many accident-prevention strategies in manufacturing have been around for decades, now employers must deal with a demographic shift: Americans working longer in life than before, leading to higher-than-ever instances of joint deterioration and a subsequent boost in workers’ compensation claims related to joint injury and replacement.

Then there’s the new high-tech culture as it intersects with driving, a concern for companies with employees who work on the road. “With new technology in vehicles, we’re seeing more distracted drivers,” Marini said. “That creates increased exposure; when drivers get distracted, it’s very similar to drunk or impaired driving.”

SEE: List of Insurance Agencies in Western Mass.

Grinnell agrees, saying, his agency insures many firms in trucking, fuel-oil transport, and other fields where driver safety is a concern. “So we’re seeing more webcam technology, GPS technology, and technology that tracks the speed of the vehicle, sudden starts and stops, swerves … all that gets recorded.”

It’s a way to both incentivize driver safety and to record the true facts of an accident, both of which affect a company’s bottom line. But another high-tech concern is causing an even greater stir these days in the world of risk management.

Breach Combers

That would be cybersecurity, an area of interest for just about every company, large or small. Not every breach causes exposure on the level of a Target or Home Depot, but any avoidable damage can harm a company’s bottom line and reputation.

“Those companies that keep medical records, Social Security numbers, and credit cards are expected to be more diligent in protecting their data than businesses that don’t have so much of that exposure,” Grinnell said. “You need to be sure you’re not only protected, but in compliance with some pretty stringent laws.”

More and more, Marini added, insurance agencies are working with clients to control cyber privacy and protect information. “It runs the gamut from healthcare to manufacturing. If people get in, they can disrupt your business and hold you hostage. We’re spending a whole lot of time developing capabilities to help our customers protect themselves from cyber exposure and risk.”

Timm Marini

Timm Marini says technology is posing new risks, from data breaches to drivers distracted by their devices.

 

One way it has done that is through the use of certified friendly hackers. “We’ve actually put on some seminars with the FBI, where our friendly hacker goes in and shows how easy it is to permeate your firewalls. For 97% of businesses, it’s not a matter of if, but when something of this nature will happen.”

But he also returned to that concept of creating a culture of safety where each employee understands the risks of, say, leaving a laptop open, neglecting strong password protection, or falling for phishing e-mails. “Those moments of carelessness may be having the same password for everyone, or keeping printed materials of a private nature in your vehicle.”

After all, employee negligence may limit insurance protection, noted Lorelle Masters,  a partner at the international law firm Perkins Coie, in Risk Management Monitor. “Although many businesses have crime insurance that covers ‘computer-systems fraud,’ ambiguous provisions or liability limits may restrict coverage,” she noted. “Some courts have held that fraud coverage applies only when intrusions are unauthorized, but not when an unwitting employee falls prey to an online scam.”

For other types of risk exposure, insurance companies rely on the guidelines laid out by the National Fire Protection Agency, the Occupational Safety and Health Administration (OSHA), and other work-related protection agencies — as well as their own, industry-specific expertise — to determine exposure to loss and help companies reduce it.

For instance, manufacturers need to train employees in handling hazardous chemicals and working around dangerous machinery and sharp cutting edges. Much like the friendly-hacker concept, many risk managers conduct mock OSHA inspections, so companies can locate and iron out safety issues before the real thing — when mistakes can lead to hefty fines. Businesses may also choose to make structural changes to their buildings if they’re located in a flood zone, near a faultline, or otherwise geographically vunerable.

Once risk is mitigated to whatever degree is possible, an insurance carrier can then assume the remainder of the risk.

“Risk management boils down to the owner and management of a business making safety a priority and really instilling in their managers to preach safety — and hold them accountable for the safety of their workers,” Grinnell said. “It’s amazing how much common sense can protect a business. On the other hand, if it’s all about profit and productivity and squeezing as much business as you can into one day, then safety falls to the side, then accidents are going to happen. When businesses get the culture of safety right, the rest kind of falls into place.”

Stepping Up

Grinnell noted, however, that many insurance companies do a mediocre job helping companies reduce risk. “Most insurance companies go out for the first visit and make sure companies have their act together, but they don’t repeat that visit or check up on them,” he said. “Some companies do offer more comprehensive risk-management services, but they’re few and far between, so companies are left to rely on their own devices to figure out their risk-management steps. We do offer a fair amount of those services.”

With the risk-management and regulatory-compliance worlds intersecting in a more complex way for businesses these days, Marini said HUB’s emphasis on providing resources to help clients navigate their risks is a definite benefit. “We have all of that available for our customers. Ninety-nine percent of the time, it’s part of the arrangement.”

Some risk-management startegies are simply common sense, from not leaving customer data lying around to shredding rather than throwing away sensitive documents; from maintaining eye-wash stations where chemicals are handled to installing cameras in parking lots and entryways to record the verity of slip-and-fall accidents that often lead to costly lawsuits.

“Those types of controls have been around for a long time,” Grinnell added. “You basically do an assessment of the business, whether you’re trying to prevent hands getting caught in machines or exposure to hazardous materials or fall exposure, whatever. There are safe practices to follow to protect yourself against all those hazards.”

Although no company can ever say it’s totally safe from the myriad events that cause disruption, financial loss, and injury — or worse — it’s clear that developing that culture of safety, with all the details that go into it, can significantly reduce exposures and help employers sleep better at night.

“You may think you’re running the best operation in the world,” Grinnell said, “but if you’re not thinking about these exposures, you’re leaving yourself vulnerable.”

Joseph Bednar can be reached at [email protected]

Insurance Sections

Mitigating Risk

Robert Wilcox

Robert Wilcox says the Team Concept program within Wilcox Insurance Agency has proved beneficial to clients.

