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Insurance Special Coverage

Putting a Premium on Measured Growth

Current and future leaders at the Dowd Agencies

Current and future leaders at the Dowd Agencies, from left: Evan Dowd, account executive; John Dowd Jr., president and CEO; Dave Griffin Jr., senior vice president; and Jack Dowd, vice president of Personal Lines.

There’s a framed picture of downtown Holyoke on one wall of the conference room at the Dowd Agencies — downtown Holyoke circa 1870.

The view is looking west along Dwight Street by the first-level canal. City Hall, prominent in the upper-left corner, looks … exactly as it does today. The other side of Dwight Street, not so much — most of the buildings seen in the image have been gone for decades. For perspective, a horse-drawn carriage is moving east down the hill.

John Dowd Jr. said the picture was owned by a long-time client who offered it to him after Dowd repeatedly raved about it. He accepted the offer and gave the picture a prominent home — across the conference room from another framed photo, this one of the insurance company’s founder, James J. Dowd, who went into business just a few decades after that picture of downtown was taken.

Together, the pictures provide some needed perspective — about time, Holyoke, the company, change, what hasn’t changed — and how they all come together. And the juxtaposition of all this will come into even sharper focus in 2023, when the agency, which Dowd claims is the oldest family-owned insurance agency doing business in the Bay State, celebrates its 125th birthday.

“We want to continue to grow, but want to make sure we’re not growing too quickly; we don’t want to get over our skis, as we like to say.”

There hasn’t been much hard planning about how to mark that milestone, he said, adding that he and others will pick up the pace in the coming months and put together some events and programs, as they did for the company’s centennial in 1998.

“We have a few things we’re planning that are in the works,” he said. “We’re trying to do some things that involve the community; overall, it’s an opportunity for us to say ‘thank you’ to the community for supporting us for 125 years and through five generations. That’s an important ‘thank you,’ and we’re thinking long and hard about what we’re going to do.”

In the meantime, the company is taking steps to ensure that it can continue its long history as an independent agency, said Dowd, noting, for example, the latest in a series of recent acquisitions that provide needed size and flexibility at a time of continued consolidation in the insurance industry.

Just last month, the firm acquired the Ideal Insurance Agency in Ludlow, which, like many smaller, family-owned agencies in the area, became available for one of many reasons, ranging from COVID-19 to lack of a clear succession plan to the inability to effectively compete in a market increasingly dominated by larger firms.

photo of downtown Holyoke, circa 1870

This photo of downtown Holyoke, circa 1870, has earned a spot on the wall in the conference room at the Dowd Agencies.

This was the third such acquisition over the past two years, coming after Dowd bought the J. Raymond Lussier agency in West Springfield and the Wilcox agency in Westfield and Feeding Hills. This expansion has given the agency much greater size, and in insurance, as in banking and most all other sectors, size matters, and it bring benefits.

“The advantages come with volume with carriers,” Dowd explained, noting that the firm is roughly 30% larger than it was a few years ago, and almost double the size it was a decade ago. “The more volume you have, the better compensation you negotiate, as well as profit sharing, services, and other perks. We’ve been able to achieve some of that volume leverage through aggregation with other agencies and through M&A.”

Moving forward, the agency will continue to look for opportunities for growth organically, and also through additional acquisitions, said Dowd, adding that it approaches this assignment with an eye toward smart growth and not taking on too much too quickly.

“We want to continue to grow, but want to make sure we’re not growing too quickly; we don’t want to get over our skis, as we like to say,” he noted, borrowing a phrase used often in business to connote getting ahead of oneself with a specific strategic initiative. “A healthy company grows organically and also through M&A. With the M&A, it has to be measured growth, but organic growth is essential — that’s boots on the ground, bringing in new clients, retaining your current clients; that’s good, healthy growth, augmented by acquisition, which comes with debt, which obviously has to measured and balanced.”

Meanwhile, there are other matters to consider, said Dowd, including succession planning for this agency, something that is obviously taken seriously at a company that has been around this long, covets its independence, and wants things to stay that way.

For this issue and its focus on insurance, BusinessWest talked with Dowd about … well, everything conveyed by those two photos in the conference room.

 

Cover Story

Dowd told BusinessWest that the phone calls come maybe once a week, or five or six times a month on average.

They’re from representatives of private-equity firms who want to know if Dowd Insurance might be for sale, and, if so, under what circumstances. He tells them ‘no,’ and in a polite way — at least the first time they inquire.

“I’ll usually have one conversation with them and let them know that we’re not interested in selling and are happy to stay the way we are. And then when they call the next month with the same question, my patience starts to wane, and I start to wonder about how obligated I am to answer every email and every phone call, especially when I’ve already talked to them and told them my plan.”

“They are relentless,” said Dowd of those on the other end of the phone. “I’ll usually have one conversation with them and let them know that we’re not interested in selling and are happy to stay the way we are. And then when they call the next month with the same question, my patience starts to wane, and I start to wonder about how obligated I am to answer every email and every phone call, especially when I’ve already talked to them and told them my plan.”

These days, there are even more people calling and asking about the agency, he noted, and that’s because of those acquisitions over the past few years and the scale they generate.

It’s a somewhat minor annoyance, and at the same time a reminder of the agency’s track record for success, he said, adding, again, that he is polite, but only to a point.

Dowd has other matters to occupy his time, he noted, adding that, overall, the firm is still trying to make its way all the way back to where it was before the start of the pandemic, especially with “behind-the-scenes” work, as he called it, when it comes to quality, efficiency, and serving clients.

“We have a quality team that evaluates what we do and how we do it,” he explained. “They would get suggestions every month from anyone on the staff — ‘here’s an area that I think we can look at and get better at’ — and the quality team would research and come to us with suggestions for developing a plan. That’s an example of an area where we lost some momentum.”

Some momentum was also lost when it came to connecting with potential new customers, he went on, adding that this put far greater emphasis on growth through acquisition, which is exactly what the company did.

“From a revenue standpoint, we were flatlining — if we held onto everything,” he explained. “And we didn’t hang onto everything because businesses were closing. It was a scary time because there was so much uncertainty. But then came the M&A opportunity, and we looked at it and said, ‘this is not a great time to be taking on some debt, but we think this is prudent.”

John Dowd Jr., seen here next to a photo of the company’s founder, Joseph Dowd

John Dowd Jr., seen here next to a photo of the company’s founder, James J. Dowd, says the Dowd Agencies targets controlled, ‘smart’ growth, both organically and through acquisition.

Elaborating, he said the agencies that came into consideration were good fits, culturally and otherwise, and under normal circumstances, they would be consider logical acquisitions. The circumstances weren’t normal, but the times dictated some aggressive action.

“Sometimes you’ve got to stick your chin out there and, when opportunity knocks, take advantage of the opportunity,” he said, adding that this is just what the firm has done.

In doing so, it has put itself in and new different position — an independent agency of considerable size — and it is determined to sell both of those qualities.

“We’re a good-sized agency, certainly in Western Mass., and the only one of our size that is still independently owned — not owned by one of the big guys,” he said. “We like that distinction, and we use it to our advantage. We’re totally local — not only do we live and participate in our community here, we’re also locally owned, and profits go right back here in to Western Mass., and not Chicago or anywhere else.”

But with that independent status comes the challenge to compete with those often much larger concerns, Dowd explained, adding that this challenge, as in banking and other sectors, is very real and becoming more stern with each passing year.

“We’re at a point now where getting to the next level requires a higher level of sophistication in just about every area,” he said. “Obviously, technology is huge because it creates the efficiencies we need. Meanwhile, the labor market is extremely difficult and challenging right now.

“The investment in technology and the way we staff ourselves, the levels of management … all of these important areas have to be looked at and adjusted accordingly,” he went on. “You can’t keep doing things the way you were when you were half the size. You have to be forward-thinking in this business; you have to be looking ahead and be prepared for what may come, and you know the unexpected will happen. You have to be nimble enough to be able to adjust.”

 

Prudent Policy

As he looks forward, Dowd sees the agency doing what it has been doing all along and especially over the past decade or so — seeking to grow organically, but also looking for opportunities to grow through acquisition and expand geographically.

The agency currently has nine locations, all in Western Mass., but it is exploring options well beyond this area code, he noted.

“We’ve looked at Northern Connecticut, we’ve looked at acquisitions in Vermont and New Hampshire, and we’ve also looked at Eastern Mass., toward Worcester, working our way in that direction,” he said, adding that, while the agency serves clients in those areas and others, including Boston and New Jersey, it does not have a physical presence in those locations, but could attain some if the conditions are right.

“In our business, it’s about where your network of contacts takes you and what your appetite for challenge is,” he told BusinessWest. “Do you want to do what it takes to be regional and available and able to support services? You just have to be realistic that you can do what you say you can do.

“We’re careful and selective with regard to companies where there’s some distance,” he went on. “But we’re looking at some relationships in New York right now where we could possibly have an ofice and be able to operate similarly, but on a smaller scale, to what we’re doing here.”

Overall, there are a number of ways to get to the proverbial next level in terms of size and revenues, he went on, adding that, while remaining independent is the preferred route, the agency will consider all its options. “We’re evaluating what steps we need to take in order to continue to grow and build the company.”

Returning to those phone calls he gets from the private-equity firms, Dowd noted, again, that he doesn’t take many of those calls anymore.

“I feel bad about that, but not too bad,” he explained. “I get a lot of messages — they call and they say they’re from such and such firm, and he’s calling again; I talked to him a year or two ago and told him I’ll call if anything changes.”

Nothing has really changed, at least on that front, he went on, adding that there has certainly been change with regard to the company’s size, reach, and position among area agencies.

Over the course of 124 years, many things have changed, but the most important ingredient hasn’t — this is still an independent, family-owned agency.

And as it prepares to mark another important milestone, that’s a quality worth celebrating.

 

George O’Brien can be reached at [email protected]

Insurance

Price Pressure

The cost of healthcare, not the COVID-19 pandemic, is now the top healthcare concern facing residents of the Commonwealth. Massachusetts residents reported that only inflation and the cost of housing were greater challenges than the cost of healthcare, according to a new survey commissioned by Blue Cross Blue Shield of Massachusetts.

The survey, conducted by Beacon Research, also found that the cost of care resulted in skipped or delayed healthcare for nearly half of Massachusetts residents.

“As we emerge from the COVID pandemic, we conducted this poll to better understand what Massachusetts residents believe are the key priorities in healthcare.”

“After two years of intense focus on COVID, cost is again the primary healthcare issue facing Massachusetts residents,” said Chris Anderson, founder and president of Beacon Research. “Consumers strongly believe that this is an urgent issue that health plans, the government, and hospitals should be working to address.”

Key findings from the survey included:

• Massachusetts residents are three times more concerned about cost of care over quality, access, or the COVID-19 pandemic;

• Healthcare costs are challenging family finances for nearly two-thirds of Massachusetts residents, trailing only the daily pressure of gasoline and food price increases;

• Eighty percent of Massachusetts residents think it is highly or extremely important to take action on healthcare costs;

• When asked who they think should be doing more to control healthcare costs, residents cited health plans (87%), government (85%), and hospitals (81%);

• Massachusetts residents are putting off needed healthcare (42%) and prescriptions (26%) because of cost; and

• Younger and affluent residents are the most likely to think care is unaffordable.

“As we emerge from the COVID pandemic, we conducted this poll to better understand what Massachusetts residents believe are the key priorities in healthcare,” said Jay McQuaide, senior vice president and chief Communications officer at Blue Cross. “There is a clear call to action in these survey results for those of us in healthcare to do more and to act with greater urgency to address the unsustainable rise in healthcare costs.”

Blue Cross reported that it is working with others in healthcare to responsibly moderate the growth in healthcare spending. Among the steps the company is taking are collaborating with physicians and hospitals to achieve contracts that reflect the community’s serious concerns related to healthcare costs; advancing next-generation, value-based payments; better supporting members managing chronic conditions; and managing pharmacy spending — the company’s most-used benefit — to ensure members are getting high-quality, clinically appropriate prescription drugs.

 

Insurance

Counting the Cost

By HUB International New England

 

When do you need to list your teen driver on your car-insurance policy, and how can you make this additional coverage fit in your budget?

It is certainly not inexpensive to get car-insurance coverage for a new teen driver. When a teen driver is added to their parent’s policy, the typical insurance premium for a one-car family is likely to increase by 40% to 50%. If you’re a multi-car family, then you will probably see your insurance rates rise even higher. And if you’re opting to reward your new driver with a car and expecting them to secure their own insurance policy, you should prepare yourself — or your teen — to pay at least a couple thousand dollars in car-insurance costs.

So we understand why parents might want to hold off on getting auto insurance for their teen driver until absolutely necessary. However, even if you think your teen will only occasionally be borrowing the family car, the fact is they are now a licensed household member. As such, if you do not add them to your current policy as a covered driver, you risk being denied by your insurance carrier for any future claims, having your coverage terminated, or both.

In addition, should you decide you want to shop around for a better car-insurance rate, you will also need to make sure your teen driver is listed on all of your insurance applications so that you get an accurate quote and adequate coverage.

 

Six Tips for Saving Money

At HUB International, we have several strategies for saving money that we discuss with our clients:

• You can take advantage of discounts such as Good Student, which rewards teens with a grade point average of ‘B’ or higher. If your student is eligible for this discount, it may save you hundreds of dollars on your car-insurance premium.

• Completing defensive-driving courses can also earn you and your teen significant monetary credits toward your policy premium. Even more, your teen will hopefully drive away from this course with a better understanding of how to keep safe behind the wheel. Since even minor fender benders can drive up your insurance costs, it’s critical that your teen — as well as all other family members listed on your policy — do their best to keep their driving record clean of any accidents and moving violations.

• Investing in accident forgiveness can limit the financial impact in the event your teen does get in a car accident. Since 16-year-olds have higher crash rates than drivers of any other age, we recommend that our clients with teens strongly consider this endorsement, which can cancel out the surcharge points that are typically assessed by your insurer after an accident.

• Sharing a vehicle with your teen rather than giving them their own vehicle may allow you to classify your youngster as an occasional driver rather than the primary driver, which is another excellent way to keep your insurance rate lower. If you decide, however, that your teen will need a car of their own, it may make financial sense and keep your insurance costs down to assign them as the primary driver of the family vehicle that is the least expensive.

• Are you adding a vehicle to your household for your teen to drive? Look for a car with safety elements, such as anti-lock brakes, airbags, and anti-theft devices, as insurers will often reward you for having these features with lower car-insurance rates.

• Monitoring your teen driver with today’s technology can not only help you keep an eye on your teen when they are on the road, but also earn you discounts on your car-insurance premium. Some insurers are now offering devices to parents that can be installed under a car’s dashboard and create a report card of your teen’s driving behavior. Information may include the number of miles the car covers, how fast your teen is driving, the hours the car is on the road, and how often your teen slams the brakes. Insurers with this program are providing discounts ranging from 15% to 30% to drivers who achieve predetermined safe-driving benchmarks.

• Raising your deductibles lowers your premiums. However, this is only a smart choice if you are comfortable knowing that you might end up having to pay a larger share of costs for an accident out of your own pocket.

 

What Are the Options?

The team at HUB International has helped thousands of families across New England adapt to having a teen driver in their home. We know that your child’s newfound independence is exciting but may also cause you some stress and anxiety. But we can help make sure you and your teenager are insured properly.

While there is a natural desire to look for ways to cut costs on your insurance as your teen becomes a full-time driver — and drives up the cost of your premium — it’s definitely not the time to decrease your coverage limits or eliminate optional coverages. In an effort to save money, you could leave your teen and all other drivers in your home dangerously underinsured and at financial risk should they be involved in an accident.

Instead, it’s an excellent time to review your current auto policy with your insurance agent. We strongly recommend that our clients with teens carry more coverage than the state’s minimum required auto-insurance levels and that they opt for additional coverages such as collision and comprehensive. We also want to make sure that they are taking advantage of commonly overlooked car-insurance policy options that can save them money, stress, and time, like Bundle & Save, Disappearing Deductible, and Loan/Lease Gap Endorsement.

Finally, because teen drivers are, unfortunately, an accident-prone age group, once your child gets behind the wheel, your liability risk inevitably increases. So it’s not a bad idea to consider adding an umbrella policy to your insurance solutions for those worst-case scenarios where your teen is in an accident and is found at fault for bodily injuries to others or damage to other people’s property. For a minimal investment, this type of coverage may give you the peace of mind that your savings, investments, retirement accounts, and your family’s financial future are protected from an accident-related liability claim.

HUB, along with our partners, is committed to improving driver safety. Nationwide, well over half of new drivers crash in their first two years behind the wheel. Safety Insurance has partnered with the In Control Family Foundation to improve driver safety in Massachusetts. The In Control program offers a half-day, hands-on driver skills-development program that teaches drivers to avoid the most common and serious collisions. In Control’s crash-prevention training course has been shown to reduce crashes by new drivers by 70%.

With Safety Insurance, you can save 5% on your auto insurance by completing In Control’s crash-prevention training course, as well as saving more than 70% on the course itself.

Contact HUB for all of your insurance needs, and for additional information on programs such as In Control, call (833) 462-2554.

Insurance

Water, Water Everywhere

By Peter Normand

 

According to a 2020 report from the First Year Foundation, there were 336,000 properties in Massachusetts alone that were at some level of risk for flooding. This number is 65% higher than the existing flood maps indicate.

The heavy rains of last summer and the claims that followed got me wondering what the future holds. We are beginning to feel the impacts of climate change in more severe and less predictable weather. How valid are our flood maps? What can property owners do to protect their property in an uncertain future? If you haven’t talked about flood insurance with your insurance agent yet, now is the time.

Banks require flood insurance on all properties that are located in a flood zone per existing flood maps. Why do they do this? Commercial and homeowners policies exclude flood as a cause of loss. Nearly all of my commercial insurance clients who have flood insurance have purchased it to satisfy a loan requirement. Nearly everyone else is rolling the dice — most stating that, since they aren’t in a flood zone, it’s not an issue. After a very wet summer of 2021, however, the conversation is changing, even if this summer has been drier.

Let’s start off by defining what a flood is. Floodsmart.gov notes that “flood insurance covers losses directly caused by flooding. In simple terms, a flood is an excess of water on land that is normally dry, affecting two or more acres of land or two or more properties.” Just because there is water in your basement doesn’t mean it’s a flood. In fact, water seeping into a foundation without the above definition being met would not be covered by flood insurance. When determining whether or not there is coverage, the cause of the flooding that damages your property does matter.

On the market side, there are more options than ever, with more carriers offering a flood product. This leads to more flexibility for our insureds. For example, some markets allow for multiple properties on a single policy, some carriers offer limits in excess of NFIP (National Flood Insurance Program) limits to adequately insure the value of the property, there are replacement cost (RC) and actual cash value (ACV) valuations, and more competition has created market pressure on premiums, especially for properties outside of flood zones.

With changing weather patterns and other unknowns, it’s reassuring to know that there are options. If you haven’t considered flood insurance in the past, or have been putting it off, now is the time to talk to you insurance agent. There is an expanding market with options to meet your specific exposures and needs.

 

Peter Normand is a Commercial Lines account executive and RiSC consultant with Webber & Grinnell Insurance.

Insurance Special Coverage

Into the Breach

 

 

 

When hackers gained access to a large retailer’s computer network through scam emails to employees, more than 900 store locations were affected, and 2 million customers were impacted before the company was alerted by a security blogger six months later. That led to several class-action lawsuits against the company, attorney generals in multiple states opened investigations, and the affected credit-card companies issued fines.

In another case, a ransomware attack blocked all access to a regional accounting firm’s computer system, and also deleted files. After ransom was paid, it took several days to restore the applications and recover deleted files from a backup. As a result, the firm was unable to meet tax-filing deadlines, causing brand and reputation damage.

Then there was a company that provides technicians to a laptop manufacturer’s repair center. While a young woman’s laptop was in the custody of technicians at the center, her Facebook account was hacked, and several sexually explicit photos were posted to it. She negotiated a quick multi-million-dollar settlement with the laptop manufacturer, which demanded, in turn, that the staffing company compensate it for the privacy breach.

These are only three of many real-life cases detailed by the Hartford Financial Services Group as warnings that companies of any kind and any size are vulnerable to cybercrime.

“That’s where insurance comes in, to mitigate the cost of a claim,” said Chris Rivers, senior vice president of Phillips Insurance Agency in Chicopee. “Small businesses sometimes feel they have less risk than larger ones, but that’s not the case. Anybody can be hacked and be held ransom or have data get out.”

Breaches can come at all severity levels, he noted, from a simple Facebook hack to an attack that steals credit-card information or Social Security numbers from tens of thousands of consumers.

Chris Rivers

Chris Rivers

“Small businesses sometimes feel they have less risk than larger ones, but that’s not the case. Anybody can be hacked and be held ransom or have data get out.”

The Hartford reports that the average cost of a data breach in 2020 was $3.86 million, and the U.S. will account for half of all breached data in the world by 2023, when an estimated 33 billion records will have been stolen by cybercriminals.

One of the more severe types of attacks, those involving ransomware, take place every 11 seconds, and the average ransom payment increased to more than $233,000 in 2020. Such attacks result in an average of 19 days of business interruption and downtime.

Again, it’s not just large companies at risk of cyberthreats of all kinds, said Jack Dowd, vice president of Personal Lines and a commercial risk consultant for the Dowd Insurance Agencies in Holyoke.

“The percentage of small businesses that are targeted is significant,” he noted. “A lot of the people doing this know that a lot of small businesses don’t have the infrastructure in place that a larger business does and are more susceptible to attack, and that’s why they’re attacking them.

“It’s important to know, if you’re taking credit cards or you have a system where you store any type of sensitive information with clients, you’re vulnerable,” he went on. “We’ve seen them target people who wouldn’t think they’d be typical targets, and your best course of action is to protect yourself as best you can, and that would include looking into cyber insurance.”

 

Costs Pile Up

According to the Philadelphia Insurance Companies, the average cost of a data breach is $204 per lost record, with more than half of such costs attributable to lost customers and the associated public-relations expenses to rebuild an organization’s reputation.

That’s one reason why cyber insurance policies cover two distinct classes of loss: first-party and third-party.

First-party coverages include loss resulting from damage to or corruption of electronic data and computer programs; income reimbursement during the period of restoration of the computer system; customer notification, regulatory fines and penalties, and public-relations expenses; and reimbursement for extortion expenses, among others. Third-party coverages, on the other hand, include legal liability for financial damage and privacy violations involving customers, employees, and other third parties.

