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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]

Insurance Sections
Insurance Is Personal — and Business, Too — at Moulton

By CLARK HOWELL

It has been exactly four years since tornadoes struck Western Mass. on June 1, 2011, an event that insurance agents remember well.

Cindy Moulton St. George (center), daughter Katie Gagner, and husband Roy St. George

Cindy Moulton St. George (center), daughter Katie Gagner, and husband Roy St. George represent the second and third generations of this family business.

Cynthia Moulton St. George, president of Moulton Insurance, recalls her employees climbing through downed trees and over debris to get to clients in the days following that unexpected disaster, which resulted in some $150 million in damages.

“We had gotten authority from our companies,” Moulton St. George said, “and they would refund our accounts. And we would just go and write checks … because people had nothing.”

She added that some people victimized by the twisters had everything “sucked right out of their house — if their house was even there.”

Katie Gagner, who manages the company’s Belchertown office — Moulton has additional offices in Palmer and Ware — added that “it was crazy” in those hectic first days of writing checks and consoling clients and residents after the disaster.

As a third-generation family business launched by Moulton St. George’s father in 1952 (Vice President Roy St. George is her husband, and Gagner is their daughter), they say they understand the needs of both families and businesses — a commitment put to the test by the tornadoes, but one in play every day.

“We are an advocate for our clients,” Moulton St. George said, adding that the image of agents sitting behind a desk is inaccurate, and that getting out into the community — though usually not scrambling over tree branches — is every bit as important as doing the paperwork of a claim.

Moulton St. George said it’s that personal connection to the community that sets independent agents apart from the large, national direct sellers of insurance.

For example, she went on, many auto service centers, and especially auto-body repair shops, won’t even do business with motorists who have direct-seller auto insurance. “They have signs right in the shops, many of them, that say, ‘if you have XYZ Insurance, don’t bother asking us to do your repairs.’”

Independent agencies like Moulton are different for many reasons, she said, but especially because they actively advocate for clients, particularly “when it comes to the claim, which is why you buy insurance.”

Setting Their Sites

When she and St. George sat down with BusinessWest, the company was both celebrating some recent successes and taking steps to further raise its profile.

Specifically, the agency had just received the Long Term Service Award from the Quaboag Hills Chamber of Commerce, and was preparing to launch a new, content-rich website.

The website — which will offer more information on business and commercial lines of insurance — is important, Moulton St. George said, because people don’t always associate the company with those areas of expertise, even after 63 years in business.

“Businesses may not look at Moulton Insurance as the go-to agency for commercial lines,” St. George said, but added that perceptions will change once people become aware of the extensive list of business and commercial products offered by their company.

However, he explained, auto, home, and life insurance will continue to play a vital role in the overall mix of products Moulton offers to residents of Massachusetts, Connecticut, New Hampshire, and Vermont.

A stronger web presence is important for an agency based in the Quaboag region that aims to reach across Western Mass. and beyond. St. George said the company probably could have better advertised its experience with commercial lines in the past, which is one reason the website is getting an overhaul.

“We can handle anything from a Main Street type business to a manufacturing facility,” as well as the fleet of vehicles associated with that company, he said, adding that Moulton represents more than 15 insurance carriers, both regional and national, to provide options should a situation require specialization.

St. George is equally proud of the employees representing those products. He noted that many agencies in Western Mass. have relatively low ratios of full-time licensed agents to total employees. In other words, an agency might have three licensed agents and a total number of 14 employees, meaning that the majority of employees can only handle administrative work, and not the actual work of determining the best insurance product for a given situation.

Of Moulton’s 16 employees, however, 14 are licensed agents, ranking in the top 20% of agencies in the region by ratio of agents to employees. Further, the agency boasts five certified insurance counselors (CICs), three in the commercial area alone.

The CIC designation, he explained, is a mark of distinction that represents a commitment to professional excellence and leadership within the industry. CICs are recognized as among the best and most knowledgeable insurance practitioners in the nation. The designation is earned by attending five intensive CIC Institutes: agency management, commercial casualty, commercial property, life and health, and personal lines. The formal training required to become a CIC includes 100 classroom hours and the successful completion of comprehensive exams in these five areas of expertise.

Moulton also boasts eight certified insurance service representatives (CISRs). These agents have gone through a program that offers additional learning opportunities in the commercial-lines and personal-lines arenas, as well as courses in health and risk management.

Earning Trust

However, St. George and Moulton St. George both stressed, knowledge of insurance products alone won’t make an agency a trusted entity within its region. That comes from years of dedication and service to a community.

“Our reputation is a big part of what we do,” Moulton St. George said, noting that her father, Charles Moulton, had the foresight in 1952 to start an insurance agency that strived to bring personal service and cost-effective insurance coverage to area customers. Since then, she said, the company’s agents have made deep connections to the community.