While acknowledging that all insurance agencies strive for solid customer service, Robert Wilcox, the fourth-generation owner of the family business that bears his name, says he takes such efforts seriously, whether it’s monitoring how claims are handled, closely assessing risk to determine what clients need (or don’t need), or even running out to house fires at night. The goal, he said, is to use his experience to help others — and, in doing so, to help his agency stand out in a crowded field.

The call came at midnight.

Robert Wilcox was in bed, but when he heard the Westfield Fire Department was battling a blaze in a client’s multi-family house, he got up, went directly to the scene, and worked with the Red Cross to find a hotel to house the displaced tenants and answer all of their questions.

“I wanted to be right there; when a tragedy occurs, it’s part of my job to help people find some sort of peace of mind and comfort, reassure them that everything will be OK,” said the fourth-generation owner of Wilcox Insurance in Westfield and Agawam, adding that a second major fire had occurred a few days earlier, and he also went directly to that home.

In another instance, Wilcox went to battle for a client when an insurance claim was denied in a highly unusual situation. He told BusinessWest a tenant had died on the second floor of a two-story building, and there was more than $30,000 of damage as blood and body fluids had ruined the floors and carpeting and the stench permeated the unit.

“The insurance carrier tried to deny the claim on a pollution exclusion in the policy,” Wilcox said. “But I argued that it wasn’t pollution and got them to pay the claim.”

He cited a number of other situations when he went to bat for clients and won, including times when auto insurers didn’t want to pay for expensive parts needed to repair a vehicle.

“My goal is to do the right thing. Fighting for a client can involve a lot of frustration, but it’s worth it when I can hand them a check that relieves their anxiety,” Wilcox continued.

The father of six children aged 5 to 17 is very active in both the community and the insurance industry, and when the interview began, he immediately acknowledged that all insurance companies work hard to provide excellent customer service.


See: Insurance Agencies in the region


But rather than focusing on competitors or what the market is doing, Wilcox takes a different approach to business by focusing on how things are handled within his own agency, which ranges from monitoring phone calls and how claims are handled to alerting customers when changes need to be made to their policies or things such as accident forgiveness come into play, to closely assessing risk for new commercial clients by taking the time to understand exactly what they do and their ensuing exposure to risk.

“The ultimate purpose in life is to use your experience to help others. It’s all about being helpful, which is my goal,” Wilcox said.

For this issue and its focus on insurance, BusinessWest looks at the history of this family-owned company and the creative measures that have been instituted to ensure the agency continues to thrive in a time when polices sold via the Internet, or through TV ads generated by direct writers such as Allstate and Nationwide, have made competition especially fierce.

Storied History

Wilcox’s great grandfather, the late Raymond Wilcox, was a tobacco farmer before he founded Westfield Mutual Insurance Agency Inc.

The reason for his career change was devastation: his farm was hit by two hailstorms, and although he recovered from the first one, the second one marked the end of his business.

“At that point, he began knocking on doors and selling insurance,” Robert said, adding that Raymond opened his own insurance firm on Sept. 1, 1923.

In 1937, he was joined by his son, Malcolm Wilcox, and during the ’40s and ’50s, the agency underwent remarkable growth.

“My father, Scott Wilcox, came on board in 1962, and when I started in 1990, my grandfather was still working,” Robert recalled, adding that, when his dad retired in 2012, he bought the business from him.

His own entry into the firm came when he was a college student. He was living independently, and when he found he was $40 short of meeting his expenses each month, he called his father to ask for help and was told to show up at the agency on Monday morning.

Wilcox said he began working part-time, and has been at the agency ever since. He literally started at the bottom, sweeping the basement, and continued his college career while he worked, eventually earning an associate’s degree in business studies from Holyoke Community College and a bachelor’s degree in finance from Westfield State College.

Wilcox earned his license to sell insurance in 1993, and as his love for the business grew, he became active in the industry. Today, his history of service includes stints as president of the Independent Insurance Agents of Hampden County and the Massachusetts/Rhode Island User Group of Applied Systems.

In 1997, Wilcox and his father purchased Pomeroy Insurance Agency and Clem Insurance Agency, followed by Palczynski Insurance Agency in 2000. All three of these businesses were in Westfield, and in 2002, the name of the agency was changed to reflect how most of clients referred to the them, as well as the fact that they wrote so much business outside of Westfield.

“We didn’t want our image to limit our reach to Westfield only,” Robert said. “It also fit our goal to acquire other agencies outside of Westfield.”

Members of the Team Concept

Members of the Team Concept program get together each month and go over practices that need to be continued and others that can be improved in order to provide the best service possible to customers.

In 2005 he built a new office for the company at its present location on Broad Street. The following year he acquired Foley Insurance Agency in Feeding Hills, and four years later he built a new office in Agawam to provide service for his agency’s new customers.

“My focus is on growth through acquisition, and I hope to be able to acquire additional agencies,” he told BusinessWest, adding that he has great respect for the companies he’s purchased.

The cornerstone of his own success is based on applying knowledge gleaned from personal experience and certifications to make sure each client has the coverage they need to fit their individual situations.

To that end, Wilcox and his employees inform current clients about any changes they may need to make to their policies, and spend an unusual amount of time working to determine exactly what each new client needs, which is especially important for commercial accounts due to their differing operations.

“You need to understand everything a business does, in addition to conducting a survey of their equipment and property,” Wilcox said, adding that he is a certified insurance counselor and licensed insurance advisor, and although few people in Western Mass. hold that designation, he chose to pursue it to increase his knowledge of risk assessment.