“Network-security liability is a coverage that will provide defense and settlement costs in the event a third-party claimant sues the insured over a failure to secure their own computer system,” Dowd explained.

Jack Dowd

Jack Dowd

“If you’re taking credit cards or you have a system where you store any type of sensitive information with clients, you’re vulnerable.”

But he warned that these expenses can total much more than the client anticipates. In fact, insurers often include sublimits on certain specific types of losses, and it’s up to the insured party to purchase higher limits.

“A lot of insurance companies give a certain amount, say $50,000, toward notifying people they’ve been hacked. But the notification costs alone, depending on the size of the client book, could be more than that. Then there’s the cost to rebuild data, the cost to secure their network … a lot of things go into cyber insurance that people don’t always consider.”

Rivers agreed. “Within the insurance industry, a lot of carriers have thrown in some smaller sublimits that weren’t there in the past. But you can always buy more, up to what you want.”

It’s easy to see why they would. The Philadelphia Insurance Companies lists many breaches over the past several years that affected thousands of customers, like the international hacking group that gained access to the computerized cash registers of a restaurant chain and stole the credit-card information of 5,000 customers, starting a flood of fraudulent purchases around the world.

Or an employee of a Massachusetts rehabilitation center who improperly disposed of 4,000 client records that contained Social Security numbers, credit- and debit-card account numbers, names, addresses, telephone numbers, and sensitive medical information. The center settled the claim with the state and agreed to pay fines and penalties as well as extending $890,000 in customer redress funds for credit monitoring on behalf of the victims.

Selective Insurance Group relates the case of a payroll employee at a plastics manufacturing company who received a spoofed email from a scammer purporting to be the CEO, requesting that the employee send all employees’ W2s immediately. Which he did, and multiple employees reported that fraudulent tax returns were filed in their name.

This last example is a case of what’s known as ‘social engineering,’ and such phishing attempts have become more savvy and authentic-looking. “They’ve gotten a little more sophisticated in recent years,” Dowd said, which is why companies, often encouraged by their insurance companies, initiate training to reduce the chances of human error causing a breach.

 

Closing the Circle

Insurance companies provide another human element to the fight against cyberthreats, Dowd said.

“If you have a cyber policy, you have a place to go, a place of refuge, if you will. If you ever go to work Monday morning and your system is hacked and someone is demanding a ransom payment, you don’t know where to begin. But if you have cyber insurance, you can call the company; they’ve been through this many times, and they’ll tell you exactly what to do. It gives you a starting point you wouldn’t have otherwise.”

When quoting a policy, he added, an agency might run a test of the company’s system and let it know of any holes that need to be closed, Dowd added. “Even if you don’t proceed with coverage, at least you know you have those entry points, and you can pass it on to a person able to close those gaps for you.”

Insurers may also supply clients with training and quarterly check-ins, he added. “They’ll have your employees take these quizzes that will supply them with real-life incidents that happen in the cyber world, and have them identify the errors or signs that they were fake or malicious; they can actually give you some real-life practice on that.”

Rivers said many insurers provide an online help center, but many clients don’t use that resource, instead hiring a computer specialist to make sure the company has the correct virus and malware protection and that there are no gaps in security, in both the hardware and human realms.

However they delegate it, keeping up to date with the latest threats, strategies, and technology is critical, he added. Even though there’s a cost associated with that, it can pale compared to the cost of a breach.

“It’s something that is out there, and everyone can be impacted by it, no matter how small or how big they may be,” Rivers told BusinessWest. “The reputation of a company can certainly be impacted by it. It’s something people don’t always think about — or want to think about. They say, ‘I only have a couple computers; it can’t happen to me.’ But it can.”

 

Joseph Bednar can be reached at [email protected]

Insurance

On the Rise

By Lisa Johnson

 

You have probably noticed higher prices in many areas of your life. From gas to groceries, prices are going up, with the U.S reaching inflation levels never seen before — and the insurance industry is not immune to this trend. Across the industry in most markets and with most insurance companies, whether you’ve had a claim or not, home-insurance premiums are rising due to a variety of factors.

Many of these factors are out of your control, as well as your agent’s and insurance company’s. Many current conditions, including increased costs of material and labor, as well as an ongoing shortage of workers, mean you may see a rise in your premiums at renewal time.

Home-insurance rates are determined by the likelihood of a homeowner filing a claim and the potential risks involved. Rates are driven by numerous standard factors, including amount of coverage needed, age of the home, location, liability issues, and previous claims. Other influences caused by national trends also contribute to rates.

Why are home-insurance rates going up? The biggest cause is the rise in inflation. When prices rise, the cost of living and owning a home increases, which in turn influences home insurance rates. These rate increases are happening in insurance companies across the country.

Home-insurance premiums can be affected by influences outside of your control. Various nationwide factors are impacting the cost to rebuild homes, leading to the need for more coverage in case of a claim. Some of the trends that are driving up costs include higher material costs and supply-chain issues. For instance, materials to rebuild homes are up 26%. Labor shortages are resulting in longer construction and claims-handling times, which also impact the cost of claims.

 

Higher Material Costs

From record high prices to shortages of materials, the home-building industry has seen lengthy delays, increased prices, and a large number of postponed projects. These higher prices for construction projects, renovations, and repairs lead to higher costs for homeowners.

With the price of building materials — such as drywall, shingles, lumber, and copper wiring — up an average of 26%, homes have become more expensive to fix and replace. According to a survey by the National Assoc. of Home Builders, this is the largest single-year increase in the survey’s history. Ninety-three percent of contractors are impacted by the increased price of materials, which leads to higher replacement costs when insurance claims are filed.

 

Increased Shipping Costs and Delays

The pandemic has impacted almost every part of the global supply chain, causing shipping delays and higher prices. When shipping ports get overwhelmed and backed up, it impacts the time it takes to get materials to homeowners and the cost of delivering the materials.

From appliances to plumbing fixtures, it’s taken weeks and months longer to get building supplies, which previously had taken days to procure. In fact, 94% of Fortune 1000 companies have reported supply-chain disruptions from COVID-19.

Globally, RBC Capital Markets reported that 77% of ports are experiencing abnormally long times to turn around traffic. In fact, Freightos.com marketplace data shows that, in September 2021, China-to-U.S. ocean shipments took an average of 73 days to arrive at their final destination, 83% longer than in September 2019.

 

Higher Labor Costs

Builders often hire subcontractors who handle electrical, drywall, plumbing, and other areas of construction. With the current labor shortages, higher costs are needed to secure skilled laborers or obtain the needed materials. This, in turn, has forced home builders to factor in higher costs for construction and remodeling work.

Eighty-nine percent of contractors are having a hard time finding craft workers, and 88% of firms are experiencing project delays. Additionally, the U.S. is seeing a drop in the number of Americans becoming tradespeople. The National Electrical Contractors Association reports that 7,000 electricians join the field annually, but 10,000 retire. This shortfall results in higher prices and longer wait times for home projects.

 

Auto Insurance Affected, Too

Home insurance isn’t the only coverage impacted by current trends. Auto insurance is also experiencing increases due to national trends. Used-car prices are up 40%, the cost of labor for repairs is up, car parts are costlier and harder to obtain due to supply-chain issues, and rental car costs are up 30%. These factors and others are contributing to a rise in auto-insurance rates.

It might be time to review your home and auto policies with an agent to make sure your coverages are appropriate in the current inflationary market.

 

Lisa Johnson is chief operating officer for Amherst-based Encharter Insurance; (413) 658-3410.

 

Sources: NAHB, AGC, Accenture, U.S. Bureau of Labor Statistics, AutoRentalNews, CCC Intelligent Solutions, CNBC. All products are underwritten by The Hanover Insurance Company or one of its insurance company subsidiaries or affiliates. This material is provided for informational purposes only and does not provide any coverage.

 

Insurance

Changing Rules of the Road

LexisNexis Risk Solutions recently released its 2022 U.S. Auto Insurance Trends Report, which aggregates annual market data about driving behaviors, auto-insurance shopping, underwriting, and claims to help insurers better navigate myriad evolving trends impacting the U.S. auto-insurance industry.

This year’s report analyzes 2021 data, detailing how the industry continues to navigate the aftermath of pandemic-induced supply shortages, inflation, and new driving behaviors, and provides insights for insurance carriers to help improve their workflows with an eye on streamlining consumer experience.

One of the big questions within the U.S. auto-insurance industry heading into 2021 was whether it would see a rebound to more normal driving and shopping patterns, or if the industry is undergoing a revolution in the wake of the pandemic that would compel insurers to think about the policy life cycle differently.

“The jury is still very much out on the long-term effects of these market trends impacting the auto-insurance industry,” said Adam Pichon, vice president and general manager of Auto and Home Insurance at LexisNexis Risk Solutions. “While we have seen some traditional patterns re-emerge with respect to miles driven and insurance shopping volumes, we saw another roller-coaster year due to volatile activity in claims severity, insurance switching, more serious traffic violations, and vehicle purchasing due to macroeconomic conditions.

“Add to that increasing consumer interest in telematics data and an active regulatory and legislative environment,” he went on, “and we are seeing more signs of a revolution in the industry than a rebound. Insurers who arm themselves with accurate and comprehensive data are poised to price and rate more accurately, handle claims more efficiently, and improve customer experience in the face of evolving market stressors.”

 

Another Turbulent Year

Auto-insurance shopping and new policy-growth numbers were volatile for the second year in a row, shaped largely by continued pandemic-related influences.

• Changes in driving behavior — including riskier driving behaviors such as distracted driving — created a notable shift in the driving-violation data mix reported. An abnormal rise in major speeding violations coincided with another yearly increase in traffic fatalities.

• Claims severity increased even as more normal driving patterns returned, particularly in the second half of the year. While severity of claims have increased, the number of ‘touches’ required to close a claim has not improved, with 29% of consumers reporting having to speak with three or more people to get their claim settled.

• Vehicle shortages and supply-chain issues led to reduced car sales and slowed the adoption of advanced driver-assistance systems after gains in recent years. And with fewer cars available, vehicle purchases were suppressed, which meant auto-insurance shopping was down, as vehicle purchases account for as many as one in three auto insurance shopping events.

• Miles driven, which is a strong predictor of loss cost frequency, rebounded to traditional seasonal patterns exhibited in 2019, and carriers could see a significant benefit in more accurate and frequent mileage readings from connected vehicles.

• According to a December 2021 LexisNexis Risk Solutions survey of U.S. consumers, 71% are interested in the of use telematics-enabled usage-based insurance for purposes of discounts. However, consumer adoption remains much lower, presenting a significant opportunity for both consumers and insurers.

• Changes in the regulatory environment are putting pressure on core rating variables as some states are introducing legislation designed to restrict the types of data used for risk-based insurance scoring. This could be harmful to consumers, as 85% of new U.S. consumer auto-insurance policies issued to consumers in 2021 benefited from products that leverage data and analytics.

“When you consider all the variables at play, I do think the assertion by LexisNexis Risk Solutions that we are in a revolution of sorts in the insurance industry is apt,” said Karlyn Carnahan, head of Insurance, North America at Celent. “Like no time I can ever recall, insurers are reliant on data and analytics to not only assess risk, but also to provide a more seamless experience for the customer from point of quote all the way through the claims process. Across the insurance continuum, data is oil that keeps the engine running.”

 

Considerations for the Road Ahead

We could be headed for another year of vehicle and insurance shopping volatility in year-over-year growth rates. Additionally, current economic uncertainty and continued risky driving behaviors suggest claims severity will remain high. Finally, LexisNexis Risk Solutions will continue to watch the regulatory environment closely in support of consumers and carriers.

“The insurance industry is in a critical phase,” Pichon said. “There are so many unknowns, and insurers, no matter the size, who adapt by using data and analytics to enhance their workflows and meet customers where they are will be positioned to make better, more informed decisions and gain market share.”

Insurance Special Coverage

A Policy of Purpose

After a long career growing FieldEddy (later HUB International New England) into one of the region’s most notable insurance success stories, Sam Hanmer called it quits, figuring he’d enjoy an early retirement. But he didn’t, in fact, enjoy it. So, three years later, with a renewed sense of passion and purpose, he got back in the game, purchasing two local agencies, with the intention to grow them further, with an eye toward cultivating the next generation of leadership.

By Stephen Carter

If not for the pandemic, Sam Hanmer said, he might have stayed retired.

Or maybe not.

A long stretch when COVID-19 largely shut down the world certainly didn’t add to whatever enjoyment his retirement years — which began in the spring of 2018 — were bringing him, but the truth, he admitted, is that early retirement simply didn’t suit him.

“Quite honestly, I was hanging around doing nothing every day and had a lack of purpose in my life,” said Hanmer, whose more than three-decade career in insurance was highlighted by the rapid growth of FieldEddy in the early years of this century and its acquisition by Hub International in 2014. “I said, ‘OK, I have to go do something. This is crazy; I’m too young. None of my friends are retired. I’m a golfer, but not a passionate golfer.’ So retirement didn’t sit well with me.”

As noted, COVID didn’t help — Hanmer’s bulldog, Santino, was his “pandemic dog,” a companion during those isolating months — and not even the golf courses were open for a while. Simply put, he was restless.

“I figured, I’ve got plenty of earning years left, so I went back to what I know,” he said, noting that he honored his non-compete agreement with HUB before jumping back into the insurance business. After bidding on another agency and falling short, he purchased the two locations of LeBel, Lavigne & Deady Insurance (in Chicopee and Springfield) in May 2021, rebranding them as the Rush Insurance Group. Then, in November, he bought Towne Insurance Agency in Agawam, changing the name to Towne Insurance Group; it may eventually be part of the Rush name as well.

“I got back in the business,” he said. “I needed something to do, and it’s what I knew.”

Back in the 1980s, when Hanmer graduated from UMass Amherst, his father was the majority owner of a firm known then as Field, Eddy, and Bulkley, but Hanmer didn’t go to work for him right away. When he later joined the family business, he started in sales but moved to the financial side when the treasurer suffered a heart attack and had to leave the company for some time. After his father retired in 1995, Hanmer stepped into the role of CEO.

It wasn’t long before he started to capitalize on a trend within the industry — many small, mom-and-pop operations struggling to adjust to changes and technology began looking in earnest for exit strategies — to grow by acquisition.

insurance business with a new venture

Sam Hanmer tried retirement, but it didn’t suit him, so he returned to the insurance business with a new venture

Over the next two decades, the firm acquired a number of agencies, including the Curtis and Hodskins agencies in Monson, Aliengena in Palmer, LDS in Three Rivers, Meadows in East Longmeadow, Remillard in South Hadley, Buckley Bridge in Windsor Locks, and both BPI and Lawson, Marino & Bertera in Springfield.

The 160-year-old firm, later branded FieldEddy, was still growing its footprint when it became part of the HUB International family in 2014, where Hanmer remained in a leadership role for three and a half years, then retired.

For a while, anyway.

 

A Different Perspective

Looking back to his un-retirement decision early last year, Hanmer figures it was probably inevitable, pandemic or not.

“I’m very happy I made the call to do it. I’ve had people, friends in the business, say, ‘why did you get back into this business?’ But it’s a good business, it really is, and they know it.

“But after a while, it can get old,” he went on. “So for me, taking three years off and coming back was a like a recharge. I was in the business 30-something years, and after 30 years, anything can get a little tiring. You take a few years off and realize — in my case, at least — retirement wasn’t working, and you come back with a different lens because you had three years off. So I’m excited and having fun in the business — probably more fun now than I had back in the day.”

Hanmer has navigated a number of changes in the sector, including the rise of direct writers like Geico and Progressive, who poured into Massachusetts after state regulations were changed to stimulate competition. But Hanmer, like other independent agents, has always countered that evolution by emphasizing the value of relationships in his business.

“The direct writers have captured a fair amount of the Massachusetts business, and you saw a big pitch years ago about online sales from direct writers. Now you see Geico offices popping up because they finally understand it is a relationship business. Geico’s done phenomenally; they don’t have to put offices up, but they’re starting to build offices you can walk into. And Progressive probably does 80% of their business through independent agents. People don’t know that.”

The other factor that’s been affecting the insurance world over the past 20 years — and remains a factor today — is consolidation, and there’s a place, Hanmer said, for locally owned companies in that landscape.

“Consolidation has been happening in all sectors, and that’s very much the case in the insurance-agency world,” he noted. “Everything is going to the nationals, and the local insurance agencies are dwindling. But we’re still local people.”

The main challenge is one of scale, he said, noting that the size of HUB certainly helped the former FieldEddy grow its business because of the buying power of a national firm. “And they have a lot of what I would call specialty units that focus on a particular sector. It’s powerful. It served us well.

“But I still think there are a group of middle-market buyers, smaller businesses that get lost in the shuffle with the nationals, and I think there’s a big opportunity for smaller local agencies to capture that business,” he went on. “A lot of national players actually walk away from that business. And in Western Mass., that’s 90% of businesses.”

So, against the backdrop of continued consolidation and with his accumulated years of experience, Hanmer saw an opportunity to be successful.

“It certainly was a scary thought to get back in, and come up with some capital in order to get back in, knowing that things have changed in three years — although they didn’t change as much as I thought they would have.”

Elaborating, he said he discussed coming back with friends and colleagues, and they led him to believe the business had changed quite a bit, even in the three years he was away.

“And there is change in the system environment, in the software we use, some of the peripheral things, but the actual dynamics of the business didn’t change. Once I got back in, I said, ‘this is what I anticipated.’”

It’s a landscape where relationship building and the consultative approach still matter, he explained.

“That’s never gone away. I’d rather be your consultant than your salesman. If someone buys from me, great, but if they don’t, and I’ve helped them, that’s fine too, because at some point, that will come around. Maybe they’ll talk to a friend. Even if I don’t ever get their business, that approach works. It doesn’t necessarily work quickly, but this is a marathon, not a sprint.”

He paused for a moment. “Well, I’m sprinting a little bit, because there will be retirement at some point ahead of me.”

 

Leaving a Legacy

For now, though, Hanmer is focused on growing his three offices, which offer personal, commercial, and employee-benefit lines — the latter being new for both agencies.

“My makeup isn’t to sit back. I absolutely plan on growing it through organic growth and organic sales and through further acquisitions, for sure,” he told BusinessWest. But he wants to leave his enterprise in healthy shape when that second retirement does come around — and, presumably, sticks.

“I’m hoping this time around to create something where a perpetuation might be internal instead of selling it externally to a national brand. If I can get a few young guys — and women — in here who are passionate about the business and want to keep it going, I would definitely perpetuate it internally, just create a little annunity for myself, as opposed to just cashing out. That’s the plan. Plans change, but that’s the plan.”

Bringing in young professionals is a national challenge, however.

“It’s hard. This industry is struggling to attract young people who want to be in the insurance business. It’s hard to get young people energized or even want to talk to you. They’d rather be in a dot-com; they’d rather be in a startup in Boston. There’s all kinds of things they’d rather do than sell insurance.”

One reason is that insurance isn’t an instant-gratification career, he explained.

“It’s a recurring-revenue business, which means your first few years are tough because you have to build a book of business. It’s a commission-based business, so once you build your business, you can create a recurring-revenue compensation program. It can be lucrative if you stick it out, but most people won’t stick it out because the first few years are lean. If they can manage through their first few years and have thick enough skin not to worry about the public perception of insurance, it can be a very lucrative job.”

The negative perception arises, Hanmer said, because insurance is something everyone needs, but they don’t want to pay for it. “They love having it when they have a problem, but if they’ve never had a problem, they say, ‘I can’t believe I spent all this money on insurance.’”

Hanmer found he needed insurance, too — not the product, but the career. He needed it more, in fact, than putting on a green or puttering around a house, or whatever activities he and Santino — who now goes to work with his owner every day — might get up to.

In other words, Hanmer needed to feel the spark of working again, so that’s what he did. And he found that spark.

“I definitely made the right decision,” he said. “I’m really happy.”

Insurance

What’s Covered?

By Mark Morris

Michael Long

Michael Long says inflation in the cost of construction materials is complicating the equation of replacement protection.

 

When preparing a homeowners policy, insurance companies want to know all the details. They’re not being nosy — they just want to accurately cover any potential loss, even the unexpected ones.

Indeed, insurance agents who spoke with BusinessWest said every homeowners policy begins with a worksheet that captures anything and everything about the home. Inquiries range from the obvious — like the age of the house, square footage, and condition of the roof — to details about the kitchen counters (formica or granite?), whether rooms feature hardwood floors or carpeting, as well as many other questions.

“We ask for lots of details so we can get a true estimate of the home to properly gauge the replacement value,” said Trish Vassallo, director of Operations for Encharter Insurance in Amherst, noting that policies are based on what it would cost to replace the home and its contents if there was an event that resulted in the total loss of the home, such as a devastating fire or tornado.

Insurance companies also try to factor in cost increases in building supplies and labor, so some offer homeowners policies with extended replacement protection that will cover 25% or 50% above the insured amount of the home.

Michael Long, CEO of the Axia Group in Springfield, explained that, with recent hyperinflation in building materials and labor, extended coverage may not be enough. Lumber has experienced a massive increase in price since the beginning of the pandemic, driven by supply-chain issues and an increase in demand. One measure for estimating building costs is the price for a board foot of lumber.

“Customers ask us why their policies increase each year, and the answer is the inflation guard, which keeps the policy in line with current construction costs.”

“Not long ago, a thousand board feet of lumber cost $345,” Long said. “It’s now up to $1,600 per thousand board feet.” That’s why one of the first conversations Long has with his clients is to make them aware of policies that offer guaranteed replacement costs that will cover rebuilding a home no matter what happens to the price of materials and labor.

While guaranteed replacement might be worthwhile for high-value homes, it can be expensive coverage. A more affordable way to keep pace with rebuilding costs comes in the form of policies with inflation-guard endorsements. Trish Woodbury, Personal Lines manager for McClure Insurance Agency in West Springfield, explained that policies with inflation-guard coverage are designed to increase the limits of what the insurance company will pay based on the costs of materials.

“Customers ask us why their policies increase each year, and the answer is the inflation guard, which keeps the policy in line with current construction costs,” she said.

Customers also ask Woodbury why the estimated replacement cost on a homeowners policy is so different than the market value of the home. The main reason is that market value is driven by the ups and downs of the real-estate market and is calculated using the house as well as the lot it sits on.

“The estimated replacement cost is based on all the specs of your house and the amount the insurance company will pay to bring you back to where you were before the incident that caused your loss,” Woodbury said. “We often have to explain the difference because it’s a far different number than the market value.”