The new website, they say, is just one way of raising the agency’s profile and letting insurance shoppers know what Moulton can offer to protect against the storms of life and business. Sometimes literally.

Insurance Sections
Insurance Companies Enlist Help from Homeowners to Prevent Losses

CoverageIceDamDPart
When recalling the bizarre weather that descended on Western Mass. in 2011 — tornadoes in June, midsummer flooding, the freak pre-Halloween snowstorm — it’s easy to forget that, even absent all of that, the year would have been a challenging one for home insurers.

The reason? A January and February riddled with ice dams and roof collapses, thanks to snow that seemed to fall every other day for weeks on end, gradually building up the weight on houses and damming under the eaves, causing water to pour into homes.

“We paid a lot of claims. That was a big deal,” said Kevin Ross, vice president of Ross Insurance in Holyoke. But while the past few weeks have brought a similar onslaught of snowstorms, he doesn’t expect nearly as many claims this year.

“A lot of people are absolutely more attuned to this; everywhere I go, people are talking about getting a roof rake and cleaning off their roof,” he told BusinessWest. “People are well aware of ice dams and the problems they can cause. I just contacted a roofer to clean off my roof because ice is starting to build up in the gutter. In general, the population understands what can happen, and everyone is cleaning off the roof now.”

It’s a learned behavior being observed across the industry.

“We’ve had a couple of claims come in,” said Corey Murphy, president of First American Insurance in Chicopee. “Fortunately, it’s not as bad as it has been in the past, even with some of these strong storms we’ve had.”

John DiStefano of Preferred Mutual Insurance agreed.

“As I drive around, I see homes where people have used roof rakes to get some snow off around the edges, or they have people going up on the roof shoveling for them. That’s always a proactive approach,” said the personal-lines territory manager for Massachusetts and New Hampshire.

That’s good news for both homeowners and insurers, he said, considering that such events are covered by most basic plans. “Roof collapses and water damage, where water seeps into the home, is covered under most forms. That is a pretty common thing.”

Therefore, it’s good news for insurance companies — which implemented rate increases of 5% to 15% regionally after the 2011’s series of unfortunate events — that customers are increasingly taking matters into their own hands by keeping their roofs and gutters as clear of snow as possible.

But when it comes to winter home hazards, they say, roofs are only part of the picture.

Peak Problems

Typically, Ross said, homeowners facing winter roof damage don’t have to scramble to see if they’re covered.

“The standard policy doesn’t have to change to provide coverage of interior or exterior dmage caused by an ice dam, or even the collapse of a building,” he noted. “However, there are certain exclusions for the collapse of a fence, a patio, a swimming pool — those are not covered. Collapse of foundations or retaining walls, bulkheads, are not covered.”

Kevin Ross

Kevin Ross says homeowners have become more proactive about preventing roof damage during the winter, and insurance companies have become better at educating them.

But once an ice dam is reported, “right away, the insurance company will pay a reasonable amount to remove ice and snow from the roof to prevent further damage,” he explained. “But only once the damage has begun — we’re not going out to clean off everyone’s roof.”

The immediate drama of an ice dam, pouring water into interior spaces, can panic policyholders, Ross added. “They’re wondering, ‘what should I do?’ Call the insurance agent right away; they will only take one deductible until all the snow is gone from roof.”

That could encompass the entire winter, he noted. “Don’t be afraid that a week later you might have more water coming in. It’s considered one event until all the snow is off the roof. So, once it starts, once you notice water inside the house, call your agent right away.”

As for roof-collapse concerns, that’s a tricky area to navigate, because the weight of the snow isn’t always clear from a visual check, forensic meteorologist Steve Wistar noted at accuweather.com.

In the Northeast, he explained, roofs are generally designed to support 30 pounds per square foot, but some are built to support 40, 50, or even 100 pounds per square foot. Further complicating matters, that weight is determined by water content, not merely depth.

Specifically, dry, powdery snow weighs less than wetter snow, and its flaky texture makes it prone to drifting, which is ideal for roofs designed to handle drifting snow. But, over time, snow compacts and settles down, meaning the snow won’t be as deep, but the weight will be the same, Wistar said.

Finally, when temperatures rise and snow becomes rain, the snow already coating rooftops can become saturated with moisture, weighing it down. And even when the snow does begin to melt, it can refreeze around gutters and drains, trapping more melting water on the edges of the roof — which, of course, can cause ice dams.

Columbia Gas of Massachusetts recently issued yet another concern for homeowners regarding rooftop snow accumulation — specifically, a number of incidents involving large icicles and snow accumulation falling from rooftops onto natural-gas meters, causing gas-line ruptures and gas leaks.