To that end, he learns all he can about a business and how it operates to make sure policies don’t contain exclusions that could prove costly. For example, a business that cleans carpets on site and offers storage needs accident coverage that doesn’t exclude the property of others.

The goal is to serve the client in the best way possible, and in some cases a close investigation can result in lower premiums. For example, Wilcox gained a client after talking to him about the 20-plus buildings he owned that contained 127 residential units.

“He had been told that he had to carry insurance on all of the buildings and wanted to know if he could self-insure the structures he owned outright,” Wilcox said, explaining that, although he needed liability insurance for every rental property, he did not need to insure buildings without a mortgage.

Since the prospect wasn’t concerned about losing buildings he owned to fire or other catastrophic events, he was able to save thousands in premiums.

“We are not a hard-sell agency; our approach is to build relationships and protect assets by understanding the client’s exposures and tailoring coverage to meet those needs,” he explained.

Innovative Change

Eighteen months ago, Wilcox devised a pilot program based on leadership that he designed to increase responsibility, determine practices that work well and should be continued, and examine instances where change could result in better customer service.

The program is called the Wilcox Service Team Concept, and four key account managers take turns acting as the team leader through a monthly rotation process. There are guidelines that promote objectivity and prevent judgment from occurring as they review situations that occurred during the month.

“It’s easy for employees in a small office to focus on what others are doing instead of looking at their own work,” he explained. “But our team works together for the betterment of clients.

“We focus on excellence; everything that is discussed is considered a teaching moment and is brought up from the position of being helpful,” he went on, adding that he wants his team to continuously think of innovative ways to serve clients and stay relevant in today’s business world.

Wilcox doesn’t attend most meetings; he considers himself a leader but trusts his employees and wants them to become leaders themselves.

Account Manager Lisa Fox finds Team Concept beneficial, and enjoys the fact that account managers do all they can to help one another, which she finds significant, as she never received any help when she worked in the claims department of two large, multiline carriers before coming to Wilcox.

“We’re comfortable bouncing ideas off one another and asking each other for help; we all have our own strengths, and Team Concept has really given us a chance to see what has worked well and where we can do better,” she told BusinessWest, adding that sharing information is educational for everyone.

For example, a client recently wanted to get a homemade trailer registered. It was never a problem in the past; the Registry of Motor Vehicles had complied with similar requests after they saw store receipts listing parts purchased to create the trailer. But in this instance, the client used parts that he already owned, which included a chassis with a serial number that the Wilcox agent found had to be traced.

Fox said sharing information about how to handle similar requests in the future prove educational to everyone concerned. “The team approach really brings things to light and has benefittd the agency.”

Marylinda Kruzel agrees. “I have never worked for a place that had anything like the Team Concept,” said the commercial lines account manager. “It took time to structure our thinking and keep to the facts without judgment during meetings, but it has resulted in open communication throughout the month as we aim to provide unified service to clients. We strive to handle every scenario in a way that is best for the client.”

Mary Russell added that Team Concept has led the agents to trust each other’s knowledge and abilities. “We always focus on the positive and how we can help the client,” she noted, citing an instance where it was pointed out that the time a client spent at the agency might have been shorter if the application process had been completed during a phone interview.

Such changes can be accomplished in a matter of minutes, but Wilcox is happy with the outcome. “The team members are thinking on an entirely different level than they were when they were just doing the job in front of them,” he noted.

Legacy of Service

Wilcox describes his 26 years in the insurance industry as a “very rich experience” and is grateful for what he has learned from his customers, knowledge gained from acquiring other companies and during the building process, and the relationships he has formed on the job and in the community, as service has been a long-standing family tradition.

He was a member of the Rotary Club of Westfield from 1995 to 2009 and served several terms on its board of directors, and is treasurer for Sarah Gillette Services for the Elderly and a trustee to Noble Visiting Nurse and Hospice Services.

“All of this experience has led the company to where we are today; we are not here to sell people policies, but to share our experiences with others and be helpful,” he explained. “No one knows where a business will end up, but I believe independent insurance agencies will continue operating in the future, and I want to make sure I am one of them.”

Which seems likely as the team works with Wilcox to perpetuate a legacy that began almost 100 years ago when his great-grandfather set out to help others after suffering his own devastating loss.

“No one plans on having anything bad happen,”Wilcox said, “but if it does, we want to make sure they have the right coverage.”

Insurance Sections

Recovering from a Disaster

By John E. Dowd Jr.

John E. Dowd Jr.

John E. Dowd Jr.

Change in the business environment is expected. From regional landscape shifts and government regulations to emerging technologies, international competition, and more, it’s important to consider all the reasons why and how to insure your business.

And while some changes are predictable, others are not, but there are ways to plan for both.

What if you went to the office one morning to find nothing there? A flood, hurricane, tornado, or terrorist attack made it impossible to conduct business as usual. It’s not a purely academic question: thousands of business owners have confronted this very problem across the eastern seaboard in the wake of recent hurricanes, including Sandy, which devastated the New Jersey and New York shorelines with storm surges up to 20 feet high, and Matthew making headlines more recently. And it wasn’t hypothetical for New Orleans businesses in areas destroyed by the Katrina flooding, nor for dozens of businesses that had significant operations in the World Trade Center on Sept. 11, 2001. In the latter case, tragically, many businesses not only lost their offices, but people as well.

How would you get back on your feet? The odds, unfortunately, are against you.

According to research from the University of Texas, 43% of businesses affected by catastrophic disasters like 9/11, Sandy, and Katrina never open their doors again. Another 51% shut down within two years. Only 6% survive and go on to prosper.