That’s why including everything in the house from top to bottom is essential to having it insured. For example, if people fail to report they have a finished basement out of concern they may have to pay higher taxes, they won’t have coverage for a loss.

“We are not trying to uncover a tax increase for the towns; our concerns are, if you have a devastating loss, we want to make you whole again,” Vassallo said. “If you have a finished basement, we want to know how finished — is there a TV room, workout equipment, is there a bathroom down there? These are all important factors so we can come up with the appropriate replacement value and include it.”

 

Water, Water Everywhere

The most common claim for a homeowners policy is water damage from a leaking roof, burst pipe, or faulty toilet. Long pointed out that, if a burst pipe happens when no one is home, damage can be substantial, and the claim can be huge, even approaching six figures.

Because water-damage claims are so common and expensive, Woodbury said homeowners can now install devices to prevent a severe incident.

“One of the devices is an automatic water shutoff when a leak is detected,” Woodbury said. “Insurance companies have begun offering discounts to homeowners who install these.”

Damage from flooding is not covered under a traditional homeowners policy. Insurance companies define flooding as water from the surface and below, usually entering through the foundation of a house. If a homeowner has a mortgage and their house is in a high-risk zone for flooding, they are required to have flood insurance. Long pointed out that changing weather patterns may require a new way to think about flooding.

“Most people figure, if they are not near a river or other body of water, they’re OK,” he said. “If we received 42 inches of rain and your house is on a hill, it could still receive flood damage that would not be covered by a traditional insurance policy.”

“Without umbrella coverage, if you tried to sell your house while there was a personal-liability judgment against you, the creditors could go after the proceeds from the sale.”

Woodbury added that anyone can buy flood insurance, and if a house is not in a high-risk zone, the homeowner will receive a preferred rating and a lower price for the coverage. “It’s available to everyone, and we’ve been encouraging people to consider it.”

In addition to covering the dwelling unit, homeowners policies will also cover personal property — up to a point. If there are special items such as expensive jewelry or fine art, the best approach is to add a coverage rider for those items. As an example of why riders make sense, Vassallo gave an example of someone who owns a $75,000 baby grand piano.

“If you had a total loss, such as a fire, and your content limits are $200,000, replacing the piano would take a huge chunk of that $200,000, leaving you a much smaller balance to cover everything else,” she said. Thus, purchasing an inexpensive insurance rider for the piano gives it full coverage with no deductible, and it no longer affects the personal-property limit. “So, it becomes a separate item that we want to keep separate.”

Another type of policy associated with homeowners insurance is umbrella coverage. These are personal liability policies that provide coverage when the limits of a homeowners and auto insurance policy aren’t enough to pay a claim.

Umbrella coverage was once thought to be necessary for homeowners who have a dog, a swimming pool, or a young driver. Vassallo said. But with payments for personal-injury claims going higher all the time, everyone should consider the added protection of such a policy. “We even suggest it for renters because you never know who’s going to sue you.”

Some people feel they don’t need an umbrella policy because the Homestead Act protects them, Long said. But while it prevents creditors from taking a person’s home, the act’s protection stops there.

“Without umbrella coverage, if you tried to sell your house while there was a personal-liability judgment against you, the creditors could go after the proceeds from the sale,” he noted.

Water damage may top the list of common claims, but Long said dog-bite claims are growing in number. A typical homeowners policy can provide some coverage, but he strongly recommends dog owners have an umbrella policy, as the average claim for a dog bite is $40,000 — and people with a dog-bite claim often pay much more for homeowners policies in the future.

For many years, companies have maintained lists of dogs they will not insure under a homeowners policy. Woodbury pointed out that the list is driven by the number of claims they see for certain breeds.

“The lists change, too,” she said. “Because companies have seen fewer claims on German shepherds and huskies, they have come off some lists.”

Before purchasing a dog, Long recommends homeowners call their insurance agent, especially if they are not set on a particular breed. “Your agent can give you the current list of dogs the companies will not cover with insurance.”

 

Remote Control

While many people work from home these days, that work can take many forms. A person working full-time for a company is different than someone who operates a home-based business. Vassallo said homeowners policies are not intended to protect business exposure, so a person who runs a business out of their home needs to see their agent for a rider to their home policy.

Liability can become an issue if customers come to the home. It’s not unusual for tax accountants, music teachers, and others to have people at their home for business reasons. In insurance terms, that’s a liability exposure that can be addressed with a separate commercial rider for protection.

“Otherwise, using the example of the music teacher, if a student or parent slipped and fell, the teacher would have no protection,” Vassallo said.

Home ownership brings with it plenty of physical hazards. Insurance companies have begun offering protection for virtual hazards such as identity theft and cyberattacks.

Long said cyberattacks are growing at a rate of 200% every year. One of the top schemes is phishing — when a fraudster sends an e-mail that appears to be from a reputable company and encourages the receiver to click on links that compromise their security. But cyberattacks have moved away from laptops and phones and can now impact other areas of the house.

“Hackers are known to access data through WiFi-enabled thermostats,” Long said, adding that those who own WiFi-enabled refrigerators have also experienced attacks by hackers who use the appliance to mint cryptocurrency, such as bitcoin. “Many policies offer identity theft, and we are now strongly recommending our clients to add cyber protection.”

Before a homeowners policy comes up for renewal, agents will contact their customers to make sure their coverage stays up to date. It’s important for insurers to know about improvements such as a kitchen renovation.

“If you’ve upgraded to granite counters, it will now cost more to rebuild your home if you had a claim,” Woodbury said. “We want to make sure the limits on the policy keep up with the cost of rebuilding your house.”

Obviously, homeowners are not looking to pay more for coverage, and there are options for those who are interested only in price. Vassallo tries to help her customers understand why having sufficient coverage is so important.

“This is probably the largest asset they will ever own,” she said, “so let’s make sure we properly protect it.”

Insurance Special Coverage

Come Together

Timm Marini

Timm Marini says HUB has become more “laser-focused” in the way it grows.

If you think you’ve seen more headlines than usual lately about insurance agencies being bought and sold, you’re not mistaken. In fact, 2021 was the fifth straight record-setting year for M&A activity in the insurance world. The reasons range from federal fiscal trends to a desire to broaden an agency’s expertise; from pandemic fatigue to the aging of the Baby Boomers who built and grew many of these firms. The idea, area leaders say, is to grow strategically, with customer service and company culture at front of mind.

HUB International is no stranger to mergers and acquisitions in the insurance world; they have long been a key element of the company’s growth, nationally and globally.

“For us and some of the bigger acquirers, we’re getting more laser-focused in what we do,” said Timm Marini, president of HUB International New England. “It used to be you acquired to grow — and grow profitably. And then it became geographic expansion, where you wanted to find some agencies in places where you weren’t.

“In the last 18 to 24 months, it’s gotten more laser-like,” he went on. “When I say that, I mean looking for specialists or looking for specialty shops that may bring in different disciplines, like medical malpractice, life sciences, startup companies, or financial services. In the last two years, we’ve acquired 50 investment firms across the country, four or five of them in New England alone.”

Still, even at a firm with that kind of record, the sheer pace of M&A activity in recent years has been striking, Marini said. Last year, a record 798 insurance agencies were sold in the U.S. — breaking the previous records of 711 in 2020, 653 in 2019, 580 in 2018, and 557 in 2017.

“Part of that was the pending increase in taxes — people were nervous the tax rate was going to go up significantly, and that may have given some of them the impetus to sell,” he noted.

Phil Trem, president of Financial Advisory for Marsh Berry, a leading M&A advisory firm for the insurance industry, noted the same dynamic.

“The heightened activity can be traced back to a number of different factors. Firms who sold believed that they might be negatively impacted by a potential federal capital-gains tax increase and a shift in expectations by the insured community,” he wrote on the firm’s blog. “While tax legislation was not enacted in 2021, there are still looming concerns that it could happen at some point in 2022. Will it be retroactive? Anything is possible, but at this point concern about a significant tax increase has waned.”

But other factors have been in play as well, Marini said. “I also think there’s some COVID fatigue in the marketplace, folks dealing with all the extra issues we’ve all had to deal with. Plus, honestly, the multiples folks are paying for these companies are significant.”

John Dowd, president and CEO of the Dowd Agencies, agreed, calling the current landscape a “feeding frenzy” marked by “irrational exuberance” on the part of buyers. “We look at what’s a good fit, what’s a fair price. We’re not going to chase.”

Dowd, whose own firm has made some key additions recently (more on that later), sees a demographic shift in play as well.

“Baby Boomers, who built this modern-day economy and have been a powerful force in every industry across the country, have been retiring to the tune of 2 or 3 million a year. That obviously includes every segment of the economy, including insurance agencies,” he noted. “A lot of agency owners have reached the point of retirement, and if they don’t have an internal succession or perpetuation plan in place, they might look to sell to somebody. That’s what’s going on out there.”

John Dowd

John Dowd

“A lot of agency owners have reached the point of retirement, and if they don’t have an internal succession or perpetuation plan in place, they might look to sell to somebody.”

As for that feeding frenzy, Dowd and Marini both noted that agencies are being sold for multiples of the EBITDA (earnings before interest, tax, depreciation, and amortization) valuation formula that would have been uncommon just a decade ago.

“Our business models haven’t changed, so why have these multiples suddenly gone so much higher?” Dowd wondered. “It’s causing people to maybe sell sooner than they had planned, thinking the multiples will go away sometime, and they don’t want to miss out on an opportunity to monetize their asset.”

 

Pathways to Growth

There are two ways of growing an insurance company, Dowd told BusinessWest. One is organic.

“That’s what we do every day, trying to attract more customers and certainly hold onto and retain those we already have,” he said. “Then there’s growth through acquisition. Our philosophy and strategy is to do both. Any business plan is going to focus on growth, profitability, and retention. When you put together your growth plan and have a healthy balance of organic growth and growth through acquisition at a pace you can accommodate and not stress your staff and your balance sheet, that’s what we consider a good, strong, healthy philosophy for growth.”

Marini said HUB has made targeted investments in niche-specific talent as a way to better serve customers, but has also not shied away from acquiring good-sized firms in the region — like the Insurance Center of New England in 2019, a move he called a strong “cultural mesh” at the time, similar to the one HUB found when it acquired his former firm, Field Eddy, five years earlier.

Over the past year or so, the Dowd Agencies acquired two local agencies, J. Raymond Lussier Insurance and Wilcox Insurance Agency, citing a similar cultural fit.

“When I talk about a good fit, it’s book of business, carrier representation, geographic location, and, most important, cultural fit,” Dowd said. “By that, I mean, are the current owners sharing the same philosophy that we have in terms of how they treat clients and how they treat staff? When there’s a good match in those two areas from a cultural standpoint, we can begin to move forward with analyzing the proposal that’s on the table.

“Not every prospective agency is a good fit for acquisition,” he went on. “We know the metrics we look for, and we have to check the boxes before we start to move forward. We can’t grow for the sake of growing; we have to do it incrementally and selectively. That’s our philosophy. We see people out there acquiring agencies all over the place; they’ve got their own philosophy, and we have ours.”

Elaborating, he called Lussier and Wilcox good examples of strong cultural fits. “We’ve known these owners for years. We know how important a priority their customers were. It was very important to these owners that their clients, who they worked very hard to build over the years, are going to be well cared for by the new owners, treated similarly and respected and serviced at the level they had become accustomed to.

Phil Trem

Phil Trem

“The build-versus-join decision is bringing a lot of firms to the deal table. This dynamic is not going away, and the market will likely continue to be very robust.”

“The proof is in the pudding,” Dowd added. “Lussier came on a year ago, and Wilcox was six months ago, and they have blended beautifully with our staff. We’ve had some get-togethers as a team where everyone gets to meet and know one another.

“That careful vetting is really important so there’s not any disruption to service to clients, that it’s seamless and smooth, and everyone is comfortable,” he went on, “because people get anxious when there’s change. It’s natural. To the extent we can, we want to address and dispel those concerns before, during, and after the transition. And it’s worked well.”

A larger agency with a broader range of specific expertise is important to customers these days, Marini said.

“Customers are demanding more service for the same dollar amount,” he noted. “And then, industry experts who know the nuances of different coverages can negotiate better premium deals with their carriers.”

It’s a win-win, in other words.

“One major driver of sellers coming to the table is evolving expectations of brokers’ clients, the buyers of insurance,” Trem wrote. “Since the beginning of the pandemic, insureds have created an expectation that their broker act as a consultant, not just someone who helps purchase insurance coverages. The end client is looking for someone who can help provide strategic guidance, risk management, and/or mitigation services.

“This creates a conundrum for insurance brokers who must keep investing in tools, resources, and talent in order to effectively compete,” he went on. “Independent brokers have to decide whether they want to use their cash flow to make these investments or partner with a firm that has already done it. The build-versus-join decision is bringing a lot of firms to the deal table. This dynamic is not going away, and the market will likely continue to be very robust.”

 

Bigger and Better

Building broader and deeper expertise in an insurance agency is one way to counter the bottom-line-focused direct writers, Marini said, especially on the personal-lines side, where they continue to grow market share in New England. And not just expertise, but relationships.

“We don’t want to be big just to be big; that thinking was 10 or 15 years ago. Now it’s getting big to be good, or just being good … and part of that model is having independent expertise, services, and claim advocacy like never before.”

He noted that HUB has won some national awards for its COVID-related communication about how the industry should react and deal with all the different challenges the pandemic has wrought. “We’ve had some competing brokers, large companies, bigger than us, grabbing those materials for their customers. We didn’t protect it; we shared it.”

Dowd agreed that M&A activity often focuses on what it brings to customers, from a broader carrier mix to specific expertise. While the mergers with Lussier and Wilcox focused more on the shared culture, he added, any benefit to customers is a factor when considering an acquisition.

Nationally, those mergers and acquisitions will continue to be a major story in the insurance world. After five straight years of setting new records for M&A activity, Trem doesn’t see a major slowdown in 2022.

“Buyers and investors are continuing to push their way into the marketplace,” he wrote. “If anything, the pandemic reminded the financial community what a great investment the insurance distribution space is and that demand is greater than ever before. It is a very favorable seller’s market because there is still more demand than there is quality supply.”

 

Joseph Bednar can be reached at [email protected]

Insurance Special Coverage

Rising Tide

After a summer of heavy rains in Massachusetts — and across the Northeast, for that matter — plenty of homeowners discovered their insurance policies don’t cover flood damage, and many are no doubt considering whether they should add such coverage. And it’s a question that may be raised even more often in the future, as climate change produces stronger and more frequent storms.

Last week, President Biden sat with state government officials to talk about the growing dangers of hurricanes and floods.

“For decades, scientists have warned that extreme weather would be more extreme and climate change was here. And we’re living through it now,” he said. “We don’t have any more time.”

But it wasn’t Florida he was visiting, or Louisiana or Mississippi. It was New Jersey, which had just experienced, according to one county commissioner, its fourth 100-year storm in the past two decades. The event turned tragic, with close to 40 people dead in New Jersey and New York, many trapped in basements and cars.

In other words, the effects of climate change on storms is no longer a problem for other regions. It’s a problem for the Northeast, too.

And it’s on the minds of those in the insurance industry.

“What was once a 100-year flood is now a 10-year flood,” said Trish Vassallo, director of Operations at Encharter Insurance in Amherst. “We’re seeing things now that we never anticipated.”

Trish Vassallo

Trish Vassallo

“What was once a 100-year flood is now a 10-year flood. We’re seeing things now that we never anticipated.”

Western Mass. residents know this well after a summer of often-incessant rain, punctuated by a few big storms that left a trail of flooded basements in their wake — most of which were not covered by insurance. But it doesn’t have to be that way.

“A homeowners’ policy is going to provide coverage for a hurricane or tornado — which is on everyone’s mind this time of year,” Vassallo said. “We’re covering for wind damage and hail. If the whole house blows away, we’re covering for that as well.

“But flooding is always going to be excluded,” she went on. “You need to purchase a specific flood policy. The basic policy is from the ground up — not the flood coming in from the surface.”

There are two types of coverage homeowners can add to their policy to cover floods, Vassallo noted. Flood insurance covers water damage that results from water that has already hit the ground, pouring in from oversaturated yards, flooded streets, or overflowing rivers, streams, or ponds. Meanwhile, water backup coverage reimburses the homeowner for water that backs into the home through an outside sewer or drain.

“The key phrase is surface and/or groundwater coming into the building,” said David Griffin Jr. senior vice president at the Dowd Agencies in Holyoke. “If a pipe bursts, causing water damage, or water gets in through the roof, or a tree falls through the house and water comes in behind it, that’s all covered [by a basic policy]. But if water from outside the home comes in — if the yard floods and starts to spill into the basement — you’ll need a flood policy to respond to that.”

David Griffin Jr.

David Griffin Jr.

“We’ve had so much water this summer — it’s unprecedented, and it’s becoming an issue for everybody.”

While add-ons like earthquake insurance don’t sell big in New England for a reason, flood insurance is becoming an “absolute necessity,” Vassallo said, noting that it’s required in Massachusetts for mortgages in designated flood zones. “A person no longer has the option; mortgages require it. You can’t close on a loan without it.”

Griffin said his team recently ran some numbers and found that only 3.5% of all homeowners in Massachusetts have a flooding policy. Considering that flood-zone requirement, the percentage of people who aren’t forced to buy the coverage but opt for it anyway is strikingly low.

Will a summer of heavy rain — or talk of more intense storms in the future — change that? Insurance professionals are watching closely.

 

A Disconnect?

While flooding from rushing water and rain is generally not covered by regular homeowners’ insurance policies, floods remain the most common and most destructive natural disaster in the U.S., according to the National Assoc. of Insurance Commissioners.

From 1988 through 2017, flood damage in the U.S. cost almost $200 billion, according to the Natural Academy of Sciences, and the increase in precipitation due partly to climate change was responsible for $73 billion, or more than a third of that, Investopedia reported this month. These figures include all property damage, not just homes.

Nonetheless, only about 15% of homes in the U.S. are insured against floods, according to both a report from the reinsurance company Swiss Re and a survey by the Insurance Information Institute.

Dowd said homeowners should take a five- to 10-year perspective on what potential flood damage would actually cost. “Do I want to spend 800 bucks a year on a flood-insurance policy? Over 10 years, that’s $8,000. What’s the likelihood of having a loss beyond that if I have to self-insure? You can look at insurance as a long-term budget item.”

Consumers can access a cost estimator, where they can input data about their home, including its age, location, construction style, square footage, and contents, and get back replacement-cost numbers that can help guide policy decisions, Dowd said.

And current events may affect that formula; these days, in the case of major, widespread damage, homeowners may run into supply-chain issues and shortages of wood and other materials, which can significantly jack up costs.

“If you haven’t looked at your limits in a while and they’re $325,000 and it actually costs $425,000 to replace it, you don’t want that kind of gap in case of a total loss,” he noted. “It’s important to be on top of that.”

But protecting a home from water damage — or any other disaster — extends beyond the policy itself, Vassallo said.

“We talk about preparedness — making sure people do the right thing to limit their losses,” she noted, which includes everything from securing movable items to cutting back tree branches that threaten windows and roofs. “This is something we deal with on a day-to-day basis here in New England. You want to limit your damage as a homeowner.

Griffin agreed. “There’s always a level of preparedness you need to have in order to limit damages in a storm. That’s something you want to think about — it can sometimes eliminate bad things.”

Meanwhile, after an incident occurs, the homeowner can take steps to minimize further damage while documenting their losses.

“Always take photos of loss of everything, and make immediate emergency repairs — put that blue tarp on the roof to prevent rain damage,” Vassallo said. “If you do need to make emergency repairs, most insurance companies will honor the photographs. I would recommend you retain damaged materials, which can prevent questions from arising. If you rip out the rug in the house, you don’t want the adjuster to pay you for builder’s grade, when you had a high-grade rug. That’s stuff we deal with all the time.”

The homeowner is expected to not just respond quickly to minimize damage, but to help prevent it as well, she noted. That means regularly cleaning gutters so they’re not backed up with leaves during heavy summer rains, which can lead to water pouring into the foundation and leaking into the basement — or contributing to ice dams in the winter.

In other words, “if you have gutters, clean them — but be careful on that ladder,” Vassallo said. “If you can do your preventive work ahead of time, you’re ahead of the game.”

 

Warning Signs

As he noted earlier, flooding has been on Griffin’s mind lately.

“Typically, this is the time of year when we see the biggest uptick in those types of claims, especially in New England,” he said. “We also see it in March, when the ground is frozen, and we may get two or three inches of rain, which slides across the frozen ground and into your home. But we’ve had so much water this summer — it’s unprecedented, and it’s becoming an issue for everybody.”

He said carriers have been sounding the alarm about this topic. “Storms are getting a lot stronger. It’s definitely something that’s been noted on the carriers’ end.”

They’re not alone, of course.

“Every part of the country is getting hit by extreme weather. And we’re now living in real time what the country’s going to look like,” Biden said in New Jersey last week. “We can’t turn it back very much, but we can prevent it from getting worse.”

And make sure we’re properly insured against the next big storm.

 

Joseph Bednar can be reached at [email protected]

Insurance

Expanding the Footprint

 

Berkshire Hills Bancorp Inc. and Brown & Brown Inc. recently announced the execution of a definitive agreement for the sale of the assets and operations of Berkshire Insurance Group Inc. (BIG), a subsidiary of Berkshire Hills, to Brown & Brown of Massachusetts, LLC, a subsidiary of Brown & Brown. The transaction is subject to customary conditions and is expected to be completed in the third quarter.

BIG has been providing insurance coverage to customers across the Northeast since its inception in 2000, growing into one of the largest insurance agencies in Western Mass. It provides personal and commercial property and casualty insurance solutions.

Sean Gray

Sean Gray

“Berkshire has entered into an exciting partnership with Brown & Brown through which we will be able to serve our customers better with an expanded offering of insurance solutions.”

“Consistent with Berkshire’s Exciting Strategic Transformation (BEST) program, this transaction allows us to simplify our operating model, repurpose valuable resources, and redeploy capital to support core businesses and strategic initiatives that will enhance long-term stakeholder value,” Berkshire Bank CEO Nitin Mhatre said. “As a result of this transaction, we will record a net gain on sale of approximately $0.55 per share on a GAAP basis in the third quarter, and anticipate $0.02 lower earnings per share in the second half of 2021.”