The company noted that it’s important that natural-gas meters and exhaust vents for heating equipment and other appliances are free of snow and ice, as gas equipment requires adequate airflow for safe combustion — and proper venting of appliances — to prevent dangerous carbon-monoxide situations.

prevent ice dams

Recent winters in Massachusetts have seen brisk sales of roof rakes as homeowners try to prevent ice dams from forming.

Columbia Gas president Steve Bryant encouraged homeowners to use a broom — not a shovel — to clear ice and snow from gas meters, and to avoid kicking or hitting the gas meter to break away snow and ice.  “Don’t shovel snow up against your meter.  Be careful when using a snow blower or snow plow near your meter. Where possible, have a clear path to your gas meter in the event a technician or emergency responder should require access.”

Cold Snap

When protecting their homes from cold-related damage, Ross said, customers shouldn’t look outside only.

“Losses can occur if you don’t keep adequate heat inside the home,” he noted. “Sometimes, when you leave for a week in Florida, you figure, ‘I’ll just turn my thermostat down and save on energy costs,’ and you come back to find that a pipe froze and burst. That’s something else from a loss-control standpoint. You need to keep adequate heat in home to keep things from freezing. It’s important to maintain the heat at 60, 62 degrees so they don’t have that problem.”

DiStefano agreed. “Do everything you can to maintain temperature,” he told BusinessWest. “Also, if you’re going away, shut off the water. That way, if a pipe breaks, it’s not a major problem. It’s easy to do, but so many people don’t do that.”

Because home insurance covers personal liability in addition to property damage, he also encourages customers to keep sufficient ice melt handy to prevent slips and falls by the mailman, UPS driver, or neighbors.

“The policy does provide personal liability coverage for slip-and-fall types of claims,” Ross added. “The owner of the property has a responsibility to keep their walkways and driveways, safe for pedestrian traffic. That’s definitely another area people really need to be cognizant of right now.”

It’s not like winter necessarily poses more weather-related insurance hazards than the rest of the year; damage from warmer-weather events, like tornadoes and hurricanes, are typically covered, Ross said, although policyholders might want to check on whether they’re in a covered flood zone and, if not, whether they’d like to add that to their plan as well.

But cold-weather threats are typically slower-developing, DiStefano said, giving insurance clients a chance to prevent them with tools as simple as roof rakes and sidewalk salt.

“More and more companies, like Preferred Mutual, have our websites set up with information for the general public to look at,” he said, “and we talk about what to do during the winter months to prevent losses.”

That pleases Ross, who clearly recalls the surge of claims in early 2011, when roof collapses and ice dams caught too many Western Mass. residents off guard.

“It was huge,” he said. “But it’s not going to be quite the same this year from a claim perspective, because people are more proactive; they’ve learned from it. A lot of people are raking the snow off already, getting the snow out of the gutter before the next storm. You have to stay on top of it. It’s a big maintenance issue.”

And one with no end in sight, Bryant added. “With record snowfall over the past month,” he said, “this winter season continues to be a challenge for us all.”

Joseph Bednar can be reached at [email protected]

Insurance Sections
High-deductible Health Plans Find Fertile Soil

Jody Gross

Jody Gross says the percentage of insurance consumers using high-deductible plans is still small, but growing quickly.

Pay now or pay later?

Employers and consumers shopping for health insurance have to ask themselves a version of this question when considering the option known as high-deductible health plans (HDHPs), which offer lower premiums than traditional plans but much higher deductibles, or the expenses that must be paid out of pocket before the plan begins footing the bills.

HDHPs typically feature deductibles exceeding $1,200 for individuals or $2,400 for families — often by a lot. In fact, according to the 2014 Employer Benefits Survey conducted by the Kaiser Family Foundation Health Research & Educational Trust, the average deductible for individual coverage paired with a health savings account is $2,098, but 18% of workers have a deductible of $3,000 or more. For family coverage, deductibles average $4,059, with almost one-third topping $5,000.

“This makes for a potentially dramatic shift in patient behavior and thinking,” Leah Binder, president and CEO of the Leapfrog Group, wrote in Harvard Business Review. “In traditional plans, even if you have a deductible, you skim to the section of the bill that says ‘patient responsibility.’ It’s usually a nice, round co-pay like $25 or $50 — the same, predictable amount regardless of which services you received. In contrast, with an HDHP, the whole bill is yours to pay.”

Although HDHPs are not a new idea, Binder explained, they’ve received a jolt of life over the past decade, with George W. Bush’s administration pushing for employers to offer the option, and the Democratic-led Affordable Care Act greatly accelerating the adoption of such plans, as the new state insurance exchanges usually feature high-deductible options.