The key, as with so many things, lies with preparation. Your chances of pulling your business out of a severe catastrophe are largely determined long before the catastrophe strikes.

Here are some of the types of insurance coverage business owners should consider to safeguard the future:

Liability Insurance: From medical or legal fees to damages a business may be held accountable for in the event of a disaster, liability insurance covers the day-to-day uncertainties of managing a business.

Workers’ Compensation Insurance: Employees who have sustained a work-related injury may be entitled to workers’ compensation. Not only is their contribution missed by your team, but the costs can be a burden if your business does not properly plan for their untimely absence.

Property Insurance: Did you skimp on flood or fire insurance? Do you store records in fireproof cabinets, or do you house them in a basement or low-lying, ground-floor storage that is prone to flooding? From weather-related disasters to fires and theft, property insurance is essential.

Life Insurance: Have you considered key-person insurance policies to have in place that could provide a cash cushion as your business deals with the death or disability of a partner or key employee? It’s important to consider the value that each staff member brings to your business and to have a plan in place if they were temporarily or permanently unavailable to continue work.

Cyber-liability Insurance: In the digital era, mother nature is not the only source of disasters. Most businesses handle some degree of sensitive customer information, and a data breach could be catastrophic. Cyber-liability insurance is essential to protect against a data breach and may help with legal defense, court-related costs, judgments, settlements, and costs involving crisis management, such as credit monitoring and public-relations services. Another type of cyber-liability insurance regards third-party defense and liability. This may produce liability coverage for electronic media, which could include copyright infringement, network security, and privacy liability issues.

An important note for small businesses is that they are frequently targeted for data breaches because they rarely have the resources such as a robust IT department to prepare and defend against cyber attacks. It is important to remember that general liability policies often exclude cyber liability and related costs. Any company that handles sensitive customer information must be aware of their vulnerability. If your company processes payments with credit cards, has access to customer bank-account numbers, Social Security numbers, or any medical data, you may be particularly at risk.

Have you gone through a formal process to determine your insurable risk in the event of a catastrophe? Generally, from the point of view of a business interruption insurance underwriter, your insurable risk is the amount of lost revenue due to the disaster, plus your monthly business overhead, times the number of months your business will be disrupted by a potential disaster. Whether your business is large or small, coverage choices can be complicated and intimidating. It makes sense to look to the experts in the field to make the process of examining your personal needs easier, and ultimately develop a plan that is customized and responsive to whatever may be in your future.

Finally, does your company have a formal overall disaster plan that would kick into gear after experiencing a serious catastrophic event? If not, your insurance agent/broker should be able to help you develop a plan that will make sure you are prepared for any situation that comes your way.

Taking the time to review this plan now before an event occurs makes very good business sense.

John E. Dowd Jr. is president and CEO of the Dowd Insurance Agencies, LLC. He represents the Dowd family’s fourth generation in the agencies, founded by his great-grandfather in 1898. Additionally, he holds several professional credentials and is an Accredited Advisor in Insurance (AAI) and a Licensed Insurance Advisor (LIA); (800) 542-0131; dowd.com

Insurance Sections

Everyone’s a Target

HackInsurance

While major data breaches in the world of retail make the splashiest headlines — understandable, when, like the 2013 Target hack, they compromise the records of tens of millions of customers — the truth is, the vast majority of cybercrime incidents are aimed at businesses with fewer than 100 employees. That’s where cyber-liability insurance comes in — products that not only protect companies from the myriad financial effects of a breach, but help them understand where their risks may lie, and how they can close the more dangerous gaps.

Bill Grinnell said he recently spoke with the owner of a construction-related business who was hit with a malicious program that froze his company’s computers and followed up with an extortion demand.

“More hacks are happening every day,” said Grinnell, president of Webber & Grinnell Insurance in Northampton. “You wouldn’t think of him as the type of business that might traditionally need cyber-liability insurance, and now he’s facing all these costs — having a company come in to get the computers up and running, potential lost business income if they can’t perform their jobs without what’s stored on the computers, then the cost of the extortion and potentially notifying people, all the customer-relations issues.

“That was eye-opening to me,” he went on. “Any business out there that has any type of sensitive records critical to the running of the business potentially needs this type of coverage.”

The good news, Grinnell said, is that businesses are more aware than ever about the threats that lurk behind seemingly safe computer screens.

Bill Grinnell

Bill Grinnell says cyber-liability insurance used to be a hot topic only in certain industries, like financial services, healthcare, and retail — but that’s changing.

“It’s a relatively new insurance coverage, and it’s still evolving. We certainly talk a fair amount about it with clients interested in purchasing coverage, and demand is definitely increasing,” he went on, noting that, until recently, cyber liability wasn’t a hot topic outside of the retail, medical, and financial-services industries, but it’s becoming clearer that many other types of enterprise are at risk.

In a recent article on its website, Ross Insurance Agency in Holyoke noted that incidents like the Target breach in 2013 (70 million customer records exposed) and the Neiman Marcus breach around the same time (1 million customers affected) won plenty of headlines, yet a 2012 Verizon study revealed that 71% of breaches occur in businesses with 100 or fewer employees. Meanwhile, according to cybersecurity company McAfee, almost 90% of small and medium-sized U.S. businesses don’t use any form of data protection.

“This is one of the most forefront issues we have, something we talk about all the time,” Kevin Ross, vice president of Ross Insurance, told BusinessWest. “Coverage is becoming more widely available and broader in scope. We have not experienced any losses here with our clients, but we do know it’s a serious threat that can cause serious financial harm. Just because you haven’t had a fire doesn’t mean fire insurance isn’t important. We protect the financial integrity of clients from loss, and those losses could be severe.”