Sean Gray, president and COO of Berkshire Bank, added that “Berkshire has entered into an exciting partnership with Brown & Brown through which we will be able to serve our customers better with an expanded offering of insurance solutions. I also want to thank the dedicated team of employees at BIG, whom I’ve had the privilege of working alongside for the past 10 years, for their contributions to Berkshire and all our communities. I know they will continue to serve Berkshire customers well in their new roles with Brown & Brown.”

Brown & Brown has offered positions to existing BIG employees, resulting in no job eliminations. Following the acquisition, BIG will become a new standalone operation within Brown & Brown’s retail segment under the leadership of John Flaherty.

BIG’s offices in Greenfield, Longmeadow, Pittsfield, Stockbridge, and Westfield will continue to operate from their current locations, and its other locations will physically combine with existing Brown & Brown offices. In addition, through a partner relationship, Berkshire Bank will continue to refer customers to Brown & Brown. Don McGowan, a regional president in Brown & Brown’s retail segment with responsibility for various offices in Massachusetts and the Northeast, will oversee the new combined operations.

Don McGowan

Don McGowan

“This transaction allows us to further expand our footprint in Massachusetts with several new strategic locations that we believe enable us to better serve our customers.”

“This transaction allows us to further expand our footprint in Massachusetts with several new strategic locations that we believe enable us to better serve our customers,” McGowan said. “We are excited to welcome all of the talented BIG teammates to the Brown & Brown organization and look forward to finding fresh opportunities to offer a wide range of insurance products and services to new and existing customers.”

RBC Capital Markets is acting as financial advisor to Berkshire, and Luse Gorman, P.C. is acting as legal advisor to Berkshire on this transaction.

Berkshire Hills Bancorp is the parent of Berkshire Bank. Headquartered in Boston, the bank has $12.3 billion in assets and operates 115 banking offices, primarily in New England and New York. Brown & Brown Inc. is an insurance brokerage firm delivering risk-management solutions to individuals and businesses, and boasting more than 300 locations across the U.S. and select global markets.

Insurance Special Coverage

Give and Take

With five generations in today’s workforce, employee benefits are no one-size-fits-all proposition — yet, they remain a key issue for employers looking to attract and retain a skilled workforce. Striking a balance between what employees want and what the business can afford is certainly a challenge — but the flexibility and options available to employers these days makes the task a little easier to navigate.

By Mark Morris

Between demographic changes in the workforce and the impact of the pandemic, employers face multiple challenges these days in offering health insurance and other benefits to their workers.

In the U.S., 49% of people receive health-insurance coverage through their employer. According to the Kaiser Family Foundation, that percentage represents approximately 156 million Americans. Many of those workers also receive coverage for dental care and disability, as well as access to a retirement plan as part of a complete benefits package.

And, despite the increasing costs of health insurance, employers are not cutting back on this essential coverage, said Peter Miller, partner with Millbrook Benefits and Insurance Services in Springfield.

“They are trying to strike a balance between offering a benefits package that is attractive to new hires, while also trying to control costs and keep the business running,” he noted.

Traditional benefits, such as healthcare coverage and retirement plans, have always been important to employees. According to Patrick Leary, vice president of Work Benefits Research at LIMRA in Windsor, Conn., traditional benefits make up the core of an employer’s value proposition to employees.

In putting together a benefits package, an employer decides whether a particular offering will be paid 100% by the employer, or use a cost-sharing approach in which employees contribute as well. A third option, known as a voluntary benefit, is completely paid for by the employee.

LIMRA provides research for the insurance and financial-services industry. One significant trend Leary has studied is the expanding demographics of the workplace.

“There are now five generations in the labor force,” he said. “The oldest workers are staying longer, while Gen Z is just beginning to enter the workforce.”

Each generation has different benefit needs, and they are all looking to their employer to address them. Voluntary benefits are one way for an employer to accommodate different needs among a diverse employee population.

Peter Miller

Peter Miller

“They are trying to strike a balance between offering a benefits package that is attractive to new hires, while also trying to control costs and keep the business running.”

“A company can offer a broad-based plan where some benefits appeal to younger workers and some to older,” Leary said. “Because they are voluntary benefits, the employer can address the various needs of their employees without increasing their costs.”

He emphasized the importance of employers working with a benefits consultant to find the right mix. “Part of the process involves the employer understanding their current employees and the types of workers they plan to recruit for the future.”

Employers typically add benefits to make their companies more attractive to the specific types of workers they seek. For example, Miller has been discussing benefit packages with a tech company looking to attract engineering graduates from prominent colleges. While traditional benefits are important, flexible work arrangements and college debt-repayment programs also have a strong appeal to this group.

“It’s important for employers to think outside the box to make themselves more attractive to the people they’re trying to hire,” he said.

College debt repayment offered as a formal benefit is relatively new, but it’s quickly becoming a popular benefit as more graduates enter the workforce saddled with large debt obligations.

Meredith Wise, president of the Employers Assoc. of the NorthEast, said employers are using different tactics to help new employees manage their student-loan debt. Some employers offer a hiring bonus so new employees can pay off a chunk of their student loan.

Another approach allows employees to pay down their debt and contribute to their retirement savings at the same time. Based on his conversations with employers, Leary said the 401(k)/student-loan payment approach strongly resonates with young employees.

“The amount the employee pays each month toward their debt is matched up to 5% by the employer in a 401(k) plan,” Wise said. “This is helpful to young workers who would not normally be thinking about their retirement savings because they are saddled with debt.”

 

What COVID Wrought

There’s nothing quite like a worldwide pandemic to remind everyone of the importance of having healthcare coverage. After 14 months of operating during the pandemic, the benefits professionals BusinessWest spoke with cited two notable trends: an increase in telehealth offerings and usage, as well as an increased demand for mental-health services.

“There’s definitely been an increase in utilization for traditional medicine and mental health,” Miller said.

Wise agreed. “Employers are looking at the mental-health benefits covered under their policies and, in many cases, are augmenting those benefits with employee-assistance programs,” she noted.

A survey released in March by America’s Health Insurance Plans reported that 56% of employees said their telehealth and mental-health services are more valuable now than they were a year ago, before COVID-19.”

Offering wellness programs as a benefit is another trend that has gained popularity in the last several years. “Employers are adding or increasing benefits around wellness, nutrition, stress management, and other areas,” Wise said.

In addition to health wellness, Leary said employers are increasingly offering financial wellness programs as a benefit.

Patrick Leary

Patrick Leary

“Some older employees might be sandwiched between taking care of their children and their parents at the same time, while others are looking at their planning needs for retirement.”

“If an employee is stressed out about their personal finances, it affects their productivity at work,” he said, pointing out that financial wellness is a benefit that can help employees at every stage of their careers by providing guidance tailored to their individual needs.

“It’s a chance to help younger employees get off to a good start and to check in with older Millennials, now approaching their 40s, about retirement planning and the telehealth benefit they can access,” Leary explained. “Some older employees might be sandwiched between taking care of their children and their parents at the same time, while others are looking at their planning needs for retirement.”

Because employees have so many different needs, communication around benefit offerings becomes essential. As COVID disrupted so many other norms, it also caused significant changes in benefit communications. But in this particular case, Miller said, the change was an improvement.

For years, the model for enrolling employees into a company’s benefit plan involved on-site meetings and speaking directly with as many employees as possible to make sure all their questions and concerns were addressed. Miller said the strong in-person presence continued even after the actual enrollments were done online.

“We’re doing many of our open-enrollment meetings now on Zoom,” he said. “One advantage is that you can gather employees no matter where they are for the live presentation, and they can ask questions, either by shouting them out or using the chat box.”

For employees who may be on vacation or traveling, the Zoom meeting is recorded and uploaded to a video-sharing platform like YouTube.

“Lots of people want to discuss their benefit options with their spouse,” Miller said. “Now they can, because everyone can access the presentation whenever they want.”

Miller said the video gives employers a tool they can use for the entire plan year. “When a new hire comes in, they can be directed to the link and listen in on the entire employee-benefit presentation. The video approach was one of the few positive developments that resulted from adjusting to COVID concerns.”

Sometimes, a new employee benefit can emerge from a catastrophe. At the onset of COVID, Leary said, employers were frantically setting people up at home just to keep their businesses in operation.

“Several months later, they began seeing the benefits of having people work from home,” Leary said. “While many are discussing a hybrid approach, where employees split their time between the office and home, working from home to some degree is now undeniable.”

Because his business lends itself to working remotely, Miller said his employees definitely perceive it as a benefit.

“If you asked me last February if working from home would be feasible, I would have said ‘no way,’” he noted. “But it not only works, it works very well.”

 

Help Wanted

These days, employers need every benefit they can offer when recruiting new employees. Despite businesses itching to expand, Miller said, employers face new challenges in doing so. “I’ve been doing this nearly 30 years, and I don’t ever remember so many different employers saying they can’t get good people.”

Local employers he’s speaking with are increasingly hiring workers from other states to meet their needs.

“My clients are looking for health plans that are more robust and have a national presence,” Miller said. “I’m hearing that from employers right here in Western Mass.”

For many, traditional benefits remain important, but they make up only a part of the employment experience. Leary said the move to remote work means employers and benefit consultants need to think in new ways to communicate benefits and enroll employees in a new hybrid environment.

“You can make the argument that flexible work schedules and the ability to work autonomously without having a manager look over your shoulder are also benefits that go beyond traditional health, dental, and disability plans,” Miller said.

It’s a trend to keep an eye on — one of many employers need to consider as they determine which benefits will attract and retain employees in a changing economy — while making sense for the company’s bottom line.

Insurance

Cover Story

From left, Bob Borawski, Dave Malek, and Mark Rosa, the leadership team at Borawski Insurance.

From left, Bob Borawski, Dave Malek, and Mark Rosa, the leadership team at Borawski Insurance.

As he talked about insurance, and also about the agency started by his grandfather almost 91 years ago, Bob Borawski drew a number of analogies to the banking industry.

Specifically, he referenced an ongoing pattern of mergers, acquisitions, and overall consolidation that has left fewer players, and far fewer smaller, independent agencies.

In banking, said Borawski, who has been on the board at Florence Bank for many years now, this activity has created opportunities for those players with a track record of strong customer service and the ability to fill a void left by those agencies swallowed up by larger interests with fewer ties to — and employees living in — the 413. At the same time, while rates and prices are always important in banking, relationships are more important.

And, by and large, it’s the same in insurance, Borawski said.

“Anyone can give a rate that’s a half or five-eighths of a percentage point less,” he said in reference to banks. “But beyond the rate, you want to have a good relationship with your client. Like an independent bank, we have a focus on being independent — we’ve chosen not to be gobbled up by one of the larger players because we think independence is important. We still think people appreciate being local.”

Dave Malek, vice president of the company, who came aboard nearly 30 years ago, agreed.

“It really is all about relationships,” he noted. “And I think that is what gets lost when you get swallowed up by a larger conglomerate.”

In essence, Borawski said, he, Malek, and the other 15 employees at this company launched at the height of the Great Depression in 1930, are continuing a pattern of personalized customer service and relationship building that was started by his grandfather, Alexander Borawski, and continued by his father, Robert.

“These days, people are always saying, ‘we can save you…,’ ‘we can save you…,’ ‘we can save you…’ — and that’s great until something goes wrong and all that savings took coverages away and didn’t provide what you should have had.”

And this pattern has served the company well, especially when it comes to commercial lines, where the Borawski company has built a large and diverse portfolio that continues to grow.

Indeed, at present, commercial accounts comprise roughly 75% of the book of business, said Malek, adding that the portfolio includes everything from manufacturers to auto dealers; nonprofits to general contractors.

And this commercial business has spawned growth in numerous areas, especially employee benefits but also personal lines, said Borawski, adding that the ability to provide a wide range of products and services to customers has been a formula for growth going back nine decades, but especially in the past 30 years as the company has sharpened its focus on its commercial portfolio.

The first and second generations of leadership at Borawski Insurance: Alexander Borawski, left, and Robert Borawski.

The first and second generations of leadership at Borawski Insurance: Alexander Borawski, left, and Robert Borawski.

Overall, this agency has been conducting business in much the same way it has since the doors opened, even if COVID-19 forced some changes when it came to where employees were working and how work was done.

Moving forward, the business plan calls for simply “more of the same,” said Borawski, adding that the company intends to take full advantage of the trend toward consolidation within the industry and continue its focus on relationship building.

“You’re either moving forward or moving backward, and our plan is to continue to grow our way — organically,” he said, adding that he believes the company is certainly well-positioned to achieve that goal.

For this issue and its focus on insurance, BusinessWest talked with several team members at Borawski to get a full understanding of not only where it’s been, but where it wants to go and how it intends to get there.

 

Independent Thinking

Borawski told BusinessWest that, upon graduating from Stonehill College in 1980, he had no plans to join the family business. Instead, he went to work for then-emerging office-supply company W.B. Mason as a salesperson.

“There were probably 35 people there at the time; I really liked it and had no intention of leaving,” he said, adding that his career took a critical turn a few years later when, while he was home for Thanksgiving, his father, who joined the agency in the early ’60s, commenced a discussion on succession.

“He said, ‘what am I going to do with this business?’ and we continued to talk,” Borawski recalled, adding that, soon thereafter, he came back home to join the company as a salesperson; eventually, he would succeed his father as president in 1992.

By then, he was also working to take a friendship on the golf course with Malek to a much different level. The two were members at what was Hickory Ridge Country Club in Amherst (the club closed a few years ago), and while talking golf and shop — Malek had been in the insurance business for roughly a decade by then — a discussion commenced about Malek coming to the Borawski agency and “helping build something,” Bob said.

That something was the aforementioned commercial-lines division that has grown so dramatically over time.

“We made a lot of cold calls over those years,” said Borawski, adding that, in addition to that time-honored strategy, the business has benefited tremendously from referrals that have led to new customers of all sizes in both the commercial- and personal-lines sides of the business.

Overall, the company has decided to grow organically, not through acquisition, as many others have. Again, as in banking, growing organically means, to a large extent, taking customers from other players, something that’s accomplished through hard work, a strong track record, a deep portfolio of products and services, relationships with carriers (Borawski works with more than 30 of them), and — here comes that phrase again — relationship building.

“Business just doesn’t fly in the door — you’ve got to go find it,” he explained. “You have to hunt it and track it.”

That’s because the competition, as in banking, is fierce. To stand out, an agency has to possess those qualities listed above, said all those we spoke with, and especially a desire to work with clients to find solutions for them, not just get a signature at the bottom of a policy — or series of policies.

“One of the things that we try to do differently is evaluate someone’s insurance program, and not just from the perspective of price,” Malek said. “It’s important to understand what their needs are and what we’re trying to provide for them, rather than just focus on the bottom-line price, because, in most cases, that doesn’t end up working out.

“Insurance is an intangible. You can’t touch or feel it until you need it. And we try to get people to understand just that — that everything is great until something goes wrong. And when it goes wrong, you need to know that you’re going to be put back to where you were prior to that.”

“You get what you pay for, and we work to get people to pay for the right coverage,” he went on. “These days, people are always saying, ‘we can save you…,’ ‘we can save you…,’ ‘we can save you…’ — and that’s great until something goes wrong and all that savings took coverages away and didn’t provide what you should have had. No one goes to the cheapest doctor for a reason.”

Mark Rosa, senior account executive, agreed, and noted that he and others in similar positions at the company strive to be advisors, not merely salespeople.

“It’s not just a game of show and tell and salesmanship — we want to advise as well,” he noted, adding that business owners who are experts at whatever business sector they have chosen are not necessarily — and not likely to be — experts on the many different insurance and employee-benefit products available today and which ones might be best for their company.

This desire to advise is another strong attribute that has served the company well during this time of consolidation within the industry, said Rosa, adding that, with those mergers and acquisitions, a personal brand of service is generally lost, creating opportunity for those who can still provide it.

“From a new-business standpoint, many people have made up their mind that they want to go somewhere else,” he explained. “It doesn’t take much for a client to figure out that things won’t be the same as they used to be. They figure that out pretty quickly, and that’s when the phone starts to ring.”

 

Bottom Line

While there are certainly many direct comparisons between banking and insurance, there are some important differences as well, Malek explained.

“Insurance is an intangible,” he noted. “You can’t touch or feel it until you need it. And we try to get people to understand just that — that everything is great until something goes wrong. And when it goes wrong, you need to know that you’re going to be put back to where you were prior to that.

“One of the things that we pride ourselves on is that we’re able to give people that sense of comfort to understand that their business is going to run just as if nothing happened,” he went on, adding that not all agencies can successfully provide this level of comfort.

Those that can think independently — in every sense of that phrase — can do it better than others. And that’s what has allowed this company to thrive for almost a century now, and prompt it to look toward the future with no plans to change how it does business.

 

George O’Brien can be reached at [email protected]

Insurance Special Coverage

Are You Covered?

By Mark Morris

Christine Fleury

Christine Fleury says making alterations to the home — a common sight during the pandemic — could change insurance needs.

Call it the great migration indoors.

When the pandemic first hit, many people were forced to quickly convert their homes into offices, schools, and entertainment centers. Some in the insurance industry predicted this might lead to more homeowners insurance claims. In reality, it didn’t.

Similarly, as people spend more time in their homes, they also depend more on their water, electrical, and heating systems to work. While some insurance claims have been filed due to these systems failing after increased use, the increase has not been notable.

In fact, Christine Fleury, Personal Lines manager at Encharter Insurance in Amherst, said companies have actually seen a decrease in severe claims from homeowners. “As people spend more time at home, they are catching that large loss before it happens.”

Corey Murphy agreed, noting that, because people are home, they are noticing and taking care of seemingly minor problems like leaky gutters.

“As people spend more time at home, they are catching that large loss before it happens.”

“As people pay more attention to fixing the small issues, they prevent the larger problems from ever happening. A little preventive maintenance goes a long way,” the president of First American Insurance Agency in Chicopee noted.

Most homeowners insurance claims are the result of severe weather incidents. When COVID-19 first hit, winter was ending, and warm weather soon followed. Bill Trudeau, executive vice president and partner at HUB International New England in Agawam, said the mild winter this year has helped keep claims down.

“Other than a couple isolated wind events, the weather has behaved itself, and that means claims have tended to be in line with company projections.”

The pandemic has thrown a few wrinkles into the home-insurance picture this year, however.

For instance, many homeowners were motivated to invest in substantial improvements to their homes. Home construction and improvement contractors point directly to being cooped up in the house as the main motivator for people choosing to make improvements to their property.

What impact does all this renovation work have on the homeowners insurance carried on the house? The answer depends on what improvements are made and what kind of coverage is already in place.

Everyone BusinessWest spoke with agreed that, for small or cosmetic improvements, there is no need to contact an insurance agent. Some larger projects, however, may require altering or increasing a home’s coverage.

“Adding square footage to your home, doing a full remodel, or building a garage would all be reasons to consult your agent to make sure you have enough coverage,” Fleury said.

Even if they are not taking on home improvement projects, Trudeau advises people to call their insurance agent at least every couple of years so they understand the coverage that’s in place and whether they may need additional coverage.

“You can work with your agent to run a cost estimator,” Trudeau said. “It’s a software tool that takes the data from your home, including any upgrades, then shows you the current replacement cost if it was all suddenly gone.”

With the lifestyle changes wrought by the pandemic, it’s more important than ever to make sure the home — and everyone in it — are protected. Here are some key factors to consider.

 

Home Work

While they may not have set foot in the office in months, people who work from home are still protected from on-the-job injuries by workers’ compensation coverage. Office workers tend not to get injured on the job, but the coverage is in place if there is an incident.

“There has never been a distinction between whether employee actions emanate from an office at the company or from an office at the person’s home,” Trudeau said. “Because this coverage is broader in scope, COVID did not force us to make changes to workers’ comp plans.”

Bill Trudeau

Bill Trudeau says claims have been kept in check recently by a mild winter.

It’s not unusual for people working from home to have a computer, monitor, and even a printer that belongs to their employer. Murphy said some jobs may require employees to have additional business assets in the home, so it might be wise to make sure everything is covered. “Most policies will pay a little toward assets being home, but it’s usually a minimal amount.”

With homes serving as business offices and classrooms, more people — and their pets — are home at the same time. According to Trudeau, homeowners’ insurance policies consider any issues with an animal as a “strict liability event,” meaning there is no way to defend the action.

“If someone knocks on your door and your dog bites them, it generally means the insurance company pays the claim,” he explained, adding that, as people acquire more pets, the likelihood of claims increases. Most insurance companies keep a list of dog breeds they will not cover because those breeds have higher incident rates.

“You can work with your agent to run a cost estimator. It’s a software tool that takes the data from your home, including any upgrades, then shows you the current replacement cost if it was all suddenly gone.”

Murphy encourages pet owners to speak with their agent because these restrictions can vary widely among insurers. “Just because one company doesn’t want to cover your breed of dog, check with another company; it’s not a universal list.”

Whether they have pets or not, Fleury advises her clients to carry personal liability coverage, commonly known as an umbrella policy, that supplements both homeowners and auto coverage.

“When we write home and auto policies for a customer, we always recommend buying personal liability coverage as well because it gives you that additional safety net,” she said. A typical umbrella policy costs less than $200 but can provide up to $1 million in additional liability coverage when the limits of homeowners or auto coverage are exceeded.

While dog bites and leaking water pipes are obvious reasons to carry homeowners insurance, it can be much harder to detect a leak when personal data is compromised. A significant increase in identity theft has motivated insurance companies to begin offering identity-theft protection as part of their homeowners policies.

“With everyone at home and increased online activity, it’s more important than ever to safeguard your privacy from someone getting into your system and doing real damage,” Trudeau said.

Apart from identity-theft insurance, he advises everyone to follow best practices such as using multi-factor authentication. For example, when working on an important account online, a code is sent to the user’s personal phone that must be entered to gain access.

Corey Murphy

As people pay attention to small issues in the home, Corey Murphy says, they can prevent larger issues from ever arising.

When fraudsters accesses online bank accounts, they often add a payee into the account. Trudeau advises customers to check with their bank to make sure it uses multi-factor authentication to prevent an outsider from accessing their accounts and to make sure it’s turned on at home.

“If someone has logged into your computer and they don’t have your phone, they can’t get that code,” he said.

Fleury said her agency includes identity-theft coverage in all its homeowners policies. “We feel it is important insurance and recommend at least $5,000 worth of coverage for identity theft.”

 

From a Distance

The pandemic has changed the insurance business in other ways. Typically, when a homeowner files an insurance claim, an adjuster will visit the home and walk through to personally inspect the damage. With COVID-19 concerns, that’s happening much less often.