“The IRS has set up some specific qualifications for what constitutes a qualified high-deductible health plan,” said Jody Gross, vice president of Sales at Health New England. “We have a $2,000 high-deductible health plan for an individual, $4,000 for a family, and the premiums are typically much more affordable.

“In order for it to be a qualified plan,” he added, “by definition, all services need to go toward that deductible, whether it’s an inpatient stay, an office visit, prescription drugs … all services need to go toward that deductible. The exception is preventive services — your annual physical, a mammogram, things like that; the government has a list of items that don’t need to go toward that deductible. Even so, a person pays a lot out of pocket before the plan kicks in.”

Accompanying many HDHPs is a product called a health savings account (HSA), by which a plan enrollee — and, in some cases, his or her employer — contributes money tax-free to an account that can be used to pay healthcare expenses. Any unused balance at the end of the year is not lost, but rolls over into the next year.

High-deductible plans and health savings accounts go hand in hand and are often an effective way for consumers to take more control over their care by forcing them to weigh the actual cost of each treatment, visit, or medication, Gross said. “Health insurance — and healthcare in general — is expensive, so the federal government set these plans up, these health savings accounts, in order to drive people down that continuum of healthcare products.”

Meredith Wise, president of the Employers Assoc. of the NorthEast, said many employers are moving toward HSAs and high-deductible health plans.

“A lot of it is because of the rising premiums,” she noted. “As you look at the deductibles and the maximum out-of-pocket expenses of most plans these days, you’re just about at that high-deductible threshold, so going to high-deductible health plans is an easy move for companies to make.”

Seeking Savings

The national numbers bear out that trend. According to the Kaiser survey, one in five workers had an HDHP in 2013, up from nearly zero in 2006. Meanwhile, half of all firms with more than 5,000 workers now offer HDHPs.

“High-deductible plans are attractive to employers because they get to bear less of the insurance cost. Many economists also like the plans, because they’re supposed to make people spend more wisely on their healthcare,” noted Jason Millman in the Washington Post.

“The big question is whether employees are prepared to handle potentially big medical bills before they hit their deductible,” he continued, noting that enrollees in employer insurance typically say they’re happy with the services their health plans cover, “but they’re much less satisfied with what they’re paying out of their own pockets.”

That caution seems to be more prevalent in Massachusetts, Gross said.

“At Health New England, 5% to 6% of our membership is on high-deductible health plans,” he told BusinessWest. “In Western Mass., they haven’t taken off like wildfire. They may shortly, but they haven’t yet, because so many services go toward the deductible, and people aren’t willing to pay a lot less in monthly premiums to have all their prescription drugs and everything else go toward that deductible.”

Wise noted that Massachusetts was initially slow to approve HDHPs. “I think, when high-deductible health plans came out, the Division of Insurance was reluctant to approve a lot of them because of the concern over what the out-of-pocket costs could be for the workforce and people in the state, so they dragged their feet on allowing those to happen.”

But that’s changing, Gross said, noting that two or three years ago, high-deductible plans accounted for only 3% of Health New England’s offerings, about half what they are today. And a year or two from now, he expects the figure to be closer to 10% or 12%. “I do see high-deductible plans gaining more steam.

“I think employers are trying to partner with health-insurance plans to find affordable solutions,” he added. “Healthcare is expensive, and there are a lot of expensive medications out there. We all want the latest technologies, but those are expensive too. One way to think about these costs is to share them with individuals.”

In this way, he explained, HDHPs and HSAs fall under the broad category of consumer-directed health plans, which require patients to become much more actively involved in their own care because they’re always acutely aware of what it costs.

“They’re thinking, ‘do I need this service? Are there alternatives? Take prescription drugs, for example; people get tied into thinking, ‘I need this brand-name medicine.’ But if they engage in a conversation with their doctor about generic alternatives, maybe a generic will work in their situation. Another example would be someone with back problems. Do they go right in for surgery, or are there alternative therapies or physical therapy that might be effective? It’s really the consumer driving their own care.”

Employers might be moving toward high-deductible plans partly out of anxiety over the so-called ‘Cadillac tax,’ set to take effect in 2018, that will impose a 40% excise tax on the value of health-insurance benefits that exceed a certain threshold, starting with $10,200 for individuals and $27,500 for families, Binder noted.

“Employers are determined to avoid that tax, but that means slowing growth now or risk blowing the cap by 2018,” she wrote. “Employers used to hesitate to launch unpopular cost-cutting strategies like HDHPs so that they would remain competitive with plans offered by other employers. But pressure from the looming Cadillac tax is felt by all employers equally, so taking a risk on cost-cutting strategies now has less of a competitive disadvantage.”