Indeed, cybercrime costs American businesses more than $100 billion per year, according to the Center for Strategic and International Studies.

“Lack of an incident can breed complacency. Companies think they’re OK, but lack of an event doesn’t mean they’re OK; it doesn’t mean they’ve done a good job,” said Bill Trudeau, president of the Insurance Center of New England (ICNE) in Agawam, adding that, while certain organizations have more to lose because of their customer exposure, almost all companies save employee data digitally.

Bill Trudeau

Bill Trudeau says hackers are always thinking up new ways to breach systems, and employers have to be prepared.

“Even in a small company, one that makes widgets and gets paid with checks, you could have some data-breach exposure with your employees, so it’s worth reviewing what kind of access you have,” he said. “If it happens to your 200 employees, it’s not going to be a heartwarming experience for you and your employees. You need to take a hard look at your computers and how you transmit information.”

Hefty Cost

According to the Ponemon Institute, which has been reporting on the cost of cybercrimes for the past several years, the cost to a company that falls victim to a data breach is $188 per record breached. Yet, business- and property-insurance policies typically exclude data risks from their terms, which has contributed to the emergence of cybersecurity insurance as a separate, standalone line of coverage.

That coverage typically protects against a wide range of losses that businesses may suffer directly or cause to others, and these come in two forms: first-party and third-party losses. Grinnell explained that third-party losses involve regulatory fines and lawsuits brought by affected customers, while first-party losses are what the business itself incurs up front, such as business-income loss, data-retrieval services, downtime, and notification of customers, to name a few. On average, first-party losses average about one-third of a breached company’s expenses.

“In a lot of small data breaches, say in a small store or a doctors’ office with 10 doctors, most costs are first-party costs,” Trudeau explained. “Then, later, you’re going to have liability claims because maybe someone did get injured, their identify got stolen, you may owe them compensation, or they could end up suing you, despite all your efforts. So a good cyber policy or data-breach policy has both coverage for first-party costs and a liability component that pays for these different injuries that have occurred.”

Some cybersecurity-insurance carriers pose a long series of questions on their application forms about the details of a company’s exposure to data risk, Trudeau said, and if the underwriter isn’t satisfied with the answers, they may not write the policy until certain practices have been changed and safeguards put in place.


Go HERE to download a PDF chart of the region’s Insurance Companies


“When it comes to a data breach which has occurred, a lot of what you do to take action up front can reduce your liability. If you self-report to authorities and if you have a turn-key response to it, that’s good,” he went on, noting that carriers that specialize in this type of coverage, like Beazley and Chubb, have turn-key response operations as part of the policy. “They’ve got forensic computer analysts that get into the system and see what went wrong, public-relations people who understand this issue — it’s not their first time trying to calm customers and the public as to what went wrong with your organization — and they also have third-party notification operations.”

Trudeau recommends that businesses hire a third party to poke around their computer systems and challenge their operations when necessary.

“People get used to their own surroundings and don’t know what they don’t know,” he said. “Just because you think your business isn’t super attractive to hackers doesn’t mean they’re not going to pick you. I think it’s important that people are always challenging their IT department or IT vendor, saying, ‘is this the best form of firewall?’

In fact, he added, ICNE works with a company that will provide an ethical hacker, which is someone not out to steal data, but to break into a system and then show the business what they found and how they got in.

“There has to be a discussion with the client about what they’re doing, how they’re identifying threats,” Ross added. “Everyone needs to be aware of it. Any time you’re dealing with any type of customer information, especially dealing with credit cards, Internet sales, anything that has to do with the web in any form or fashion, you could be exposed to liability should you be hacked and clients’ information be exposed. That’s the threat.”

Knowledge Is Power

The impact on businesses can be severe and long-term, the report noted, citing an Economist Intelligence Unit consumer survey conducted in 2013. It found that 18% of respondents had been a victim of a data breach, and, of those individuals, 38% said they no longer did business with the organization because of the breach. Meanwhile, 46% said they advised friends and family to be careful of sharing data with the breached company.

However, data breaches don’t always have malicious origins. According to the data breaches it serviced in 2013 and 2014, Beazley reported that the two most common sources of breaches are unintended disclosure, such as misdirected e-mails and faxes (31%), and the physical loss of paper records (24%), which is particularly prevalent among healthcare organizations.

Breaches due to malware or spyware represented only 11% of breaches in 2013 and 2014, but they have been increasing, the firm reported, with the total number of breaches in this category growing by 20% between 2013 and 2014. Due to heavy forensics costs — money spent to find out exactly how the breach occurred — these breaches are on average almost five times times more costly than unintended disclosure.

Still, considering the sheer number of cases of accidental data exposure, employers can take steps to prevent data theft, Ross noted. These include protecting every computer connected to the Internet or the internal network with anti-virus and anti-spyware software (including any laptops that connect wirelessly); installing security-software updates promptly to stay ahead of hackers; securing the company’s wi-fi network by requiring passwords or even configuring the wireless access point or router to hide the network name; securing computers and network components and requiring log-on passwords for all employees; and continually educating employees on security guidelines for computer, network, database, e-mail, and Internet usage, as well as penalties for violating those guidelines.

“The bad guys are always thinking up new things. It’s important to stay on top of it,” Trudeau added, noting that data breaches may not be doubling or tripling in frequency year over year, but they are rising slowly. The financial industry alone saw 642 incidents in 2014.

As a result, “the  number of people willing to buy data-breach insurance continues to increase year after year, as more customers start seeing it as something that should be part of their insurance portfolio,” he went on. “You need to be vigilant of the fact that someone may have come up with some way to hurt your organization that you’re not aware of yet.”