“In some ways, COVID is moving insurance companies along the digital side of things,” Murphy said. “They are allowing homeowners with a claim to submit photos and even have video calls if the insurer is set up for it.”

The trend toward relying on consumer photos rather than a visit by an adjuster follows what’s been happening on the auto-insurance side for some time.

“If someone knocks on your door and your dog bites them, it generally means the insurance company pays the claim.”

“Many auto insurers have created apps where the person making the claim takes a photo of the damage, uploads it for an adjuster to review, and then the payment is processed,” Fleury said.

The move toward more digital interaction is no surprise to Trudeau.

“Long before COVID, people e-mailed pictures and documents to us,” he said. “Companies have simply accelerated the move to modernization by using many tools they already had.”

Murphy likes to remind customers that every insurance company offers something a little different that their competitors. That’s why it’s important to put some thought into selecting a homeowners insurance policy.

“People need to assess what they have, in terms of their house and what’s in it, and then speak with an agent about what needs to be covered,” he said, adding that it’s about matching a person’s situation with the company that can best provide coverage for their needs — especially at a time when those needs, and demands on the home, are still in flux.

Insurance

Expanding the Footprint

Lussier-Dowd’s new office

Lussier-Dowd’s new office at 181 Park Ave. in West Springfield expands the merged company’s footprint to six locations.

The Dowd Agencies and the J. Raymond Lussier Insurance Agency announced last week they have merged their operations and will be known as Lussier-Dowd Insurance.

The merger and addition of a branch in West Springfield expands Dowd’s footprint to six offices located throughout the Pioneer Valley. The new office, located at 181 Park Ave., is minutes from Routes 5 and 20, and Interstates 91, 291 and 391. An open house will be planned at a later date.

“We’re excited for the Lussier Agency to be part of our team. I have known the Lussier family for many years, and they have always been a highly professional, customer-driven insurance agency,” said John Dowd Jr., president and CEO of the Dowd Agencies. “We are also excited to have a location in the fine town of West Springfield.”

The West Springfield office will be a full-service insurance agency providing personal, commercial, wealth-management, and employee-benefits products and services.

A native of West Springfield, David Griffin Jr., vice president of the Dowd Agencies, said he is excited about his company planting roots in his hometown. “I was born and raised in West Side, so it is particularly exciting for me. More importantly, West Side is a great and vibrant town here in Western Mass.”

The Lussier-Dowd Insurance Agency is open Monday through Friday, from 8 a.m. to 4:30 p.m., and can be reached by calling (413) 737-5359.

A full-service agency, the Dowd Agencies has been helping individuals and businesses in Western Mass. with their personal insurance, commercial insurance, employee benefits, and financial needs for more than 120 years. Established in Holyoke in 1898, the Dowd Agencies is the oldest insurance agency in Massachusetts with operations and management under continuous family ownership.

 

Insurance

Premium Concerns

By Mike Horan

Insurance costs have already been rising — the property and casualty space has seen 11% rate increases annually, on average — due to uncertainty around pandemic losses, catastrophic natural-disaster claims, a lack of capacity in the reinsurance market, low interest rates, and increased size of claims due to social inflation.

Now, just a couple weeks into Joe Biden’s presidency, we are asking ourselves: how will the incoming administration impact businesses like yours, and, consequently, the insurance marketplace and your premiums?

With the inauguration of Biden on Jan. 20, we expect a return to a highly pro-union, pro-workers’-rights administration similar to what we saw under President Obama (and Vice President Biden) from 2009 to 2017. This could very well come with a change of leadership at the Occupational Safety and Health Administration (OSHA). The current acting administrator, Loren Sweatt, has been in the role as an interim since 2017, and experts anticipate a changing of the guard.

“To prepare for the incoming administration and the changes that will accompany it, we encourage you to prioritize your safety practices. OSHA will be examining this much more closely, and so will the insurance companies.”

Most importantly for your business, you can count on a shift back to heavier enforcement of OSHA workplace violations. During his campaign for the presidency, Biden called on OSHA to “double the number of OSHA investigators to enforce the law and existing standards and guidelines.” Based on this, we expect more inspectors visiting businesses to ensure compliance, and heavier fines for infractions. We also anticipate a return to practices such as issuing press releases publicly naming companies that have been fined for workplace-safety violations, in an effort to discourage other businesses from making the same mistakes.

At Webber and Grinnell, we place heavy emphasis on loss control and creating a culture of safety within our clients’ operations. This is not just because we care about doing the right thing and keeping everyone safe (although that is certainly the primary reason). It’s also because we know that insurance companies are scrutinizing safety and losses more than ever due to the aforementioned facts about rising costs in the marketplace. They are rewarding safe companies and penalizing unsafe companies. One of the primary resources they use to make these decisions is OSHA records, so it is absolutely essential that you adhere to OSHA’s policies and guidelines.

To prepare for the incoming administration and the changes that will accompany it, we encourage you to prioritize your safety practices. OSHA will be examining this much more closely, and so will the insurance companies.

You need to be a step ahead by doing everything you can to create a culture of safety. Long-term benefits include fewer injuries, less downtime, lower insurance costs, better employee morale, and a work culture that will attract the best talent.

 

Mike Horan is a business insurance specialist and RiSC consultant at Webber and Grinnell Insurance.

 

Coronavirus Insurance Special Coverage

At a Premium

The story is a familiar one by now: hospitals across the U.S., hammered by COVID-19, began directing resources toward fighting the pandemic last spring and curtailed elective and non-emergency procedures. Meanwhile, patients, even when sick, stayed away from medical practices out of fear of infection.

As a result, health insurers continued to reap premiums while paying out millions of dollars less in medical claims. Some of the largest companies reported second-quarter earnings about double what they were a year ago. Anthem’s net income soared to $2.3 billion for the second quarter, up from $1.1 billion in 2019, while UnitedHealth reported net income of $6.7 billion, compared to $3.4 billion last year. Humana’s second-quarter net income rose from $940 million in 2019 to $1.8 billion in 2020.

But the issue is a complex one, especially in Massachusetts, where laws governing insurance are different, said Keith Ledoux, vice president of Commercial Line of Business, Sales, Marketing, and Business Development for Health New England, a 166,000-member health plan based in Springfield.

For example, HNE did see lower utilization for medical services among its members in the early months of the pandemic; however, at the same time, it saw an increase in prescription-drug fills as members made sure they had their medications during stay-at-home orders.

“On the pharmaceutical side, we saw a small spike in claims and overall costs starting at the end of March and the beginning of April because we had relaxed our rules on allowing folks to fill prescriptions early, or to get a greater supply,” Ledoux told BusinessWest.

Meanwhile, “after April, on the medical side, we saw a significant reduction in claims, but starting in probably June, we started to see that pick back up — almost back to what we would consider to be somewhat normal.”

At the same time, the pandemic brought about a significant increase in telehealth utilization; through April, HNE had processed 114,000 telehealth visits for its members versus 900 in all of 2019, accounting for $12 million in costs for Health New England.

“One reason that’s so costly for us is that we’re mandated by the government to pay the same rate for telehealth as we would for an in-person visit, and typically telehealth is cheaper than in person,” Ledoux said, adding that future state negotiations will likely alter that formula as telemedicine continues to gain traction in healthcare.

“The silver lining is not the cost, but the behavior shift of so many members embracing the idea of telemedicine, which does broaden your ability to access non-invasive care. There’s definitely an opening for systems to adopt a new approach and potentially increase their revenue stream using telemedicine.”

Massachusetts-based Tufts Health Plan reported that COVID-19 treatment costs were one factor in actually recording a drop in net income between the first six months of 2019 to and the six months of June 2020.

Keith Ledoux

Keith Ledoux

“After April, on the medical side, we saw a significant reduction in claims, but starting in probably June, we started to see that pick back up — almost back to what we would consider to be somewhat normal.”

“Tufts Health Plan proudly serves all segments of the market, regardless of a person’s age or life circumstance,” Chief Financial Officer Umesh Kurpad noted in a statement. “This diversity in our business translates into different financial pressures, such as significantly higher COVID-19 infection rates and treatment costs for our members, particularly those who rely on both Medicare and Medicaid.

“Year-to-date, our earnings were challenging, with the increased costs of COVID-19-related expenses across virtually all of our businesses,” he went on, projecting COVID-19 expenses to reach $220 million for the full year. “The pandemic cost tail is anticipated to be long with the lingering impact of COVID-19 survivors and increased morbidity from deferred care.”

In short, there’s no one trend common among health insurers in a year where they, like all industries, have learned to expect the unexpected.

Appointment Viewing

Another Massachusetts-based insurer, Harvard Pilgrim Health Care, reported little change in second-quarter net income from 2019 ($36.2 million) to 2020 ($40.9 million). It also encouraged members not to avoid medical services they need.

“Now more than ever, our focus remains on the health and well-being of our members and the communities we serve,” President and CEO Michael Carson said. “Many people have deferred care over the past several months, and it is incredibly important that they not neglect their health. Healthcare providers have implemented stringent safety precautions, and we encourage our members to seek routine and preventive care, including checkups, health screenings, and vaccinations.”

Ledoux told BusinessWest that HNE typically doesn’t know the performance of a year until probably three or four months after the year has closed.

In its planning for 2021, he explained, the company must consider uncertainties with expenses, which include utilization continuing to pre-COVID levels; increased use of high-cost technology; and costs of new pharmaceuticals, vaccines and testing, as well as increased costs for certain behavioral healthcare for children and adolescents.

Consumers are protected to an extent by state and federal laws that require health plans to rebate customers annually if the percent of premiums spent on medical expenses falls below a certain threshold.

Under the Affordable Care Act, insurers are required to use a fixed percentage of the money they take in from premiums for their customers’ medical expenses — at least 80 cents of every dollar they collect in premiums from small businesses and individuals, and 85 cents per dollar for large employers. The remaining 15% to 20% percent is what they are allowed under the ACA to spend on administrative costs like overhead and marketing, and to keep as profit. Excess revenues are to be returned to consumers in the form of rebates.

“If we perform even 0.1% better than 88%, we have to rebate that excess margin back to the market. In a regular year, our target margin is around 1.9%, which we hardly ever achieve. All these variables make it difficult to make a profit.”

Under Massachusetts’ health-insurance law, that number rises to 88 cents on the dollar. “If we perform even 0.1% better than 88%, we have to rebate that excess margin back to the market,” Ledoux said, adding that, “in a regular year, our target margin is around 1.9%, which we hardly ever achieve. All these variables make it difficult to make a profit.”

Some of those variables emerged this year in the form of concessions to the pandemic and the stress it has placed on families, he noted. “We relaxed a lot of rules on how we collect premiums. Normally it’s a 30-day grace period, and we expanded that another 30 days.” HNE also allowed furloughed employees to stay on their companies’ health plans.

“We continue to evaluate our position in the market,” he added. “There are already protections in place, profits above what would be considered reasonable, and a mandate to rebate that back to the market. We already know it self-corrects on its own.”

Meredith Wise, president of the Employers Assoc. of the NorthEast, told BusinessWest that health-insurance premiums haven’t been a big topic among EANE’s members. “We’ve heard from some employers who are getting refunds, but it hasn’t been a major thing that anyone is focusing on at the moment.”

Nationally, insurers are spending a far lower portion of premium revenue on their customers’ healthcare costs. For example, CVS said its medical-benefits ratio was 70% for the second quarter, compared to 84% over the same period in 2019.

According to a report in the New York Times, the ACA gives companies a three-year window to calculate how much to return, so members probably shouldn’t expect relief anytime soon, especially because it’s hard to tell what the rest of the year will bring, with COVID-19 numbers still fluctuating dramatically from state to state, as well as the impact of potentially expensive new vaccines or treatments around the corner. At the same time, many people who postponed getting medical attention could surge back into doctors’ offices and submit more bills for coverage.

“The second half of the year could see a lot more care, and higher costs, than the first half of 2020,” according to a statement by America’s Health Insurance Plans (AHIP). “However, if these costs never materialize and remain below certain levels, American consumers, businesses, and taxpayers are protected by provisions in federal and state laws that require health-insurance providers to deliver premium rebates and put money back into their pockets.”

Community Focus

In addition to changes in patient volume and the bottom line, the pandemic shifted the priorities of Health New England in other ways, Ledoux said.

For instance, it contributed $300,000 in grants for COVID-19 relief efforts throughout Western Mass. to help residents with access to food, mental healthcare, child care, housing, and basic needs.

The company has also made benefit adjustments that make it easier for members to get the care they need, such as eliminating out-of-pocket costs for all telehealth services and for COVID-19 diagnostic testing ordered by a medical professional, no prior authorizations for members receiving medical care for COVID-19, and flexibility with payment plans and adjusted underwriting guidelines to ease the burden for employer-group customers and members.

Meanwhile, as it approaches Medicare’s annual enrollment season, Health New England is holding online Zoom sessions and drive-up events, and has added staff to its call center, to help educate people about their Medicare options.

“The second half of the year could see a lot more care, and higher costs, than the first half of 2020.”

Tufts has implemented a number of changes as well, including compensating providers 100% of an in-office rate for telehealth, working with providers on a case-by-case basis to address their concerns regarding payment stability, extending premium payment periods for employers who need more time to make payments, and contributing $2 million to support those affected by the coronavirus outbreak in Massachusetts, Rhode Island, New Hampshire, and Connecticut.

Certainly, reports of soaring profits may persuade some lawmakers to revive proposals to cap insurers’ profits even more, but insurers say they are using their financial strength to help customers, hospitals, and doctors. In the New York Times report, AHIP also cited trends like waiving co-payments for COVID testing and treatment and paying for telemedicine visits, some of which the government has mandated be covered.

“From the very beginning,” AHIP CEO Matt Eyles said, “health-insurance providers have focused on being part of the solution.”

Joseph Bednar can be reached at [email protected]

Insurance

Covering All the Bases

By Mark Morris

When COVID-19 became a daily reality in March and working from home became the default for many businesses, Trish Vassallo had to scramble. Of the 26 employees at Encharter Insurance, where Vassallo is director of Operations, only three were set up to work from home.

“Thanks to our tech provider, we were all up and running within a week,” Vassallo said, noting that the system at her office is advanced to the point where calls to the Encharter switchboard are fed through to employee laptops. “When customers call us, they have no idea whether we are in the office or at home. It’s seamless.”

Bill Trudeau, executive vice president and partner at HUB International New England, recalled that, when workimg from home became the norm, his business was about 95% ready to serve clients remotely.

“While our people certainly didn’t plan for a pandemic,” he said, “we were fortunate that our business was designed for our staff to effectively serve clients remotely from home.”

Both Encharter and HUB International have since limited interactions in their offices to only necessary functions and are not yet open to the public. It’s a different situation at Axia Insurance, which offers Registry of Motor Vehicles services in its office.

Michael Long, president and CEO of Axia, explained that, to safely accommodate people using the registry services, a dedicated area at the building entrance was set up to screen people before they come in. While Axia has offered RMV services for several years, it’s seeing an increase in the number of people using it since the pandemic.

“The RMV requires everyone to make an appointment, which can often be scheduled up to two weeks out,” Long said. “At our location, we can take care of people the same day.” Before COVID-19, he added, 30 to 40 people a month would use Axia’s registry service. Long said it now serves that many every week.

Trish Vassallo

Trish Vassallo

“Thanks to our tech provider, we were all up and running within a week. When customers call us, they have no idea whether we are in the office or at home. It’s seamless.”

Because of the registry service, most of Axia’s staff are working in the office. Long said shifts are staggered so that a typical five-day work week means working from home two or three days and in the office for the balance of the week.

For years, staff have been able to work from home when necessary, but Long admits the pandemic adds a layer of difficulty. “Working out schedules that will adapt to everyone’s needs at home and taking care of their families has been a harder challenge than actually maintaining business.”

For this issue’s focus on insurance, BusinessWest spoke with area agencies about how they’re managing to keep the customer experience consistent even as they change how they do business, thanks to a pandemic that continues to challenge all sectors of the economy.

Adjusting Expectations

The agencies BusinessWest spoke with all said their business was steady — if, some cases, only slightly lower due to the pandemic, which has hurt a number of their commercial insurance clients.

For example, several of Encharter’s restaurant customers reduced their insurance coverage because so many of them closed in the early days of the pandemic. With most offering only limited service even now, Vassallo said her agency tried to help its restaurant clients in their time of need.

“When stay-at-home first happened, we went to all of our local restaurateurs and purchased a large amount of gift certificates to try to help them keep going,” she recalled. To get the gift certificates out into the community, Vassallo used them as prizes in weekly and monthly contests Encharter ran on its social-media platforms.

Long said insurance companies are offering deferred billing and special payment plans to help companies that have lost business during the pandemic. One creative approach involves companies that need to take a vehicle off the road. They can now temporarily suspend the vehicle’s insurance coverage instead of ending it.

“In the past, insurance companies would not have agreed to do that,” Long said. “The business would have had to turn in the license plate, and if they suddenly needed the vehicle, they’d have to go through the insurance and registry process all over again.”

Trudeau added that, while some of his clients have been under pressure to reduce staff and sales estimates, others are doing more business. “We have a few businesses that are growing because of changing demands during the pandemic and people shifting their buying habits.”

Not surprisingly, all three agency managers said videoconferencing on Zoom, Skype, and other popular platforms has allowed them to keep in touch with staff and customers.

Because HUB International has 28 locations in New England, Trudeau and his counterparts have been using conference calls and videochats in ways they hadn’t before — a trend he predicts could have a lasting impact.

“Instead of asking people to travel to a central New England location every quarter, they might choose to do that only once a year and have the other three quarterly meetings by videoconference,” he said.

Bill Trudeau

Bill Trudeau says the increased adoption of videoconferencing platforms in his industry could have a lasting impact.

When the pandemic ended the walk-in traffic at Encharter, Vassallo and her staff started to make wellness calls to keep in touch with clients.

“The calls had nothing to do with insurance,” she said. “They were simply a way to contact our customers during the early months of the pandemic to say, ‘we’re just checking in; how are you doing?’” So far, she and her staff have made more than 2,000 calls, and the effort has been well-received. They’ve continued the calls to check in and to remind clients about policy renewals.

As valuable as modern tools are to keeping in touch, certain personal dynamics get lost during a pandemic. In the past, Long would often get together with other managers in Axia’s offices across Massachusetts and Rhode Island, and he has missed doing so since the pandemic.

“We have a culture of being a close-knit organization, and when you are not in contact with people on a regular basis, some of that culture seems to dissipate,” he said. “We use videoconferencing, but it’s not quite the same.”

Trudeau cited another culture challenge resulting from the pandemic: bringing a new employee on board.

“You want to invite someone into the culture of your company, but they can’t be there to experience it,” he said. “Part of a new job is the work, and part of it is walking around, meeting people, and creating the feeling of a social connection with your co-workers.”

Gradual Return

Calling it a “soft approach,” Vassallo is talking with her staff about re-entry to the office. She acknowledges some families need at least one parent at home for schooling reasons, but her greatest concern is that everyone becomes too comfortable staying home.

“Right now we have a re-entry date of mid-November, so we are not rushing this,” she said. “When the time comes, we need to get back because we still need to have a presence in our office.”

As staff from all three agencies return to their respective offices, the spaces are all being reconfigured to follow the current pandemic safety guidelines. Temperature checks, hand sanitizer, and other precautions are all part of the new normal.

Still, according to Long, one thing that doesn’t change is the role of the insurance agent.

“Our job is to protect your potential financial loss as best as we can,” he said, while cautioning against looking at insurance protection as a commodity. “It’s not about getting the cheapest insurance; it’s about getting the most value out of your insurance.”

Helping customers achieve that goal hasn’t been easy this year, but it’s a task that continues at all area insurance agencies — if sometimes a bit differently than before.

Insurance Special Coverage

Sticker Shock

Business-interruption insurance should be a simple idea to explain. But in the era of COVID-19, it has become a thorny topic.

“It is coverage that most businesses have as part of their insurance program; basically, it’s one of the key components to an insurance portfolio for a business,” said John Dowd Jr., president and CEO of the Dowd Agencies. “A covered loss is defined as physical damage to your property or on your property.”

He noted, as one example, a fire that causes a shutdown until repairs are made, with the insurance payout allowing the business owner to pay rent, taxes, and in some cases wages and benefits. “It also covers loss of property, which is a very important coverage.”

But not every event is covered, he noted, and that’s the rub lately among business owners who would like business-interruption insurance to cover losses from the pandemic-related economic shutdown — and lawmakers in several states, including Massachusetts, are pushing to enshrine such losses in the coverage.

“Obviously COVID isn’t covered — the loss that triggers business interruption has to be the result of physical damage to the property,” Dowd reiterated. “The problem with COVID is that’s not physical damage; it’s a virus. It’s specifically excluded, like other transmittable diseases. The way it’s worded, it’s not a coverage situation. As a matter of fact, the insurance industry cannot cover something like that because they can’t estimate the catastrophic potential of such a situation.”

That didn’t stop 39 Massachusetts legislators from co-sponsoring a bill earlier this spring titled “An Act Concerning Business Interruption Insurance,” calling for business-interruption coverage for losses due to “directly or indirectly resulting from the global pandemic known as COVID-19, including all mutated forms of the COVID-19 virus.”

Moreover, the bill asserts, “no insurer in the Commonwealth may deny a claim for the loss of use and occupancy and business interruption on account of COVID-19 being a virus (even if the relevant insurance policy excludes losses resulting from viruses), or there being no physical damage to the property of the insured or to any other relevant property.”

The legislation applies to policies issued to businesses with 150 or fewer full-time employees, and insurance companies can apply to the commissioner of the Division of Insurance for relief and reimbursement of amounts paid on claims through a fund created by the act, subject to eligibility and reimbursement procedures to be established by the commissioner.

John Dowd Jr.

John Dowd Jr.

“The way it’s worded, it’s not a coverage situation. As a matter of fact, the insurance industry cannot cover something like that because they can’t estimate the catastrophic potential of such a situation.”

Such relief would be needed, as Dowd demonstrated with a little math. He noted that, if business-interruption insurance was triggered by COVID-19 for all businesses with fewer than 100 employees, the cost would be between $280 billion and $350 billion — per month. “Our collective surplus of all insurance companies is somewhere between $800 billion and $900 billion. In three months, the industry would be insolvent.”