Wise said the Affordable Care Act, for the most part, hasn’t scared employers, even small companies, off their current health plans, but the Cadillac tax is absolutely a concern.

“I think employers are concerned about the luxury tax coming up,” she said. “If premiums keep going up the way they are, and they would fall under the luxury tax, many of them are going to move to high-deductible health plans.

By All Accounts

At the same time, employers are finding more acceptance of HDHPs among individual consumers because of the combination of lower premiums and the availability of health savings accounts, which offer a number of tax savings, Gross said.

“As an example, I can deduct money from my paycheck and put it into my health savings account tax-free, and that money in the health savings account earns interest — some work like a regular bank account, and with others, you can invest the money. Those earn interest tax-free, and when you spend money [from the HSA] on qualified medical expenses, your payment is tax-free. That’s three ways, from a tax perspective, to save money.”

For consumers who don’t like being hit in the wallet for every single doctor visit and prescription up to their deductible, Health New England offers a hybrid plan — part of its “essential-products suite,” as Gross called it — that features lower premiums and higher deductibles (anywhere from $500 to $2,000) than traditional plans, but covers regular office visits and prescription drugs from the outset. “Because it’s not a qualified plan, you can’t have a health savings account with it, but people are migrating there; 30-40% of our business is in our essential-products suite.”

Gross uses a qualified HDHP and a health savings account himself and appreciates the flexibility it offers, he said. “I put money into it from my paycheck, and I use it as a way to save some money tax-free. I’ve used the savings account to pay for medical expenses — when I went to the doctor, instead of a co-pay out of pocket, I ran my card and paid the whole bill.”

These accounts are owned solely by the individual, and unfortunately, most employers choose not to contribute to them, he noted. “Some employers, a small percentage, may put money into health savings accounts to help employees get started. But the majority aren’t doing that.”

Companies, in fact, are more likely to opt for health reimbursement accounts, which the employer owns, and are typically a use-it-or-lose-it proposition; “if the person doesn’t use the health reimbursement account, the money goes back to the employer.”

Wise agreed, noting that “companies are moving to replace the HSAs, and many of the employers are not contributing to them.”

In short, employers are no different from individual consumers when it comes to seeking healthcare savings. And with high-deductible plans gaining acceptance against a backdrop of rising premiums for traditional plans, that trend looks likely to continue for the foreseeable future.

And that, for better or worse, puts the onus on patients to make decisions that are healthy for both their bodies and their bank accounts.

Joseph Bednar can be reached at [email protected]

Insurance Sections
At AXiA Insurance, Creating Value Is the Rule — Literally

President Michael Long

AXiA Insurance Services President Michael Long

Everyone who works for Michael Long follows what he refers to as his “Always Rules.”

They are part of a vision he created long before he opened AXiA Insurance Services Inc. and are the cause and reason behind the laughter that peals frequently from meeting rooms and cubicles in his Springfield headquarters, the smiles on the faces of employees, and the myriad perks, rewards, and awards they receive that range from engraved crystal wineglasses and decanters to unusual birthday gifts they are given at employee-appreciation events.

Their happiness translates into superb customer service, which falls precisely in line with Long’s belief system. “You can’t create value for your customers if you don’t create it for your employees first,” he said, explaining the reasons behind the eight rules he originally created and two he added later.

“I had been in the insurance business for 30 years before I launched this company, and during that time, I saw many valuable employees leave,” he said. “So I realized, if I wanted to be the best agency — not necessarily the biggest — I had to train my employees well and create an environment where they felt valued.

“I consult with my employees about where the agency is going and what is coming next. I also allow them to map their own careers and chart their own destination,” Long went on, adding that he posts the courses and/or certifications needed to move from one position to another and gives employees paid time off to get the education they need to move up in the company.

“What difference does it make to my employees if I am doing well, but they are not moving up with me?” he asked rhetorically. “People want to know what will happen to them.”

The majority of employees work four days a week on a rotating schedule, although they can work five instead if they prefer to do so. But longer workdays result in benefits to clients because it allows AXiA to be open from 7:30 a.m. to 6 p.m.

There are also three ‘snow teams,’ and if there is a blizzard, two of the teams can work from home. In addition, every employee is given two paid days off to volunteer for any charitable organization they choose.

Long’s belief that employees who feel appreciated provide better customer service has led to measurable success, and he has achieved every goal he outlined in the 10-year plan he created before he opened his full-service insurance agency in October 2001. “We’ve averaged more than 15% growth every year,” he said.

AXiA began as a one-man operation in a rented room in Market Place in Springfield. Today the business has 32 employees in six locations that include Springfield, Easthampton, Natick, North Kingston, R.I., and two offices inside MassMutual.