Grinnell told BusinessWest that there’s still too many holes out there, due to nothing more complicated than complacency.

“A lot of people think it it’s big businesses getting hacked — ‘they won’t get me.’ I think that’s beginning to change, but there’s a long way to go,” he said. “We need to get the word out and let people know the exposures that lurk out there and help them address them, both through insurance means and making sure they have the proper firewalls in place to prevent attacks as much as possible.”

In other words, anyone can be a Target, and there’s ample evidence that some common-sense precautions — and perhaps a well-written insurance policy — can go a long way.

Joseph Bednar can be reached a  [email protected]

Insurance Sections

No End in Sight

Maura McCaffrey

Maura McCaffrey says health plans work with drug companies to negotiate prices and with community physicians to assess patient needs, but rising costs continue to be a concern.

It’s a well-publicized issue in an election year, so it’s no surprise that lawmakers — including several presidential candidates — have been teeing off on soaring drug prices.

“Americans pay, by far, the highest prices for prescription drugs in the entire world,” Bernie Sanders recently noted. “A life-saving drug does no good if the people who need it cannot afford that drug.”

He pointed out that nearly one in five Americans between ages 19 and 64 did not get at least one prescription filled last year because they did not have enough money.

“There is no question that medicines help millions of people live healthier and longer lives, and can also prevent more expensive illnesses and treatments,” Sanders continued. “However, it is unacceptable that the United States now spends more than $370 billion on prescription drugs, and spending is rising faster than at any point in the last decade.”

Rising drug prices are having tangible effects on consumers, including those in Massachusetts. Among 16 carriers that recently testified before the state Division of Insurance, the first quarter of 2016 saw an average rate increase of 6.3%. They were asked to present the data used in determining their proposed rate filings for small-group plans in the second quarter of 2016. There are other reasons behind the increases, including the cost of expanding coverage under the Affordable Care Act, but drug prices are universally cited as a driving factor.

Meanwhile, even amid ever-louder complaints from lawmakers and the media, Pfizer, Amgen, Allergan, Horizon Pharma, and other manufacturers have raised U.S. prices for dozens of branded drugs since late December, with many of the increases between 9% and 10%, according to the Wall Street Journal. Overall, prescription-drug spending rose 12.2% in 2014, after just 2.4% growth in 2013, the Centers for Medicare and Medicaid Services reported.

What’s Happening?

There are a number of factors at play, ranging from the fact that the U.S. government doesn’t regulate drug prices to rising development and production costs; it can take more a decade and more than $1 billion to get a new drug approved. Still, there’s plenty of opportunity, industry critics say, to bring relief to patients.

“Their argument is we can — we can raise prices on this, the market will bear it, people like this drug, they rely on it, their physician will write it,” Marco Rubio recently told an audience on a campaign stop, blasting drug companies. “And so, because we can, we do. And it’s just pure profiteering.”

Insurance companies are feeling the pressure, Maura McCaffrey, president of Health New England (HNE), told BusinessWest. “Health plans have a responsibility to manage the pricing of these pharmaceuticals.”

They do this in two major ways, she explained. The first is to work with a pharmacy benefit manager, a third-party liaison between drug companies and insurers, to negotiate the drug prices. “Over the past year, Health New England did a very large renegotiation with its pharmacy contracts, and that has been very beneficial to members in Western Massachusetts.”

The second strategy is HNE’s clinical care assessment committee, which includes both primary-care and specialty physicians and meets eight times a year to discuss new medications — how they compare with current offerings and who the most appropriate patients would be.

“We come up with clinical criteria to make sure the right people have access to the right medications,” McCaffrey said, adding that, if the drug in question treats an uncommon condition, the committee will go into the local medical community to find additional specialists who can speak to that topic.

Difficult Spot

At the gathering before the Division of Insurance, Elin Gaynor, HNE’s assistant general counsel, cited several recent examples of unsustainable drug prices, including $259,000 per year for a drug treating cystic fibrosis, $118,200 per year for a breast-cancer medication, and more than $100,000 annually for a new hepatitis C treatment.

“As a community, we must be willing to tackle some very tough questions,” added Michael Caljouw, vice president of Government and Regulatory Affairs at Blue Cross Blue Shield of Massachusetts. “What is the right price for new drugs and therapies? What is the appropriate use of them? Who decides? How can we achieve a better balance between medical advances and affordability?”

In making coverage decisions, McCaffrey told BusinessWest, safety and effectiveness always trump cost. “Then, if it looks to be a safe and efficacious medication, we look at what else is on the market and compare the safety profiles and efficacy profiles. The last thing we do is compare the cost profiles. We do this every time.”

Dr. Peter Bach, a physician and director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, recently explained in the New York Times that drug manufacturers are hamstrung by the complexity of biology, government regulations, and shareholder expectations for high profit margins.

What they’re not saying, he went on, is that they take advantage of laws that force insurers to include virtually all expensive drugs in their policies, and an industry philosophy that demands that every new healthcare product be available to everyone — no matter its cost or how little it actually helps.

In late 2014, the New England Journal of Medicine detailed a number of ways drug companies take advantage of this system. For instance, they buy up the rights to inexpensive generic drugs, lock out competitors, and raise prices. In one example, albendazole, a drug used to treat certain kinds of parasitic infection, was approved 20 years ago and, as recently as 2010, had a wholesale cost of $5.92 per day. Three years later, it was $119.58.

“Many of these drugs remain key therapeutic tools. The number of prescriptions for albendazole has increased dramatically in part because the drug has increasingly been used to treat parasitic infections in refugees,” explained the report’s authors, Drs. Jonathan Alpern, William Stauffer, and Aaron Kesselheim.