Having said that, he noted that pandemic coverage is already available — a development that emerged over the past decade following SARS and other global threats. For example, the organization that operates the Wimbledon tennis tournament bought such a policy, which costs more than $1 million a year, but when this year’s event was canceled, the policy paid out $15 million.

Impossible Costs

State legislation is a different matter, of course, aiming to reshape the very nature of business-interruption insurance. New Jersey lawmakers proposed and defeated such a bill this spring, “presumably because they looked into the potential insolvency of insurance carriers,” Dowd said. “And if people can’t buy insurance, what happens to our economy?”

Carl Bloomfield, managing director at the Graham Co., a Philadelphia-based insurance brokerage, recently told Insurance Business America that, while more than a half-dozen states that have proposed this type of legislation, he doesn’t expect the bills to pass.

“Doing it through state legislation would be very detrimental to the country on a go-forward basis from the aspect of overturning centuries of contract law,” he noted. “If you start upsetting the precedent of contract law that’s been established for centuries, that creates a very dangerous environment for all businesses because there’ll be no certainty around something that’s in the contract today, but could be overturned in court.”

If the Massachusetts bill becomes law, constitutional challenges are certain, writes Owen Gallagher, publisher of Agency Checklists, a news source for the Massachusetts insurance industry.

“Carriers would basically take the claims, get documentation that there was actually loss of income or profit, determine if there are covered claims or not, and then the federal government would pay the bill.”

The rewriting of existing insurance contracts, as proposed by this legislation, he notes, would raise constitutional questions under the U.S. Constitution’s contract clause.

“As members of a regulated industry, insurance companies have not fared well in contesting state legislative or regulatory action claiming a constitutional violation of the contracts clause. The United States Supreme Court has upheld laws impairing contracts based on a state promoting public welfare. However, this legislation may be one of the very few laws that fails that minimal test based on its blatant revision of existing insurance contracts for a limited class of insureds.”

The second constitutional challenge arises under the Constitution’s takings clause, which states that private property cannot be taken for public use without just compensation.

“Insurers have had some success contesting laws where a state’s regulatory mandates go too far and amount to a confiscation of property,” Gallagher notes. “In this case, the proposed law creates new obligations that take money from insurance companies and transfers it to small businesses that have suffered economic loss because of state action. It is difficult to see how these insurers would not have had their property taken for a public purpose in violation of the Constitution.”

Dowd sees the U.S. government eventually negotiating a coverage cap for pandemic events much like it did with terrorism in the years following 9/11. “The insurance industry is saying, ‘OK, in the future, we’re willing to participate, but we need a cap, like $250 million, which is the most the insurance industry can absorb for a pandemic, and everything over that, the federal government has to pay.’

“So they’re in the throes of negotiating that,” he said, adding that carrier involvement would likely be voluntary. “That makes sense, as a lot of the smaller mutual insurance companies don’t have nearly the surplus that the Travelers and Liberty Mutuals have. But a lot has to be sorted out.”

A Better Plan?

Dowd, who serves on the board of the Massachusetts Assoc. of Insurance Agents, said that organization backs an idea that would cast insurers in more of a support role to the government on pandemic claims as they relate to business interruption.

“Carriers would basically take the claims, get documentation that there was actually loss of income or profit, determine if there are covered claims or not, and then the federal government would pay the bill,” he explained. “We think that’s a good idea, rather than throw out stimulus money to companies that may not need it, that may not experience a loss of income. Instead, we’d have people file, have their experience validated, and get paid based on need — not an assumption that every small business needs it.”

Such a plan is being considered in the fifth stimulus bill being kicked around in Congress, he added, which makes more sense than forcing insurers to cover for losses they never considered.

“We just don’t have the financial wherewithal to pay that financial bill. We’d be out of business,” Dowd said. “But if we can offer services at an agency level and carrier level, review the claims, and validate the claims, we think that has some merit.”

Joseph Bednar can be reached at [email protected]

Insurance

Deepening Its Roots

Timm Marini, president of Personal Lines

When FieldEddy Insurance entered the HUB International family a little over five years ago, it traded a name with a rich regional history for one backed by the resources of a large corporation. The result has been the best of both worlds — HUB’s clout improves the office’s ability to grow specific niches through talent development, while the company is still able to focus on local needs with an emphasis on building deeper relationships with customers.

The insurance company known as FieldEddy had more than 160 years of history and a still-growing geographic footprint in Western Mass. when it became part of the HUB International family in 2014.

It’s a move that simply made sense at the time, Timm Marini said, and he feels even more strongly about that five years later.

“It’s such a natural fit for us,” said Marini, president of Personal Lines at HUB International New England in East Longmeadow. “There’s a cultural mesh in that our focus and HUB’s focus has always been in delighting the customer.”

Several years ago, FieldEddy employees were tasked with coming up with tools and resources they needed to better ‘delight’ those customers, Marini recalled. “We got to about seven of them and looked at each other and said, ‘we’re going to go bankrupt trying to buy all this and do all this on our own.’ So we plugged into HUB, and that’s when we really became the market leader.”

While FieldEddy had grown dramatically through acquisition over the previous two decades, under the HUB name, the company took a more organic approach, Marini told BusinessWest, adding talent in specific growth areas, from cybersecurity to healthcare (in the wake of health-insurance reform in the Bay State, followed by the Affordable Care Act nationally).

But last year, it was back on the acquisition trail, purchasing the Insurance Center of New England in Agawam — a move, Marini said, that represented the same sort of ‘cultural mesh’ that FieldEddy and HUB did five years ago.

“They had some great talent on their team and a couple of niche markets that made sense for us,” he said. “We’re not just buying to get big. We’re buying to get better. If we can buy an organization or invest in an organization that helps us get better, that’s what HUB’s acquisition strategy country-wide is.”

“When there’s a catastropic event — a hurricane, a tornado — HUB is ready, and we’re communicating to our customers, we’re communicating to the marketplace, and we’re giving them better data than what you’d receive in the news. We’re getting ready for the event.”

The company undergoes a due-diligence process before making an offer, he explained, one that involves three questions. “Number one, is it a good fit? Number two, are they bringing something to the party to make us better? And number three, can we make it grow?

“This was a great cultural fit, with really educated people — just good, solid folks. That first piece of it was a home run,” Marini went on. “Then, they have talent that we didn’t have, and we’re getting that talent. HUB wants to bring levels of expertise and be able to delight our customers differently. We want different people on our teams, different resources available to us, that will help our customers.”

For this issue’s focus on insurance, Marini talked about how HUB continues to expand both its reach and its knowledge base in numerous ways.

Hub of Activity

HUB itself has been around only since 1998, with its first operations in Canada and Chicago. Its first acquisition after that was CJ McCarthy Insurance Agency in Wilmington, Mass. in 2000. It picked up FieldEddy 14 years later.

Today, Marini said, HUB is the largest independently owned agency in New England, the largest personal-lines agency in the country, and the fifth-largest agency in the U.S. overall. So, while the firm operates autonomously with local decision making, it does so with plenty of clout behind it.

“A lot of our talent investments, we could never do on our own,” he said, citing growth in areas like risk services and loss control, claims advocacy, and underwriters who specialize in specific niches.

Legalization of marijuana is one example. “We’ve made pretty significant investments in educating our brokers across the country and making sure we can handle the unique needs of that industry.”

As another example, “on the health side, we’re asking, ‘what do we need to do better for the customer?’ We’ve invested in health and wellness folks, people who can help mitigate exposures and help us all be healthier … we’ve invested in actuaries, underwriters, data-analytics experts, just to help carve out the information and make sure the pricing we receive from insurance carriers is the right one for our customers.”

“I believe we’ve tried to move away from just the transactional side of things. Price is important, coverage is more important, but most important is being that advocate — not just when the negative or adverse thing happens, but being there through the process, through the life of the product that you’re talking about. It’s not just the transaction.”

And in times of emergency, HUB brings more to the table than insurance, he added.

“When there’s a catastropic event — a hurricane, a tornado — HUB is ready, and we’re communicating to our customers, we’re communicating to the marketplace, and we’re giving them better data than what you’d receive in the news. We’re getting ready for the event.”

When a hurricane devastated Bermuda last year, he noted, “we had $10 million homeowner customers on the island. And when that happened, we had barges filled with emergency-care stuff out there. HUB coordinated it — paid for by us, by our carrier partners — and it had nothing to do with insurance, just to do with taking care of people.

“Again, as a small independent, we didn’t have the resources to do that,” he went on. “That’s really cool. To be able to communicate that and see it in action, it puts me to bed thinking we made the right decision five years ago.”

In general, Marini said, being part of a large national company is a healthy balance between local autonomy and broader resources.

“The budget is more regional and filters across, but my team is plugged into the process. We have growth initiatives and retention initiatives — again, focused on delighting the customer,” he told BusinessWest. “We say, ‘grow well, grow big, but don’t just be big — be great at what you do.’ And the greatness comes from our customer feedback.”

Knowledge Is Power

HUB International New England has also bolstered its educational outreach in recent years. For example, it recently sponsored a seminar with about 350 business customers about the new employee leave laws in Massachusetts, featuring Bill Alpine, director of the Commonwealth’s Department of Family and Medical Leave, and two attorneys.

“That whole educational process takes a real investment in your people, in your talent. And that’s one of the benefits of HUB,” he said, adding that the company offers a ‘HUB University’ program in Chicago, where employees are trained in specific industries and niches to be better able to serve certain types of customers.

“It could be as simple as one individual or one family that owns one home, or a high-net-worth individual with millions of dollars of assets, all the way to the largest corporations in the world,” he said. “We educate each one of those folks and determine their needs through an assessment, a conversation. It’s not just selling them a product, it’s really finding a solution — and having them understand up front what they’re buying.”

All insurance, after all, is assessing risk and deciding how to mitigate and cover it, he went on. Someone in a flood zone might decide, based on not having a flood in the past 100 years, that they’re OK with not covering that, but at least they’ve had the conversation.

“It’s an educated buying decision based on some expertise we bring to the table. It’s not just trying to sell a policy,” Marini said. “And how do you get there? We have to educate our employees, and they educate our customers. It’s a shared conversation, not a unilateral conversation.”

HUB takes part in national summits with industry experts as well, talking about hot trends and digging into coverage details, such as how to protect, say, someone’s vast wine collection from California wildfires. That’s a first-world problem to be sure, he noted, but if it’s something of value to the customer, then it’s important to HUB.

“Each person has specific things that are special to them,” he told BusinessWest. “Our responsibility is to find the right levels of protection for them.”

That involves forging relationships, he added.

“I think about some of the partnerships I have personally. The same guy has made my suits for 28 years. The same guy cut my hair for 34 years. Those are personal relationships — yes, they provide a service, and insurance is a service — but they’re real, personal relationships that bring different conversations than you have with your friends and your other acquaintances.

“I believe we’ve tried to move away from just the transactional side of things,” he continued. “Price is important, coverage is more important, but most important is being that advocate — not just when the negative or adverse thing happens, but being there through the process, through the life of the product that you’re talking about. It’s not just the transaction.”

Community Ties

Marini says HUB International New England has long maintained relationships of another kind as well — with the nonprofits and community organizations it supports with money, time, energy, and expertise.

“I still sit on six nonprofit organizations. It’s all about giving back to the community,” he said, adding that employees are encouraged to get involved as well, even if it overlaps with work time. “We encourage that; we don’t count it against their time. It’s good for our organization. We want to be in the community, frankly. It’s what we are. And HUB is the exact same way. It’s an expected part of the culture.

“We encourage everyone in the organization to be involved. It’s rewarded, not penalized,” he went on. “After all, this is a people business. We earn a lot of money, and we invest a lot of money. That’s something I’m proud of.”

 

Joseph Bednar can be reached at [email protected]

Insurance

Beyond the Bottom Line

If a customer wants insufficient coverage, Mark Lussier says, he or she should at least have a conversation about it and understand the risk.

Mark Lussier tells the story of a newly licensed driver backing out of her driveway in South Hadley who didn’t see the 85-year-old walking along the sidewalk. They met, and he fractured his hip and was in rehab for six months.

“Fortunately, the lawyers weren’t bloodthirsty, and they settled for the policy limit for bodily injury,” said the co-owner of Lussier Insurance in West Springfield, noting that, too often, lawyers aim for the maximum award, putting the defendant’s house and savings at risk.

Yet, “in its infinite wisdom, the Commonwealth of Massachusetts has determined that $20,000 of bodily-injury coverage is all you need to be legal,” he told BusinessWest.

Then there’s property-damage coverage on auto-insurance policies, which has a minimum requirement of $5,000. “I had a case not too long ago where someone hit a hydrant and a parked car, and then a porch. I’m guessing $5,000 wasn’t enough to pay for all that stuff. But it’s interesting to see how many people have only $5,000 for property damage.”

Many bare-bones policies come from the direct writers like Geico and Progressive that saturate the airwaves with ads focused only on premium price. But, in reality, insurance 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 12 years — 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.

“So many people are gathering information online without talking to the agent to explain the coverage, so they don’t understand at all what they’re purchasing. It’s the same old story,” said Trish Vassallo, director of Operations at Encharter Insurance in Amherst.

And, while $5,000 won’t cover the cost of a telephone pole or guardrail, injuring a person with one’s car and being undercovered is usually far worse, she explained. But that doesn’t have to be the case, as the premium difference between $100,000 and $250,000 in coverage can be as low as $10 per year — well worth the peace of mind.

Trish Vassallo

“I don’t think there’s an agent in Massachusetts who doesn’t welcome clients calling and talking to them. We like getting away from billing questions and talking about the nuts and bolts of insurance. It’s what we live for — sharing knowledge. It’s so important to make sure you understand everything you’re getting. You don’t want to learn about it after a loss.”

“That’s what we explain to them. Accidents happen, and if a building is hit, $250,000 might not be enough, but it certainly gets you closer,” she said, adding that, if a pedestrian is hit and successfully sues, $100,000 isn’t going to cover the costs.

Auto insurance, like all personal lines, is all about understanding risks and making an educated decision on what one’s comfort level is, she said — and not just settling for the lowest bottom-line price.

Bundle of Options

Under managed competition, carriers have been able to offer individualized add-ons and rider endorsements, from accident forgiveness to gap coverages to good-student discounts, and local agents say it’s important to have a conversation to get the best price for the coverage that’s actually sufficient.

“Today’s market is all about packaging and bundling insurance, and when you shop just one product, you sell yourself short in the money game,” Vassallo said.

To that end, she said, picking up the phone and talking to an agent is far superior to pressing a few buttons online.

“It’s about educating yourself, and I don’t think there’s an agent in Massachusetts who doesn’t welcome clients calling and talking to them. We like getting away from billing questions and talking about the nuts and bolts of insurance. It’s what we live for — sharing knowledge. It’s so important to make sure you understand everything you’re getting. You don’t want to learn about it after a loss.”

Part of that education, Lussier added, is understanding what’s most important to insure.

“Why buy auto insurance? In the consumer’s mind, it’s to protect the car; that’s the thing they care about,” he said. “I was the same way when I was a brand-new driver. ‘Give me what I need, whatever’ — until you have a claim. One thing I hear is, ‘I thought I had coverage for that.’”

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 incentives, such as bundling auto and home insurance when both policies are bought from the same carrier, offering multi-car discounts or AAA membership credits, or using disappearing deductibles to reward drivers for not having accidents over a long period of time.

Then there are away-from-home discounts for college students who are on their parents’ policies, yet spend much of the year away from home without access to the family car.

“A newly licensed driver can add $800 to $3,000 to a premium, depending on whether they have their own car or not,” Lussier said. “A good-student discount can take some bite off that, and then you can get a discount while they’re away at school. Some companies require you to be at least 100 miles away to give you the discount, some only 25.”

What parents should not do in that situation, Vassallo said, is take their child off the policy completely to save some money.

“You don’t want to do that — God forbid he gets in his roommate’s car and gets into an accident, and the roommate has minimal [coverage] limits, and now the family is looking at potential harm to their assets. Companies can give discounts for students who go off to college, but you should keep them on the policy. Even though they’re not a regular driver anymore, it still provides protection.”

Limited Thinking

One rule of thumb when it comes to liability and coverage, Lussier said, is to ask, ‘how much am I worth?’

“If I’ve got a house, a savings account, a 401(k), I have to protect that with bodily-injury [coverage], then $20,000 isn’t going to be good enough,” he told BusinessWest, noting that, often, the difference between coverage levels doesn’t translate to all that much in the annual premium. For instance, he asked, what if the difference between $100,000 and $300,000 is just $80 per year?

“Do you want to take a risk for 80 bucks a year? When an accident happens, we want to know that we had the discussion and that you’re OK with understanding the risk after considering your driving habits and where you drive and what you have to protect,” he explained. “You’re saving 80 bucks to have crappy limits. We can keep your crappy limits, but we want you to tell us that’s what you want.”

Joseph Bednar can be reached at [email protected]

Insurance

Co-owners Anna Holhut and Glenn Allan.

That’s What the Nathan Agencies Have Been in Since 1969

The various names can be confusing at first, but make no mistake, the two divisions that make up the Nathan Agences — Amherst Insurance Agency and Amherst Financial Services — are all about making things clear, whether it’s choosing the right property coverage, exploring the various life-insurance options, or figuring out a strategy to carve out a secure retirement. The three principals say they’re just continuing Ron Nathan’s legacy of creating a one-stop shop to bring peace of mind to all stages of life.

Anna Holhut recalls a family with an insurance claim — no, actually, a family with a life-changing crisis.

“They had a fire, and they had nothing, and I had a check for $25,000 the next morning on my desk so they could go buy shoes and socks — and coats, because it was in the winter. They lost everything. Even if you could put a huge amount on a credit card or have reserves, it’s still huge.”

Or the man who, several years ago, had just lost his mother, so he was already in poor spirits when he came home around 9:30 p.m. to a flooded house due to burst pipes. “That night, we had people out there helping him,” Holhut, president of Amherst Insurance Agency, told BusinessWest. “He was overwhelmed, and he was saying, ‘thank you so much.’ But we want to be there, to try to put things in place to help our clients.”

Part of that process, she noted, is teaming with quality companies, from the insurers themselves to home-restoration firms, attorneys, and anyone else who needs to be part of the insurance process, both when the policy is written and when — often sadly — that coverage comes into play.

“We’ve obviously been here a long time and have the networking to get in touch with people in order to help people, and I love to do that,” she said. “That’s what I strive for.”

Glenn Allan, who co-owns the company with Holhut and serves as its vice president, agreed. “Everybody’s going to say, ‘we provide great service,’ but saying it and doing it are two different things. It’s easy to say, harder to do.”

The Nathan Agencies have been striving to meet that standard since Ron Nathan launched the firm — then known as the Nathan Agency and focusing on life insurance and investment products — in 1969. Now celebrating its 50th anniversary, the enterprise actually encompasses two distinct businesses under one roof: Amherst Insurance Agency and Amherst Financial Services, the latter owned by financial advisor Christian Sulmasy.

Christian Sulmasy says he brings a “comprehensive approach” to his work in financial services.

Sulmasy’s clients run the gamut from young people seeking a basic life-insurance policy or a 401(k), just getting used to saving and financial planning, to people in their 50s deciding where to focus their investment energies and discussing long-term-care insurance, to people in retirement protecting their assets.

“What I’m trying to bring to the table is a more comprehensive approach,” Sulmasy said. “When Ron set this all up, he wanted it to be a one-stop shop, so when a client comes in, it’s ‘let us help you with your retirement, your life insurance, insuring your house.’ It’s more than just, ‘let’s roll over your IRA, and let me manage your IRA.’ Now, we’re doing things like retirement projections. Are you on track? Are you not on track? And what strategies do we employ? That’s what I bring to the table, that comprehensive approach.”

In short, these two businesses under the Nathan Agencies umbrella comprise a lifetime of services for clients of all ages who are looking to the future and wondering how to make it a secure and successful one.

Continuum of Care

When Nathan opened his doors in 1969, Sulmasy said, “he created quite a practice. At one time, he sold a lot of life insurance. He did financial services. He also had property and casualty insurance, all under the Nathan Agencies umbrella. And he even had a real-estate arm at one point, which doesn’t exist anymore.”

In 1979, Nathan purchased the Amherst Insurance and Real Estate Agencies and changed his company’s name to the Nathan Agencies. These days, Amherst Insurance Agency offers property and casualty products, and the Amherst Financial Services Agency provides life insurance, health insurance, and financial-services products through Lincoln Investment.

As Nathan approached retirement, he forged a succession plan to allow the business to continue. In 2012, he sold Amherst Insurance Agency to Holhut and Allan, who had joined the firm in 1987 and 1991, respectively. Sulmasy came on board in 2014 and struck a deal to purchase Amherst Financial Services in 2017.

Holhut and Allan mainly serve individual clients, though a growing commercial-lines practice serves a range of companies, with niches including the home daycare market. “Those are people a lot of companies have difficulty insuring or don’t want to insure,” Allan said. “We’re more of a personal-lines agency than a commercial-lines agency, although we’re trying to grow the commercial aspect of the business.”

No matter the client, Holhut said, customer service is a particular point of emphasis. “I would say we run our business like a family business even though we’re not related. It’s the customer service to our clients; we really strive to go the extra mile for our clients. We have receptionists answering the phone when you call. It’s a very friendly, upbeat staff.”

Allan agreed. “We try to ensure that, when people are left messages, they respond in a timely manner. That’s the biggest complaint we hear from people coming from other agencies — ‘oh, they never got back to me.’ We never want to hear that about our staff.”

Technology has driven plenty of change in the insurance world; Holhut and Allen have both been around to witness the total changeover from paper files to electronic ones, and how that has affected speed of communication and response times between agents and customers — not to mention the ability to respond to a need from anywhere.

“Heaven forbid we had a tornado or hurricane and we couldn’t be here. I always want to be able to set up somewhere we can help our clients. And we can put things into play to do that,” Holhut said. “Because that’s when you need somebody — when something bad happens.”

Again, it’s that message of relationships and personal service, which she said customers can’t get from direct insurance writers on the internet.

“We look at people’s policies, and we’re astonished at the limits. When something happens, they find out they have only $5,000 worth of property-damage coverage and they did $25,000 in damage. There aren’t many cars out there worth only $5,000. So it’s a matter of educating them,” she said. “When people are purchasing something online, they’re just pushing buttons, and they’re just going for the lowest price, and the lowest price isn’t always the best. Maybe you get it cheaper, but you don’t have the coverage you need when something happens.”

Or, as Allan put it, “are you buying a price, or are you buying the coverage you need?”