Long makes it a point to understand his employees’ strengths and weaknesses and avoids delegating any duty to an employee that he or she doesn’t truly enjoy or excel at.

“I’ve seen agencies that failed and others that were very successful,” said Long. “But I also saw many skilled and talented people fail because they were told to do things they were not good at. They should be allowed to become great in the areas they enjoy.”

He learned this lesson as a child and said it remained with him as he matured. Long said his mother and teachers did so many things to try to improve his poor spelling that it robbed him of time that would have been better spent focusing on subjects he enjoyed.

“So, what I bring to the table is a different view. I believe everyone has unique abilities, so I try to structure job duties so people are using those abilities,” he said. “The things they don’t do well are passed off to someone else who is great at those tasks and enjoys them.”

Natural Consequences

Long said the rules he created and the happiness of his employees has a direct relationship on the way customers are treated. A positive attitude must start at the top, he said, as he listed his rules, which are:

• Always create value for employees, customers, and vendors;
• Always plan toward the future with reasonable deadlines and objectives;
• Always support the people you work with;
• Always treat everyone with great respect;
• Always seek out education and growth;
• Always keep a positive attitude and outlook;
• Always work with the strengths of others;
• Always look for lessons from mistakes, not blame;
• Always look for and take advantage of opportunities; and
• Always work within your strengths and unique abilities.

“These principles allow us to provide the best service possible at the best price,” Long said, noting that, whenever the cost of someone’s insurance policy goes up by 10% or $100, they are contacted and given alternative options, which is possible because AXiA represents 20 insurance carriers.

Agents also analyze each client’s policies on a regular basis. “Customers are not insurance experts, and sometimes people are paying for things they don’t need, but lack coverage in other areas they should have,” Long said.

He told BusinessWest that the company began conducting annual team reviews for commercial clients two years ago to make sure their policies do not have any gaps or overlaps. They also do a full review of each personal insurance policy every two years, and clients receive a letter about any areas of concern, which are typically sent via e-mail.

“We have 80% of our clients’ e-mail addresses; the average in the industry is only 20%, and we also text information,” Long added. “It’s very important to our clients to communicate with them this way because they are busy.

“But everything we do comes back to my theory and the name of the company,” Long said, explaining that AXiA is a Greek word which translates to “value, capability, merit, worth, and worthiness” in English.

Director of Operations Alana Sambor said the approach makes a difference. “We have already reviewed the policies of more than 2,500 of our clients this year,” she said. “We want to make sure they have the right coverage at the right price, and we publish information we think they need to know.”

Alana Sambor

Alana Sambor says AXiA goes out of its way to regularly review clients’ coverage to make sure it reflects their needs.

One thing Long believes sets AXiA apart from other insurance agencies is its approach to new clients. “We don’t just ask to see a copy of their current policy and provide them with a quote,” he said. “We analyze it and ask them a series of questions, such as whether they own more than one piece of property, then come back with a report or recommendation about how their policy should look. It’s not an apples-to-apples quote; it’s based on what the person really needs.”

For example, a person may have a $250 deductible on their homeowner’s insurance policy. “But since it’s unlikely they will turn in a small claim, we may advise them to take out a larger deductible and purchase other coverage for things such as backed-up sewers or drains with the money they save,” Long said.

The company also continuously works to improve communications with clients. Two years ago, AXiA put an emergency phone number in place so customers can contact a representative 24 hours a day, seven days a week. “And we are looking at creating a mobile app as well as an interactive website, which we hope to launch next year,” Long said, explaining that it will give clients instant access to their claim history and premiums, so they can see what they paid for a policy years ago.

The new website will also allow commercial clients to issue certificates of insurance for themselves around the clock by logging into the system. “Many contractors, who range from painters to landscapers to truck drivers, need a certificate when they arrive at a new job site, and they often start work at 6 a.m., before we are in the office,” said Sambor. “We have had truck drivers who found they couldn’t leave California without a new certificate, which can be problematic due to the time difference. This will allow them to print whatever they need, any time of day or night.”

Caring Atmosphere

Long promotes his company by having the name AXiA emblazoned on special vanity license plates that are issued to all of his employees. He also purchases shirts, sweaters, and other articles of clothing that display the company name and logo.

But he believes it is his positive attitude and the gratitude passed on to clients by satisfied employees that most accounts for his growth and success.

Sambor noted the company is growing so fast that it interviews at least one new job applicant every month, but added they are very choosy about who works for them.

In fact, before Long hires someone, he spends a great deal of time making sure he or she will fit in well and comply with the company’s rules. “We always want to do what is right for the customer, so our employees must show up on time, finish what they start, and say ‘please’ and ‘thank you’ to every client,” he said.