“The Centers for Disease Control and Prevention recommends presumptive treatment of refugees arriving in the U.S. if they have not had prior treatment,” they went on. “Because the people who need albendazole are generally disadvantaged, the costs resulting from the enhanced demand and associated price increases are largely borne by the patients themselves through substantial out-of-pocket payments or by taxpayers through public insurers such as Medicaid and the Refugee Medical Assistance program.”

The albendazole situation is hardly unique, they added. “It is well-known that new, brand-name drugs are often expensive, but U.S. healthcare is also witnessing a lesser-known but growing and seemingly paradoxical phenomenon: certain older drugs, many of which are generic and not protected by patents or market exclusivity, are now also extremely expensive.”

For example, the price of captopril, which is used for hypertension and heart failure, increased by more than 2,800% between November 2012 and November 2013, from 1.4 cents to 39.9 cents per pill. Similarly, the price of clomipramine, an antidepressant also used for obsessive-compulsive disorder, increased from 22 cents to $8.32 per pill, and the price of doxycycline hyclate, a broad-spectrum antibiotic introduced in 1967, increased from 6.3 cents to $3.36 per pill.

The practice infuriated a number of U.S. lawmakers, who teed off on drug companies last month during a session of the Senate Special Committee on Aging.

“I find it so disturbing and unconscionable that a company would buy up a decades-old drug that it had no role in developing … and then would hike up the price to such egregious levels that it’s having an impact on patient care,” said U.S. Sen. Susan Collins, who chairs the committee.

Beyond the Status Quo

Solutions have been difficult to come by, but Bach suggests one: what if insurance companies weren’t required to cover all drugs? He explained that, in Europe, many countries reject a handful of drugs each year based on their high cost and relatively low effectiveness — so companies are forced to offer their products at attractice prices.

As a result, prices in Europe for prescription drugs are typically 50% below what U.S. consumers pay. The pharmaceutical industry might argue, he went on, that drug spending accounts for just 10% of all healthcare spending, but that equals around $300 billion per year — no small number.

And those costs are being passed on to patients. The Wall Street Journal noted that Lilly’s drug Cyramza will cost the average Medicare patient $2,600 per month without supplemental insurance — more than most Medicare-age people earn each month, before taxes.

It would make sense, Bach argued, to do one of two things: free insurers and government programs from the requirement to include all expensive drugs in their plans, or demand that policymakers set drug prices in the U.S. equal to those seen in Europe. “Either approach would be vastly superior to the situation we have today.”

The New England Journal of Medicine report offered another strategy for bringing prices under control. The authors suggest that substantial increases in the price of an unpatented drug could trigger the FDA to issue a public announcement seeking other manufacturers for generic versions of the product. Companies responding to such a request could receive expedited reviews of their manufacturing processes, and generic-drug user fees could be waived to further increase incentives for potential competitors.

Meanwhile, they concede, there is little that consumers can do.

“Some patients seek to acquire these drugs in other countries, since many of them are widely and inexpensively available outside the U.S., but such foreign sources may be of variable quality. Until regulatory and market solutions are implemented to reduce prices for these older drugs, patients requiring such drugs and the physicians treating them will continue to be faced with difficult choices.”

McCaffrey said Health New England is trying to maintain as much consumer choice as possible, but not at the expense of ballooning rates.

“Going into 2016, one of our top priorities is to make sure people have access to the medications they need,” she noted, “but at the same time make sure we can control premiums for them so they can afford the health insurance that gives them access to the medications they need.”

Joseph Bednar can be reached at [email protected]

Insurance Sections

A Downtown Institution

CCSF President Bob Stewart

CCSF President Bob Stewart

Bob Stewart says that when it comes down to the fine print, there’s not a lot of difference in the cost of insurance policies from one company to the next.

“It’s all about relationships,” said the president of Chase, Clarke, Stewart & Fontana (CCSF), an independent insurance agency with deep, 144-year-old roots in Springfield. “Any insurance purchaser can go down the street and find another policy that may be a few dollars less than the policy they have. But it’s not all about being the lowest price on the street; it’s about providing the best coverage and providing the best service you can for your clients.”

He said his firm isn’t unique in that respect; in the era of managed competition, a time when large, national insurance chains have flooded the market with marketing campaigns focused on bottom-line promises, independent insurers have been forced to focus on the personal touch, or, as he called it, “servicing the heck out of it.” Fortunately, he added, that’s long been key to the culture at CCSF.

“That’s how we keep business — return the phone calls, answer the e-mails, go see clients,” he went on, noting that house and office calls make even more sense as downtown Springfield prepares for three years of construction hassles related to the MGM casino and the I-91 viaduct reconstruction.

“With what’s going on downtown, the parking is horrible, so we don’t encourage any of our clients to come into our office; we will go out and see them. We’re always hopping in the car; that’s just routine. We’d rather go see our clients in their office or home and talk to them there. That’s part of the service aspect, too.”

And those clients are diverse, Stewart said.

“We don’t necessarily specialize in any one thing; we do an awful lot of personal-lines insurance — homeowners, auto insurance — but we do a large amount of commercial insurance as well, a lot of professional liability, medical liability, social-service-agency liability, lawyers’ liability. I have a small program of accountants’ professional liability, with clients all over, from Boston to Pittsfield. My brother [Jim Stewart] runs a church program; he’s a broker for a national church organization, the United Church of Christ.”

Jim Stewart is one of three vice presidents, along with Dan Fontana and Raymond Lukas, and they all bring different types of expertise to the table, Bob explained. “We’re all over the map. Ray is a financial planner by trade, so he’s done a lot of life insurance, employee benefits, and financial planning, so any stuff we need done on that end, that’s always his bailiwick.