Education is a big part of Sulmasy’s job, too, whether it’s helping small businesses navigate health-insurance offerings or explaining to individual clients what goes into hybrid life-insurance policies, which offer both a health benefit and help paying for long-term care. Or, of course, teaching people why it’s never too early to plan for retirement.

“People are becoming more wise to it, but for every client that wants to move forward, there are two or three who need a push,” he told BusinessWest. “It doesn’t have to be a full estate plan — it could be basic things like a will, healthcare proxy, or power of attorney. At the very least, getting those in place is important.

“Everybody’s different,” he went on. “Some people kick the can down the road: ‘I’ll deal with it next year.’ With them, my role would be to motivate them or push them in the direction to do what’s in their best interest. I can’t make them do it. I’m not an attorney — I can’t draft up a will for them. But we have some relations with estate planners in the area, and where appropriate, I try to at least let them know these are people I’ve done business in the past and have a comfort level with, and if they want to pursue it, I can certainly help them with that.”

Cradle to Grave

Holhut said her division of the Nathan Agencies also has strong rapport with the attorneys and realtors it works with. “We have the reputation of getting the paperwork to them correct and on time. They don’t want headaches. They don’t want to hold up a closing. It’s important. And we stand behind our reputation.”

Meanwhile, an active blog on the agency’s website educates the public on how to mitigate risk with seasonally placed articles on topics ranging from ice dams to kids going away to college.

The two sides of the Nathan Agencies often refer customers to one another, recognizing that, together, they can help people through numerous stages of life, which is something Ron Nathan always prioritized. “A lot of people say they do it,” Allan said, “but we can actually do it.”

Sulmasy, for one, enjoys the aspect of his job that helps people find security and peace of mind.

“I used to be in the corporate world, struggling to find my social footprint on this earth,” he said, adding that he wanted to make a greater impact on society. But it was a failing economy that gave him the kick he needed.

“I was laid off from my last corporate gig in 2008, when the market was plummeting,” he said. “But I was able to figure out what I want to do for the rest of my life. I made the jump into financial planning, where I could still rely on my financial skill set I’d accumulated, but, at the same time, help people in a more meaningful way than I was in the corporate world. And that’s been totally gratifying for me.

“That’s why I got into the industry — I wanted to help people,” he added. “I believe this is a relationship business. I feel like the relationship is equally important as the financial advice and guidance I and my team provide. Knowing it’s about relationships and knowing I’m trying to help people, it’s been a great fit, and I haven’t looked back.”

Holhut looks back, in some ways — like when she finds she has served multiple generations of a family.

“We watch the kids grow up, then they have kids, then the kids are driving … it’s crazy,” she said. “I enjoy that. I’ve always said I love what I do, because I love the people.” u

Joseph Bednar can be reached at [email protected]

Insurance

Take These Measures to Protect Against Common Threats

Privacy and security are two growing areas for small-business owners. Most businesses have at least some digital presence. Keeping your own data and the information provided by customers safe is crucial. Verizon recently reported there were 53,000 data incidents in 2018, including 2,216 confirmed data breaches. As a small-business owner, here are some measures you can take to help protect your company from these threats.

Install Anti-malware Software

Anti-malware software is designed to prevent various types of online attacks on your computer. Malware is a general term for a program that can harm your device. It could be a virus, phishing sites, ransomware, spyware, etc. Having this type of software in place is one of the most basic, yet very effective, ways to protect your business from digital threats. If you have more than one computer or device, you should get anti-malware software for all of them.

Update Your Software

Updating your existing software is another easy but effective measure you can take. When a software has an update, it can provide additional protection from malware. Sometimes, software might release a new patch. If a new patch is available, make sure to perform the update. It’s a good idea to turn on automatic updates so you don’t have to worry about manually updating all of your software.

Install a Firewall

A firewall helps block out connections that are unauthorized or harmful. Some computer systems may have a basic firewall, but consider getting a more substantial one for your business platforms. A more robust firewall can help protect your business from potential hazards.

Encrypt Data

Encrypting data just means no one can access your data without a password or other form of authorization. It’s another layer of defense if your computer gets hacked or someone tries to access it without your knowledge. Different encryption software options are available for your business to choose from.

Back Up Your Data

Backing up your data is essential if you encounter a cybersecurity threat. If something happens, you will be able to restore all your data quickly. Make sure your backed-up data is located somewhere outside of your computer. If your computer is compromised, at least then you will have a copy somewhere safe. You can back up your data on a physical storage device, or in the cloud. You can also go through a storage device company.

Train Your Employees

Sometimes a cybersecurity threat occurs when an employee makes a mistake. Informing your employees about best practices — such as educating them on what phishing e-mails look like and how to use different security measures your company employs — can help keep your business safe. Having an educational meeting or seminar can make a difference in the world of digital threats.

Hire a Professional

Hiring a professional to visit and assess your cybersecurity efforts can help reinforce your company’s defense. They can help you set up the types of protection your business may need. It’s never a bad idea to consult a professional, since they have expertise in the field.

Get Cyber Insurance

Because of the growing threat of data breaches, you may want to consider getting cyber insurance. This coverage helps protect your business in event of a data breach, loss of sensitive or personal data, and the legal matters that go along with information loss.

Bottom Line

Hopefully, all the methods mentioned above will prevent any data loss, but sometimes things happen that are out of your control. Talk to your insurance agent about cyber insurance and how it can help protect your business. u

This article first appeared on the blog of Encharter Insurance in Amherst; Visit www.encharter.com.

Insurance

Protect and Serve

Phillips Insurance team members, from left, Christopher McMaster,  Chrystal Greenleaf, Joe Phillips, and Christopher Rivers.

Phillips Insurance team members, from left, Christopher McMaster, Chrystal Greenleaf, Joe Phillips, and Christopher Rivers.

In the 66 years since Joe Phillips’ father opened the business that bears the family’s name, the insurance industry has undergone plenty of change, both in the range of risks faced by individual and business clients and in the products available to lower those risks and protect key assets. But the way the agency does business has changed as well, reflecting a modern approach to technology, mobility, and employee flexibility. The result has been high retention of both team members and clients — and consistent growth.

The insurance world has changed significantly in the 22 years since Joseph Phillips took the reins at Phillips Insurance Inc. — not to mention the 66 years since his father hung out a shingle in Chicopee.

But some changes at his agency don’t have as much to with insurance itself as they do with the way today’s employees — especially younger ones — want to work.

“We try to be as flexible as possible in this changing work environment,” Phillips said, noting that four employees work from home — actually, they kind of have to, living in Montana, Florida, Delaware, and right around the corner, relatively speaking, in Boston. “And we try to be as flexible as possible. Our office is open from 6 to 5 every day, so everybody picks eight hours within that timeframe to work. Some people come in at 6 and leave at 2. It works out, especially for some of the new parents whose spouses work.”

It adds up to a high employee-retention rate; four of Phillips’ 28 staffers have been there for more than 20 years, and 10 have been around more than a decade.

“You need to think about employee retention,” he said. “The average person has seven to nine jobs in their lifetime. If our average employee had seven to nine jobs in their lifetime, our retention would kill us. And our customers want to come in and see the same face, talk to the same person on the phone.”

“Everyone has become so fast-paced right now — people want something sent over, and you’re e-mailing and texting clients 24/7. And you have to, because it’s just as fast on their side as well.”

That’s why insurance agencies, like businesses of all kinds, need to compete for talent, he said — not just up front, but once they’re on board.

“Interviews used to be pretty one-way, and now — and I think it’s healthy — it’s a two-way interview, so when I bring in a new prospect for employment, they’re interviewing me as well. We sell them on the benefits we’re providing — retirement plan, health insurance, flexible work hours.”

It’s an office that’s set up for flexibility, he said — not just for flex time and maternity leave, but when a snowstorm strikes, or a major accident clogs up the Mass Pike, workers are set up through agency-automation technology to work from anywhere. That means no slowdowns at a time when clients demand speed and efficiency like never before.

“Everyone has become so fast-paced right now — people want something sent over, and you’re e-mailing and texting clients 24/7. And you have to, because it’s just as fast on their side as well,” Phillips said. “There are no more days off, which is good and bad, I guess. Companies don’t start their workday at 9 o’clock anymore. If they are, they’re far behind the curve.”

The agency’s headquarters in downtown Chicopee will soon expand for the fourth time in the past 20 years, a testament to its consistent growth.

The agency’s headquarters in downtown Chicopee will soon expand for the fourth time in the past 20 years, a testament to its consistent growth.

All this modernization and flexibility makes a difference, Phillips said, noting that clients appreciate stability — the agency boasts a 98% client-retention rate — and the staff has increased from 17 employees in 2014 to 28 today. Some of that growth has been internal, with three people who started as receptionists moving up to broader duties.

In short, Phillips Insurance is keeping up with the times, its president said, and growing all the more for it.

Family Business

Phillips’ father entered the insurance business in 1953, purchasing the William J. Fuller Agency, which was founded in 1892, and changing the name. The younger Phillips came on board in 1996 and took over the business when his father died unexpectedly a year later. At the time, the staff totaled three people, and two of them — Joe Phillips and Jeanne Jones — are still there.

Growth has necessitated some physical changes. This fall, the agency will undergo a 2,500-square-foot addition on the back of the building — its fourth addition in 20 years — and it also bought the former Masonic temple next door and will be tearing it down to build a 30-car parking garage.

The growing clientele is dominated by commercial lines, which account for 80% of total premiums. Much of that business is surety bonds for construction-related risk, mostly in Western Mass., but a good percentage east of Worcester, where the construction market is particularly active, and some out of state.

“MGM has really helped — we had 10 clients working down there, from a $20 million site package to the $6 million masonry package,” Phillips explained, adding that the Five Colleges have been doing a lot of building in recent years as well, providing further growth opportunities.

Another change has been the rise of captive insurance, he said. “That’s a little different. Our clients actually get together with a group of other like-industry-group businesses, and they form their own insurance company. They become the profit center. Instead of spending $500,000 a year to a major national carrier and that carrier making hundreds of thousands of dollars off you, you can make money off yourself. It’s becoming more and more common; it’s a growing section of the market.”

Phillips has also grown its employee-benefits department quite a bit over the past five years, while its personal lines — including home, auto, boat, ATV, and personal umbrella — are growing well, with the agency licensed with 20 insurance carriers, including some of the largest players, like Safeco (a member of Liberty Mutual), Arbella, Safety, and Preferred Mutual.

Still, “we specialize in complex risk — a lot of construction solar, recycling … a lot of tougher industries,” Phillips stressed. “It’s a diverse group of businesses, from Northern Tree Service, one of the largest tree-cutting companies in the country, to the Student Prince restaurant in Springfield.

“We’re an industry-specialization agency — construction, hospitality, manufacturing — so we align ourselves with the insurance carriers that want to ensure those types of businesses,” he added. “We have very good relationships with our insurance carriers. We’re one of the largest writers for Liberty Mutual in New England, and other household names have been great partners.”

Current Events

The modern approach to doing business spills over into Phillips’ online presence, which includes Instagram, LinkedIn, and a revamped website with an active blog that aims to educate clients — and hopefully future clients — on various aspects of insurance and risk; recent articles cover boating safety, lowering one’s carbon footprint, and home-security technology. Meanwhile, the agency has won awards from the Republican’s Reader Raves program four years running.

Meanwhile, the agency’s charitable efforts include sending about 15 employees annually to prepare Thanksgiving meals at the Knights of Columbus, as well as donating to efforts like the Joseph D. Freedman Bowl-a-thon to benefit Camphill Village, Berkshire Hills Music Academy in South Hadley, and Link to Libraries.

The latter is an example of civic involvement that goes beyond donations, Phillips said. “We’ve got about six people now going to elementary schools in Chicopee. We donate a few hundred books a year, and a different person goes over and reads every month. It’s great for morale. Everybody loves to do it. And it’s an opportunity to get out of the office.

In fact, he said, there’s a bit of a reading backlog because the volunteer readers don’t want to stop doing it. “We gently nudge them aside to give everyone an opportunity.”

Another hands-on activity is the bowl-a-thon, which Phillips has been involved in for eight years, sending 15 to 20 bowlers to participate and raising $85,000 last year alone.

“We want people to feel good about where they work and what we do for the community, and there are certainly plenty of worthwhile causes out there,” Phillips said. “It’s tough to pick — there are only so many hours in the day and so much money to go around. You have to pick a few and really make a commitment to it. Something like Link to Libraries is really hands-on and gets everyone involved, rather than just writing a check.”

In a way, those community-engagement efforts aren’t much different than the insurance business itself. In both cases, the goal is to solve problems and make people’s lives a little more secure.

Joe Phillips says the agency has built a strong reputation for taking on complex risk, much of it surety bonds for construction projects.

Joe Phillips says the agency has built a strong reputation for taking on complex risk, much of it surety bonds for construction projects.

“With the personal lines, we’re protecting someone’s most valuable assets,” he said, adding that they also help families deal with the cost and stress of milestones like, say, adding youthful operators to an auto policy.

“On the commercial side, we’re also solving problems,” he went on. “We’re coming in and working as a trusted advisor, much like they’d work with their CPA or their attorney. We identify risk exposures that maybe they hadn’t really reflected on in the past that they should have — assets that are at risk. We try to work with them to develop the most comprehensive package for their insurance, whether it’s a utilizing captive insurance or using higher deductibles to save on premiums and maybe absorb some of the risk on smaller losses.”

It’s gratifying, Phillips added, to come to work every day knowing this work — and what the agency does outside the office — makes a difference in the region.

“We try to be out there in the community through business networking, charitable networking, and, of course, just trying to do the best job for our clients,” he said. “That’s the best referral — our existing clients.”

Joseph Bednar can be reached at [email protected]

Insurance

Shelter from the Storm

In the insurance world, an umbrella policy is exactly what it sounds like, sitting atop home, auto, and business insurance coverage and providing excess protection against liability risks. What is less clear, area insurance experts say, is why more people don’t avail themselves of this relatively inexpensive vehicle. After all, life’s storms can strike at any time, and when they do, no one wants to be totally exposed.

Even the best intentions can’t always fend off an expensive lawsuit, said John Dowd, president and CEO of the Dowd Agencies in Holyoke. Take a field trip, for example.

“If you or your spouse has volunteered to chaperone your kid’s school field trip to an amusement park, you both can be held legally responsible for anything that goes wrong on the trip,” he explained. “If a child under your care is injured during the excursion, that child’s parents might try to sue you for damages.”

Which could wind up being a trickier situation than simply loading that child into one’s own car and crashing it — because the driver’s auto-insurance policy covers bodily injury. But what about situations like that field trip — what policy covers that?

It’s just one example, Dowd said, of why an umbrella policy is a good idea for most people. “A personal umbrella policy can provide coverage for such potential incidents, allowing you to chaperone a trip without worrying about potential financial risks.”

An umbrella policy — sometimes referred to as ‘family insurance,’ he noted — essentially sits atop existing auto and homeowners policies to deliver an additional layer of protection, especially against catastrophic liability loss.

“I would like to see anybody who has any net worth — say, more than $100,000, which would include most homeowners these days — to have a personal umbrella,” said Mark Lussier, who co-owns Lussier Insurance in West Springfield.

“The idea behind a personal umbrella is, you want to cover your net worth. When I get a phone call from someone who says, ‘I have this umbrella, but I don’t really need it,’ I say, ‘if somebody were to sue you for everything you were worth, is what you have on your home or auto policy enough?’”

Dowd noted that the coverage from a personal umbrella policy is wide-reaching, providing protection for scenarios not covered by a typical home or auto policy. For instance, if a family member rents a snowmobile on vacation and is involved in an accident, the umbrella policy may help pay for the cost of repairs and medical bills of the injured parties.

Perhaps the most compelling aspect of an umbrella policy, Lussier said, is its cost — maybe $250 or $300 per year for $1 million in coverage, with additional coverage available beyond that, typically in increments of $1 million. “I have a couple of clients who’ve got $5 million umbrellas because their net worth justifies the extra cost.”

“The idea behind a personal umbrella is, you want to cover your net worth. When I get a phone call from someone who says, ‘I have this umbrella, but I don’t really need it,’ I say, ‘if somebody were to sue you for everything you were worth, is what you have on your home or auto policy enough?’”

That’s on top of legal defense fees, which insurers cover as part of any policy. “So, if the unimaginable happens and you’re called by Mark E. Salomone, you have peace of mind knowing your insurance is going to defend you as well as pay anything you’re legally responsible for.”

Mark Lussier

Mark Lussier says the inexpensive cost of a personal umbrella policy, coupled with the many scenarios it covers, present a strong argument for buying one.

In addition, the umbrella is worldwide coverage. “So you can be vacationing in Europe, and if someone is injured because of something you’re responsible for, your umbrella is going to respond,” Lussier said.

Bill Trudeau, president of the Insurance Center of New England in Agawam, said he draws a simple diagram to explain the umbrella concept to customers, with policies like home and auto represented by rectangles, and the umbrella hovering over all of them.

“You can imagine a multi-fatality accident, where the claims might easily surpass $1 million. If an accident is deemed your fault, you may run out of insurance,” he explained. “But if you’ve bought a $2 million umbrella to go on top of a $1 million policy, now you have $3 million in protection in that instance. It’s a policy for excess liability claims — product liability, premises liability, bodily injury, property damage, all kinds of claims. It’s one policy, and you can decide how much protection you want to buy.”

Surprising Circumstances

Lussier stressed that umbrella coverage isn’t technically coverage the policy holder doesn’t already have. “You can’t get umbrella unless you have the underlying policy.”

While some may ask why not just increase coverage on existing home and auto policies, he pointed to the broad nature of umbrella protection, and, again, its cost.

“Many times, to buy more coverage under the basic policy begins to beg the issue of why you shouldn’t have the umbrella. I can have a $1 million umbrella for three cars and two houses for $250 a year. So it’s cheap.”

In Massachusetts, Dowd explained, most umbrella policies provide coverage for the policy holder and their immediate family members living in the same household, with some exceptions. And he listed a few scenarios where that wide net may come in handy.

For example, “if a dog attacks a guest in your home, you may be responsible for any medical bills,” he explained. Even a small bite could end up costing thousands of dollars, and, while some homeowners insurance policies provide liability coverage for dog bites, they typically restrict what breeds are covered. “If your policy excludes your dog’s breed, umbrella insurance may help cover any financial responsibility you have for the incident.”

As another example, if a recently licensed teenager causes a multi-vehicle auto accident, the resulting financial liability could be expensive. “While a single-car accident likely won’t exhaust your auto-insurance policy, a multi-car accident might exceed the coverage,” he said. “Personal umbrella insurance can cover expenses beyond those covered in your auto policy.”

One hindrance to purchasing umbrella coverage, Lussier noted, is that the holder must first increase his or her automobile bodily-injury coverage to $250,000 — and that floor can rise to $500,000 for older drivers. “In some cases, especially with multiple cars, that can be unaffordable. People say, ‘I can’t allocate that risk transfer; I’d rather retain the risk myself and take my chances.’ And that’s really what insurance is all about — it’s a transfer of risk.”

Then there’s something called ‘personal-injury coverage,’ Lussier said, which is different from bodily injury, instead referring to libel, slander, false arrest, and defamation of character. And this has become a minefield in the age of social media.

“Many times, to buy more coverage under the basic policy begins to beg the issue of why you shouldn’t have the umbrella. I can have a $1 million umbrella for three cars and two houses for $250 a year. So it’s cheap.”

“Some people, especially teens, don’t fully comprehend the power of social media,” Dowd said. “If your child makes a disparaging remark or unsubstantiated claim about someone on social media, that person might try to sue for libel.”

An umbrella policy may provide coverage for such situations, with most policies extending coverage to online statements. “Aside from just physical damage, umbrella protection can provide financial assistance if you’re being sued for libel or slander.”

Lussier agreed that this is a significant issue in an era when everyone is quick with a camera, and when images, videos, and statements online can live forever.

“Depending on your means, you can find yourself liable for substantial sums,” he told BusinessWest. “Nowadays, something said innocuously or without much thought can be a big deal. It goes viral, and the next thing you know, you’re saying, ‘I didn’t really mean it the way it was taken, but if I’d have known it would go that far, I would’ve kept my mouth shut.’ And if you put it in writing, you can make it even worse.”

Cost of Doing Business

Clearly, personal umbrella policies cover a wide net of possibilities. But it can be tricky when they cross over into the business realm. Lussier cited the example of a photographer who closes his studio and moves his enterprise into his house. “Now his house is a business exposure, and an umbrella excludes business exposures.”

That’s where a business umbrella comes in, working in much the same way a personal umbrella does, but covering liability risks related to a business.

Bill Trudeau

Bill Trudeau says growing businesses should continually reassess what level of coverage they need from an umbrella policy.

“If you have a relationship with your broker, they’re likely to offer you umbrella liability,” Trudeau said of business owners. “If you’re doing a review of your insurance, it’s something almost any competent broker brings up. As your business grows, it would be part of the basics of insurance coverage.”

The nature of the business would impact the risk exposure and, hence, the level of coverage needed, he noted. While a $1 million umbrella might be fine for a storefront shoe store or florist, a business owner with a fleet of heavy trucks would likely need more.

“We’re hoping not to scare people, but we want them to make realistic choices,” he said. “And a lot of times, those choices are informed by some requirement from the place you’re doing business with, like a contractor taking on bigger jobs, like a casino or office tower or hotel chain. The risk managers for those entities tend to have a requirement for higher limits of liability. So, like it or not, if you want to play in that area and do business with these kinds of clients, you probably have to buy an umbrella of some sort.”

Fame is a factor, too, Lussier said — and often results in higher rates per million of coverage, because famous people are seen as bigger targets for lawsuits.

“If you’re a high-profile person, like a news anchor, you won’t get an inexpensive umbrella, because of the higher exposure,” he explained. “If we’re selling you cheap insurance, we’re basically gambling that you’re never going to use it. That’s really what insurance is all about. The most people participate for the least amount of risk, so we can then price it accordingly.”

In addition, the level of coverage should reflect not only one’s net worth, but future earning potential as well. A doctor who just graduated from medical school and plans a career in brain surgery might have little more than debt to show right now, but a lawsuit could put significant future earnings at risk.

In the end, Trudeau said, umbrella coverage can bring peace of mind in myriad scenarios.

“If something’s gone wrong in your business — someone went through a stop sign, something terrible happened, some member of the public is injured badly, and your company is sued for $5 million — you can take some comfort: ‘I bought insurance, and I’m able to pay what people wanted to negotiate without having to declare bankruptcy.’ It’s still awful, but you have that small comfort, as opposed to sitting there wondering what to do.”