“When I began my company, I laid out everything that I wanted to do for clients and told prospective employees about my value plan, and the majority of them are still with me today,” he went on. “But it’s a fast-paced environment, so we screen candidates carefully.”

That extends to making sure their unique abilities fit the role they will play in the business. “For example, our receptionist is not only very pleasant, she has real empathy for people. It’s important because she is the first person people talk to, which sets the stage for further transactions,” Long said.

Sambor agrees. “The atmosphere at AXiA makes it a place that is fun to work at, and even the small perks, such as a hot cookie machine and cappuccino/espresso machine, make a difference to employees. We spend more time together every day than most people do with their families, so we need to enjoy our jobs,” she said. “We have a team-oriented environment, and if one person is struggling or engrossed in a project, another person will cover for them while they complete what they need to do.”

Long also publishes jobs on the company website that don’t yet exist, but will be available in the future, as well as pay grades and levels so people know how much money they can expect to make as they advance through the ranks.

He feels that’s important because it helps him retain employees. “I sit down with each of my employees once a year and go over their individual goals,” he said.

The company is dedicated to going green, which has provided employees with additional perks and also resulted in benefits to clients.

“Eight years ago, we began going paperless, so we don’t have rows and banks of file cabinets. We e-mail policies to customers, unless they ask for a hard copy, and we plan to install solar panels in the building,” Long said. He added that allowing employees to work four days a week provides additional fuel savings and reduces emissions.

The company also recently began giving employees partial subsidies for gas if they drive vehicles that get high mileage. “And next year, we plan to do something smaller for the balance of our employees,” he added. “We don’t do things halfway.”

Bottom Line

Long identifies himself as a problem solver, and said it’s the approach he used when he began formulating the principles that would become the cornerstone of his insurance agency.

“I spend time identifying things that could hold us back, and look at situations and find resolutions other people wouldn’t think of,” he said. “I often tease my employees, but I believe people are supposed to laugh at work. If they are having a good time, they are more effective and efficient, and if they like their jobs, they do better at them, which leads to happier clients.”

Insurance Sections
Homeowners’ Liability Often Extends Beyond the Home

By JOHN E. DOWD Jr.

John E. Dowd Jr.

John E. Dowd Jr.

One misconception about homeowners’ liability insurance coverage is that it covers only incidents in the home. In actuality, the comprehensive personal liability (CPL) coverage under a homeowners’ insurance policy is really not associated with any location, other than the limitations and exclusions on the policy.

Here are some examples of what probably would be covered by CPL:

• Sports incidents: for example, you are playing golf and you drive a ball that hits someone in the head and disables them. If you are found liable, as long as you were not doing it professionally, your policy will likely provide coverage.

• After shopping at your local market, you accidentally drop a bottle of olive oil in the parking lot, and it shatters and bleeds the oil onto the pavement. Another shopper comes along, slips, and seriously injures herself on the pavement. While the assumption is that the injured party will take action against the market, the typical practice of attorneys is to go after everyone associated with the incident.

• You are on vacation at a hotel, and you are so excited to leave the room to enjoy a sightseeing tour that you forget to turn off the faucet. The running water causes significant damage to the hotel structure. The hotel decides to go after you for damages. Your CPL will defend you and may pay out damages if you are deemed liable.

• Your kid lends his skateboard to a friend, and the friend, who may not be experienced with the skateboard, gets seriously injured trying to make a maneuver. Parents can be held liable for this injury, and there is a very good chance this will be covered by the CPL coverage.

• If your dog bites a stranger at the park, your CPL will cover you as the owner and responsible party for the dog, as long as the policy does not exclude coverage for your dog breed. Some homeowners policies exclude coverage for breeds deemed dangerous, such as pit bulls.

Additionally, the CPL coverage will usually extend coverage for the following items, even if an incident happens away from the insured premise:

• Trailers that are not attached to a motor vehicle;

• Motorized golf carts;

• Watercraft that does not have a motor or is not more than a specified amount of horsepower;

• Sailboats below a certain length;

• A vacation residence (however, certain conditions may apply, so you also may need to schedule it); and

• Non-motorized bikes.

Here are examples where coverage does not exist and is excluded by nearly every homeowners’ insurance policy:

• Your cars, which are clearly excluded if registered for road use. This is exactly why you need to get a separate auto insurance policy;

• Motorized recreational vehicles, especially if they are off the premises;

• Any incident related to business; and

• Intentional acts.

Policies vary, so it is important to review your policy to see what may be covered and what may not be covered. Additionally, some policies allow you to endorse a coverage that may not be on the policy. This is why it is so important to sit down with your agent to address additional risks you may have and make sure coverage for those risks is addressed.