“It really is a fun business,” he went on, “and I wish we were able to attract more younger people into the field because it’s a great business. It might not have all the glitter of a Wall Street job, and we are in downtown Springfield, which doesn’t appeal to a lot of people. But it’s a wonderful business, and we’ve been very successful over the years. I’ve thoroughly enjoyed it.”

For this issue and its focus on insurance, BusinessWest sat down with Stewart to talk about why he’s a believer not only in his industry, but in Springfield itself, and why he’s still excited after 42 years in the business about helping people and businesses protect what’s important to them.

History Course

Since William Fuller opened an insurance business in downtown Springfield in 1871, that firm has never been headquartered more than a couple blocks from where it sits now, on the corner of State and Main streets.

“We’re probably the oldest independent agency in Springfield — maybe in Western Massachusetts,” Stewart noted. “Basically, our history is a series of mergers and purchases over the years.”

Fuller’s agency was later acquired by Samuel Sherwood and William Cone, growing under their leadership and then with Sherwood’s son, Malcolm. Raymond Redfield then added the business to his own agency, along with the Oppenheimer Agency, which had started around 1880. In 1957, Redfield invited the Russell D. Chase Agency and the Arthur H. Clarke Agency to merge together as Redfield, Chase & Clarke.

Meanwhile, another agency had been thriving in Springfield — the Lewis J. Stewart Insurance Agency, started by Stewart’s grandfather just after World War I and later run by his son, Robert Stewart Sr. In 1966, that agency joined with the growing Chase agency, which was renamed Chase, Clarke, Stewart. Bob Stewart came on board in 1973, followed by Jim in 1980.


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But the consolidation process was far from over. In 1995, the agency merged with the R.J. Fontana Agency — bringing Dan Fontana into the fold — forming Chase, Clarke, Stewart & Fontana.

CCSF

CCSF, located in the office building on the corner of State and Main Streets, has had a presence in downtown Springfield for nearly 150 years.

In 2000, the company purchased the Mutual Insurance Agency of Springfield, whose history dates back to 1827. Finally, in 2004, CCSF purchased the Lukas Insurance Agency of Springfield.

Through it all, the commercial-lines business has changed little over the years, save for occasional shifts in rates, but the same can’t be said of personal lines.

“That has changed drastically since what they call managed competition,” Stewart said. “Take auto insurance — back in the ’80s, we had probably about 12 insurance carriers writing auto insurance in Massachusetts, and not the big ones. No one wanted to come in because the state set the rates and said, ‘this is what you’re going to charge.’ Insurance companies were bound by those rules, and most of them felt they couldn’t make money in Massachusetts.

“But then the gloves came off and managed competition started,” he went on. “Insurance companies could set their own rates within certain parameters, so the field is much more wide open now. We’re now competing with the big insurance carriers from all across the country.”

Before this new era, he explained, independent agents wrote some 80% of auto policies, which was unheard of across the U.S.; that figure was closer to 40% or 50% in most states.

“That market share has dropped, and we knew it was going to,” Stewart went on. “And it has caused the insurance carriers we do business with, the independent-agency carriers, to really come up with some unique and unusual coverages and pricing to compete with some of the big companies that have come into the state. They’ve been very responsive. They’ve stepped up to the plate when they needed to compete from a pricing standpoint or from a coverage standpoint, by enhancing policies.”

Marketing has changed in some ways as well, particularly with the emergence of social media, which CCSF has put to effective use with a blog, where it shares information with various types of clients — for example, an article about cybersecurity for business customers, about insulation for homeowners, and about child car safety for motorists, just to name a few recent entries.

“That’s one way to stay in touch with them, let them know what’s going on in the industry, what kinds of things they can do to lower their premiums, protect their properties, and lower their risk,” he explained. “We’re been fortunate to have a young woman in the office who is really versed in social media. I’m kind of old-school, but everyone says it’s beneficial, so we’ll continue to do it.”

Selling a Promise

Stewart is just as pleased to see the changes emerging in Springfield — not just the casino, but a surge of activity and new business in the central business district that give him hope for the city’s future.

“When I started here in 1973, it was an entirely different downtown area. We had Steiger’s, Forbes, A.O. White, Johnson’s Bookstore — all sorts of stuff down here,” he told BusinessWest. “We went from that to seeing not much of anything in downtown Springfield. But I’m positive about the changes that are proposed and are happening. I they will benefit the city as a whole, not just downtown. I’m very positive about it. For those of us who work right in the center, what’s going on now in construction is inconvenient, but it’s an inconvenience that will be short-lived.”

Three years of construction and traffic snarls may not seem short-lived to some business owners, but with his company’s history sprawling back 144 years, he finds it easy to take the long view. Besides, there’s always someone new to get in the car and visit.

“For me, it’s really all about the people I deal with. We have a tremendous staff in our office, it’s fun to deal with them, and it’s fun to deal with all my clients — I really enjoy talking to people, going out to see them. That’s what makes it interesting. If I had to sit behind my desk all day, every day, I’d probably be miserable.”

Stewart is also gratified by a job where he helps people protect themselves against the worst, or at least mitigate hardships when they do strike.

“One client I’m dealing with now, his house was badly burned — a very extensive, very serious loss,” he said. “I talked to them a few times the last few weeks, and things are going smoothly, and the checks are getting cut. It’s good to see that what we’ve provided for them is actually going the way it’s supposed to, and things are being put back together without any further issues.”

At its heart, he concluded, “all we’re selling as an insurance agency is a promise, so we’d better be able to deliver on that promise when the time comes.”

Joseph Bednar can be reached at [email protected]