Joseph Bednar can be reached at [email protected]

Insurance

Culture of Coverage

Gov. Charlie Baker announced that the Massachusetts Health Connector completed Open Enrollment with the highest membership in the 13-year history of the state’s health-insurance exchange, covering more than 282,000 people with health insurance.

“The Health Connector just completed its most successful Open Enrollment since the start of the Affordable Care Act, signing up more than 65,000 new people with health insurance coverage,” Baker said. “Massachusetts leads the way with the best insured rate in the country, with over 97% of our residents covered due in part to the Health Connector’s strong efforts to create a culture of coverage in the Commonwealth.”

Lt. Gov. Karyn Polito added that “the Health Connector plays an important role in ensuring communities across the Commonwealth have access to affordable, high-quality healthcare. Over the last four years, the Connector has worked tirelessly to transform the exchange into a functional and reliable service, as is evident by its current milestone enrollment figures.”

“Massachusetts shines as a model for the rest of the nation when it comes to getting people enrolled in health insurance — and maintaining coverage. That success is built off outreach and education efforts that effectively and efficiently target the state’s underinsured communities and get more people covered. This year, the Connector made inroads in these tough-to-reach uninsured groups.”

The Health Connector held Open Enrollment from Nov. 1 to Jan. 23, twice as long as the federal government’s Nov. 1 to Dec. 15 open period, to ensure Massachusetts residents had as much time as possible to shop for affordable coverage. Throughout Open Enrollment, Massachusetts residents were encouraged to get covered or stay covered, provide security for their health and financial well-being, and comply with the state’s individual mandate. Assistance was available through community-based health navigators around the state.

“Massachusetts shines as a model for the rest of the nation when it comes to getting people enrolled in health insurance — and maintaining coverage,” said Health and Human Services Secretary Marylou Sudders, the Connector board chair. “That success is built off outreach and education efforts that effectively and efficiently target the state’s underinsured communities and get more people covered. This year, the Connector made inroads in these tough-to-reach uninsured groups.”

As of March 1, 282,114 people were enrolled in health insurance, including 209,973 people in ConnectorCare, the state’s innovative affordability program, through which state subsidies are made available on top of federal tax credits, resulting in lower premium costs for members — including $0 premiums for the lowest-income enrollees — while also offering no or low co-pays and no deductibles. Overall, Health Connector membership rose 13%, compared to a 4% enrollment decrease through the federal healthcare.gov platform. In addition, 18,000 individuals receive dental insurance through the Connector.

“With stable operations and a clear message to get covered and stay covered, this was our most successful Open Enrollment to date, with high retention rates and strong new enrollment,” said Louis Gutierrez, executive director of the Massachusetts Health Connector. “We are going to keep working to ensure that everyone in Massachusetts is covered.”

The Health Connector placed extra focus on outreach and public education about affordable coverage options in communities with higher rates of uninsurance and worked to raise public awareness about coverage generally. At the close of Open Enrollment, the Connector had enrolled more than 65,000 people who did not have coverage at the start of Open Enrollment, about 22% more than last year.

Insurance

Lines of Defense

While major data breaches at national companies justifiably make news, small businesses may not recognize that hackers target businesses of all sizes and types. But awareness is on the rise, especially as insurance companies hone their products aimed at protecting against cyber threats — and help clients understand that buying insurance is only one line of defense, and that complete protection requires in-house diligence, too.

When is cybercrime not cybercrime?

When it falls under the broad category of something called ‘social engineering,’ said Bill Trudeau, president and CEO of the Insurance Center of New England.

That term refers to a broad range of ways to manipulate people into giving up confidential information, or even money. It can include anything from phishing schemes to leaving a flash drive on the ground, hoping someone will find it and load it onto their computer out of curiosity, thereby installing malware on their company’s network.

Or say, Trudeau suggested, a CFO receives an e-mail he thinks is from the company CEO, reading, “we worked out a new deal with ABC Company. Wire them a $20,000 deposit; I’ll have full details when I return.”

“If they get your CFO to wire money to an unknown source, it’s not really theft because they did it voluntarily; it was a trick,” Trudeau said. More importantly, the loss would not be covered by typical cyber liability insurance, because it’s not technically a cybercrime, which involves the perpetrator physically hacking a network, not conning someone else into doing it. Instead, the client would need a fraud endorsement on its insurance policy.

“Social engineering is cropping up more, spreading like a pandemic,” Trudeau said. “Now, enough bookkeepers have been embarrassed or fired that, when they see an e-mail like this, they usually say, ‘wait, I’m not falling for this.’”

But the ones who do succumb to social engineering make it abundantly clear that, while cyber liability insurance is still an important part of a company’s defense against risk, just as important is a culture that trains employees in avoiding being conned.

“Social engineering is a relatively new term that refers to illegal fund transfer or diversion,” said John Dowd Jr., president of the Dowd Insurance Agency. “You can also unwittingly introduce a virus to a third party. This virus may have been put on your website by someone without you knowing it, and when people go onto your website, they get infected … and it’s your fault.”

That’s not to say cybercrime the way most people understand it — a hacker breaking in and exposing confidential data, for example — isn’t still a major problem, one that companies need to work with their insurance agents to cover. While historic breaches like Target in 2013, with 70 million customer records exposed, make headlines, the reality is that most breaches occur in businesses with 100 or fewer employees.

According to the latest report by Cybint Solutions, which provides cybersecurity education and training solutions to businesses and organizations, a hacker attack occurs every 39 seconds, affecting one in three Americans each year.

Bill Trudeau

Bill Trudeau says businesses need to take stock of exactly what data is at risk, and how damaging it would be to have it exposed, in order to craft a plan of defense.

In 2016, 95% of breached records came from three industries: government, retail, and technology. However, 64% of all companies have experienced web-based attacks, and 43% of cyberattacks targeted small businesses. Meanwhile, 62% experienced phishing and social-engineering attacks.

The threat is growing due to the increasingly interconnected nature of the world today, Cybint notes. According to a recent Symantec Internet Security threat report, there are 25 connected devices per 100 inhabitants in the U.S. By 2020, there will be roughly 200 billion connected devices.

The total cost for cybercrime committed globally has added up to $100 billion, Cybint adds. “Don’t think that all that money comes from hackers targeting corporations, banks, or wealthy celebrities,” the report notes. “Individual users like you and me are also targets. As long as you’re connected to the Internet, you can become a victim of cyberattacks.”

It’s concerning, the report notes, that only 38% of global organizations claim they are prepared to handle a sophisticated cyber attack.

“Many businesses, by and large, do not manage the threat as well as they should,” Dowd told BusinessWest. “This could be due to lack of understanding the true exposure and financial implications of a breach. Certain businesses have a greater exposure than others, but any business that stores personal information or uses a computer has the potential for a claim.”

Growing Costs

While the average cost for each lost or stolen record containing sensitive and confidential information increased 4.8% last year, to $148, according to IBM’s annual “Cost of a Data Breach” report, Trudeau said companies need to individually assess what they have at stake.

“You’ve got to look at this on a granular level,” he said. “What data do you have? What data-breach exposure do you have? Do you store information that’s a concern?”

The answer to that question could vary by quite a bit. “You might have blueprints or schematics, designs, but how critical is it? Some might shake their heads and say, ‘no one cares; it’s on the Internet, so it’s not top secret.’ But if a law firm’s files are stolen, there could be embarrassment and reputation risk. You have to decide what you’re trying to accomplish.”

Cyber liability 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. 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.

The costs to businesses associated with a data breach, from lawsuits to regulatory fines to notification expense, can be staggering, Dowd noted, and insurance companies have responded with new policy forms that protect against many cyberthreats that customers may never have heard of.

“Policies today are much broader than they used to be out of necessity — the crooks keep coming up with unique ways to hack into your computers and steal information,” he said. “In some cases, they will charge you a ransom to return the information they stole from you. Insurance policies can cover all of the costs associated with a breach, including fines and penalties.”

When a data breach does occur, how a company responds up front — self-reporting to authorities and having a turn-key response — can reduce its liability. In fact, carriers that specialize in this type of coverage, like Beazley and Chubb, have turn-key response operations as part of the policy.

“Social engineering is cropping up more, spreading like a pandemic. Now, enough bookkeepers have been embarrassed or fired that, when they see an e-mail like this, they usually say, ‘wait, I’m not falling for this.’”

Immediately notifying victims and paying for identify-theft-prevention services can help avoid the liability costs that typically outweigh the first-party losses, Trudeau added. “You need liability coverage, but you hope you’ll never have to use that if you handle everything correctly with the victims.”

Businesses need to have not only insurance against cybercrime, but a plan of defense in case something does occur, Dowd said. “Virtually no one is immune from this danger. The laws on the books today are very strict with regard to protecting personal information, whether it is your clients or your employees.”

In response, according to the Cybint report, approximately $1 trillion is expected to be spent globally on cybersecurity from 2017 to 2021. Meanwhile, unfilled cybersecurity jobs worldwide will reach 3.5 million by 2021. Even now, more than 209,000 cybersecurity jobs in the U.S. are unfilled, and postings are up 74% over the past five year. Clearly, it’s a threat that isn’t expected to go away.

Eyes Wide Open

Employers can take a number of steps to prevent data theft, such as protecting every computer connected to the Internet or the internal network with anti-virus and anti-spyware software; 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.

And, of course, training employees on how to spot a scam.

“It’s not a data breach when you fool someone into giving up data,” Trudeau said. “In the last few years, insurance providers have seen a striking increase in people voluntarily parting with their money. We need to make sure we’re having the right conversations.”

He said he’s heard of someone posing as a technician visiting a business, and asking to use the bathroom. Once out of sight, he ducks into the first empty cubicle he sees and inserts a flash drive onto a computer to upload malware.

“Certainly prevention is important. A lot of little things can happen,” he told BusinessWest. “Awareness is important, to stay fully ahead of all the shenanigans.”

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, 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. Companies may also choose to hire a third party to poke around their computer systems and challenge their operations when necessary.

“Prevention is critical because the fallout from a breach is not limited to out-of-pocket expense,” Dowd said. “You can also lose clients and sales.”

Indeed, according to an Economist Intelligence Unit consumer survey conducted in 2013, 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.

“Having a good IT firm who knows how to protect your system on an ongoing basis is critical,” Dowd continued. “Going through the application-for-coverage process is very helpful and often eye-opening because it reveals what you may or may not be doing correctly from a prevention standpoint. I will often suggest to clients that they go through the process of applying in order to educate themselves, even if they ultimately choose not to buy the insurance policy.”

After all, the best policy against becoming a victim is knowledge and vigilance. But an actual insurance policy is a good idea, too.

Joseph Bednar can be reached at [email protected]

Insurance Sections

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.


Click HERE for a listing of area insurance companies


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]

Insurance Sections

Take Charge of the Situation

By DAVID GRIFFIN

David Griffin

David Griffin

The nationwide shift to EMV is well underway.

EMV — which stands for Europay, MasterCard and Visa — is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. In the wake of numerous large-scale data breaches and increasing rates of counterfeit card fraud, U.S. card issuers are migrating to this new technology to protect consumers and reduce the costs of fraud.

“These new and improved cards are being deployed to improve payment security, making it more difficult for fraudsters to successfully counterfeit cards,” says Julie Conroy, research director for retail banking at Aite Group, a financial industry research company. “It’s an important step forward.”

Most of all, it means greater protection against fraud.

Approximately 120 million Americans have already received an EMV credit card and that number is projected to reach nearly 600 million by the end of 2015, according to Smart Card Alliance estimates.

Here are six frequently asked questions to help you understand the changes:

1. Why are EMV cards more secure than traditional cards?

It’s that small, metallic square you’ll see on new cards. That’s a computer chip, and it’s what sets apart the new generation of cards.

2. How do I use an EMV card to make a purchase?

Just like magnetic-stripe cards, EMV cards are processed for payment in two steps: card reading and transaction verification.

3. Will I still have to sign or enter a PIN for my card transaction?

Yes and no. You will have to do one of those verification methods, but it depends on the verification method tied to your EMV card, not if your card is debit or credit.

Chip-and-PIN cards operate just like the checking-account debit card you have been using for years.

4. If fraud occurs after EMV cards are issued, who will be liable for the costs?

Today, if an in-store transaction is conducted using a counterfeit, stolen, or otherwise compromised card, consumer losses from that transaction fall back on the payment processor or issuing bank, depending on the card’s terms and conditions.

After an October 1, 2015, deadline created by major U.S. credit card issuers MasterCard, Visa, Discover, and American Express, the liability for card-present fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction.

Consider the example of a financial institution that issues a chip card used at a merchant that has not changed its system to accept chip technology. This allows a counterfeit card to be successfully used.

“The cost of the fraud will fall back on the merchant,” says Martin Ferenczi, president of Oberthur Technologies, the leading global EMV product and service provider.

EMV Cards and Retailer Liability

Most insurance carriers have a coverage called either “data breach” or “cyber liability.” Presently the coverage has been undersold. With the conversion to EMV cards, it is very important for retail merchants using credit cards to become familiar with this coverage and its options. Coverage varies by carrier coverage forms. The important thing to know is that local businesses have a larger exposure.

In addition, EMV debit cards will roll out at a slower pace; only 25% of debit cards will utilize EMV by the end of 2015. This number will increase to 96% by the end of 2017. Automated fuel dispensers will have until 2017 to shift to EMV cards.

5. If I want to use my chip-card at a retailer that doesn’t support EMV technology yet, will it work?

Yes. The first round of EMV cards — many of which are already in consumers’ hands — will be equipped with both chip and magnetic-stripe functions so consumer spending is not disrupted and merchants can adjust.

If you find yourself at a point-of-sale terminal and are not sure whether to dip or swipe your card, have no fear. The terminal will walk you through the process.

“For example, if you enter a card into the chip reader slot but the reader isn’t activated yet, it will come up with an error and you’ll be prompted to swipe the card in order to use it,” says Randy Vanderhoof, executive director of the Smart Card Alliance.

And vice-versa.

6. Will I be able to use my EMV card when I travel outside the country?

Yes and no.

The U.S. is the last major market still using the magnetic-stripe card system. Many European countries moved to EMV technology years ago to combat high fraud rates. That shift has left many U.S. consumers who have magnetic-strip cards looking for other forms of payment when they travel.

Finally, as criminals become more and more sophisticated, it is important to make sure, as a business, your crime coverage does as well. Do you have cyber liability coverage, electronic fund transfer fraud coverage, and employee dishonesty coverage?

Crime coverage in the future will be as important to buy as general liability coverage.

David Griffin is a principal and the executive vice president and treasurer of The Dowd Insurance Agencies. He is a licensed insurance advisor (LIA) as well as a certified insurance counselor (CIC); [email protected]; (413) 437-1005.

Insurance Sections
Insurance Agencies Raise Their Profile Through Blogs, Social Media

In an industry as competitive as insurance, Maureen Ross O’Connell succinctly stated what must be the goal for every agency: “we want people to think of us when they think of insurance.”

Bill Grinnell

Bill Grinnell says social media is limited in how much business it can attract, but it’s still important to maintain an online presence.

But in an era when Americans, especially the younger crowd, aren’t reading as much print media as they used to — the striking decline of daily newspaper readership over the past two decades testifies to that trend — how do agencies reach out to potential new customers?

One answer is social media, from Facebook pages to LinkedIn listings to blog posts, said Ross O’Connell, president of Ross Insurance in Holyoke. But the messages and techniques used on these media are strikingly different than what might be considered traditional marketing.

“We don’t talk much about insurance on Facebook at all,” she said of the company’s lively Facebook page, which is updated virtually every day. In the weeks before this article went to press, Ross posted an article about a major airbag recall, but also one about how parents feel when their kids start driving and another about identify theft.

Meanwhile, the agency shared congratulations to the region’s high-school and college graduates, recognized National EMS Week, shared information on the Great New England Air Show, polled readers on favorite cookout foods, and solicited comments on Deflategate. In short, the page mixes helpful information — only occasionally touching on insurance-related topics — with a healthy dose of fun and human interest.

“People are not on social media to be sold to; they get annoyed when you try to sell to them on Facebook,” Ross O’Connell said. “We run contests, share relevant information, but we’re not trying to sell insurance on Facebook. They have an opportunity, if they’re so inclined, to request a quote off the Facebook page, but mostly, we just want to be part of the conversation.”

Meanwhile, Agawam-based Insurance Center of New England (ICNE) maintains its Facebook page with several posts per week. Recent topics range from auto safety and roadside emergencies to photos from the company’s recent Paint Craze Night to benefit the YWCA; from congratulations to clients that have won awards to an infographic about financial literacy in childhood. Meanwhile, several articles posted to the ICNE’s website delve into weightier insurance topics, from Affordable Care Act compliance to workers’ compensation.

“We definitely are embracing the tools — not to say we’ve mastered them,” said company President Bill Trudeau, noting that ICNE also engages with the region’s professional crowd through LinkedIn. “Our Facebook persona tends to be more community-oriented. We do put some things about insurance in there if it’s something of interest, like the windshield-wiper thing, using headlights when they’re in use. Or we might say something about fire-safety reminders. But it’s not filled with insurance stuff.”

The goal in posting any item on Facebook, he continued, is for people to read it and find it interesting — and hopefully keep coming back. Meanwhile, sharing news about local events and causes ICNE or its employees are involved in drives home their connection to the community. “We see it as a way to demonstrate what we’re all about, Trudeau said, “what we’re up to besides insurance.”

Bill Grinnell, president of Webber & Grinnell Insurance in Northampton, said his firm has focused increasingly on social media and online communications over the past two years, but the jury is out on what the agency gains from such activity.

“I am still unconvinced how we benefit,” he told BusinessWest. “We’re certainly doing it, but I don’t think it’s a silver bullet that will propel my business forward by any means.

“People just don’t go to insurance-company websites to hang out,” he added. “When we post something on Facebook, we want to make it interesting — but it’s not the most exciting business in the world. Obviously, we try to get people to follow us on social media, but that doesn’t replace old-fashioned ways of getting new business. Still, I do feel we are ahead of the pack in terms of our social media.”

Home and Oughta

Most effective, Grinnell said, is the company’s two online newsletters — the Guardian, geared to personal-line (home and auto) customers, and the Protector, which goes out to business clients, business prospects, underwriters, vendors, and other people the agency associates with. The contents of those newsletters then get posted to Facebook and LinkedIn.

“We do keep it somewhat relevant,” Grinnell said. “For example, in our personal-lines newsletter, we had an article over the winter with a lot of great information about ice dams — what causes them and how to prevent them. We also had a nice article on how your insurance company responds to water damage. We followed that up with what’s covered in flood coverage, seepage, and so on. That got good response from people.”

He’s currently drafting an article on how points affect auto-insurance premiums, and another on the pros and cons of different deductible levels and what kind of savings customers should expect. Meanwhile, the business-insurance newsletter recently featured a piece on workplace injuries and the impact they have on business income, business interruption, and insurance coverage.

“I went recently to an Employers Association meeting about employee engagement and got a couple of jewels from that on helping me run my business,” Grinnell went on. “Then I put an article in my newsletter; I took what I learned from it and shared it with my customers.”

Similarly, Ross O’Connell said the blog on her agency’s website — updated regularly by a full-time social-media architect, and featuring articles on everything from employee benefits to motorcycle safety to health-insurance plan options — is also geared to customers as well as prospects.

That architect, Krystal Carvalho, also writes for a second Ross blog, insurance-boss.com, which mixes hard information with lighter fare, like a piece on Easter desserts, and profiles of agency clients. But there is some crossover among the two blogs and the Facebook page.

“Everything changes in the social-media world,” Ross O’Connell said, “so much so that we’re shifting our philosophy and bringing our soft social stuff onto our website as well. So charity work, community events, that used to be all on insurance-boss.com, but the ultimate goal here is to drive people to our website. So our strategy is shifting a little bit now as we speak.”

To varying degrees, all the agencies that spoke with BusinessWest said social media can be a branding tool to keep a company’s name and community connections on people’s minds. Trudeau said this happens when ICNE posts a photo of a newly hired employee.

“We might stay more top of mind the next day,” he said. “And if someone asks them, ‘I don’t have a good agency; who do you use?’ hopefully they’ll think of us just a tiny bit more than if they had not seen anything.”

Social media has other practical uses, Grinnell added, noting that LinkedIn can be a solid recruiting tool. “We can communicate with all our LinkedIn friends about positions that are open and also look at individuals who might fit the job description. That has been useful to us.”

Brand Names

Trudeau said businesses that post regularly on social media have to strike a balance between being interesting and annoying; no one wants their feed clogged with material they have no use for.

Still, Ross O’Connell said, “it’s absolutely important to have a presence on social media — we have to be part of the conversation, branding ourselves.”

She added that the agency’s initial goal when starting to delve into social media was to reach out to the younger generation. “Of course, the average age on Facebook is now 55, but that was not the case when we started. We’re reaching a diverse audience.”

Trudeau also sees value in being part of the daily conversation on people’s news feeds.

“People have a lot of choices in the marketplace, where they can buy house and car insurance. If they see they can get competitive prices from someone who’s engaged in their community, we think people will choose to work with us as opposed to what we call a black box: ‘OK, time to get on the computer for a quote from State Farm, Geico, Progressive, or Allstate.’ You’re not going to run into those people at the local Red Cross board meeting; they don’t really have a specific presence in the Pioneer Valley.”

In short, the company’s pitch is that it represents many different carriers and can offer attractive products, he added. “But social media gets out the message that we’re engaged in the community, and here are some things we think are interesting and fun about us.”

Grinnell said there’s an element of client retention as well, and making sure customers are engaged with the agency and even expanding the relationship.

“It’s a very competitive world in the insurance business these days, and the insurance companies do most of the billing, most of the processing, so typically people don’t hear much from their agent unless they have reason to call them,” he told BusinessWest. “We felt it was important to get out in front of them and remind them who we are. We bring value to the table, and we try to bring value in that newsletters.”

As Ross O’Connell mentioned, however, the landscape is always shifting, so insurance agencies are constantly challenged to change with the times.

“We don’t always have all the time we need to do it,” Trudeau said. “It took a while to build those muscles, to have everyone remember, ‘hey, if you’re going to be at such-and-such event, get us some material.’

“We’re all students of social media,” he added, “and we’re doing what we can to do it better.”


Joseph Bednar can be reached at [email protected]

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