Liability coverage is perhaps the most important coverage you should have, simply because most of these cases involve attorneys, and if coverage exists, the insurance companies provide for your defense, as well as any settlement up to the limits of your policy. Again, an annual review of your personal risk exposure with your agent is essential. It could be a very short conversation with your agent from year to year if nothing has changed in your life, but more often than not, changes do occur that could expose you unnecessarily to a potentially uninsured loss exposure. Ignorance is never a good defense.

One thing that you should carefully note is that, if you are involved with any activity where you charge a fee of some kind, there is a good chance that the insurance company will deem this to be a commercial exposure and will therefore not cover the activity under your CPL. Your agent or broker is always available to answer these questions, and you should never hesitate to put him or her on the spot.


John E. Dowd Jr. is the fourth-generation president and CEO of the Dowd Insurance Agencies. The Dowd Agencies is a full-service agency, founded by his grandfather in 1898, which provides personal, commercial, and financial-planning needs. The Dowd Agencies has six offices in Western Mass.; (413) 538-7444; [email protected]

Insurance Sections
The Line Is Blurry, but Employers Must Be Careful Not to Cross it

By BILL GRINNELL

Bill Grinnell

Bill Grinnell

As business owners, our quest for increased efficiency and cost-effective solutions has led many of us to hire subcontractors. It often makes sense to subcontract for work outside of your expertise or for extra work during abnormally busy times of the year.

From an insurance standpoint, subcontracting work has advantages. A sole proprietor with no employees is not required to have workers’ compensation insurance in Massachusetts. Thus, this cost is eliminated by subcontracting work within the law.

But subcontracting work within Massachusetts law is much easier said than done.

Massachusetts Is Tougher Than the IRS

The laws governing subcontracting are much more complicated and stringent in Massachusetts than they are on a federal level. The IRS is the government agency that determines whether a worker is an employee or an independent contractor, due to the tax implications of the determination.

The IRS has a list of 20 factors it uses to determine a worker’s status. The factors pertain to how, when, and where the work is performed. Some of these factors include:

• Whether a worker must comply with the employer’s instructions for the work;
• Whether the employer provides specific training;
• Whether the worker must comply with hours set by the employer; and
• Whether the worker is on the job full-time.

In Massachusetts, the law presumes that everyone you hire is an employee until proven otherwise. You’ve heard of innocent until proven guilty? Well, in Massachusetts, every freelancer you hire is an employee until proven an independent contractor.

Misclassification Is Costly

Misinterpreting the laws can have unexpected and costly consequences. Employers found to have misclassified an employee as an independent contractor may be subject to income-tax liability for withholding that should have occurred with wages that should have been paid, FICA and FUTA contributions, state unemployment-contribution payments, potential overtime and other wages owed, workers’ compensation insurance premiums, and civil and criminal liability.

Non-willful violations of the law can incur fines of up to $10,000 and imprisonment for up to six months for a first offense. For violations found to be willful, the fine can rise to $25,000, and imprisonment can last up to one year for a first offence.

To steer clear of these landmines, ensure that your subcontractors qualify as independent contractors.

Three Critical Tests for Independent Contractors

In Massachusetts, there are three critical tests workers must pass to be deemed independent contractors: They must be free from the employer’s control, they must work outside the employer’s usual course of business, and they must do the same work regularly for other companies.

Freedom from Control
A worker must be free from the presumed employer’s control and direction in performing the service, both under a contract and in fact. To be free from an employer’s direction and control, a worker’s activities must be carried out with independence and autonomy. For example, workers should provide their own tools, set their own hours, and take their own approach to completing a job.

In the old days, paper-delivery boys and girls were deemed independent contractors. Today they are considered employees, and we no longer see young kids delivering papers door-to-door.

Work Must Be Outside the Usual Course of Business
To qualify as an independent contractor, the worker’s job or service also must be performed outside the usual course of business of whothat performs work that is part of the normal service delivered by the employer may not be treated as an independent contractor.

Here’s where the lines get sketchy. I have seen nightmares created by insurance-company auditors. If a home builder hires a plumber, is that outside of his usual course of business? Some insurance auditors interpret this law very strictly and take the position that any construction activity performed for a general contractor is in the same course of business. Thus, the auditor makes a charge for any uninsured subcontractors.

Work Must Be Done Regularly for Others
Third, an independent contractor must represent himself or herself to the public as being in business to perform the same or similar services. Furthermore, an independent contractor often has a financial investment in a business that is related to the service he or she is currently performing for the employer.

For example, if a restaurant were to hire the same driver to pick up meats and fresh produce every day and that driver only drove for that one restaurant, an employee relationship would exist.

Make sure your subcontractors pass all three tests to ensure that you will not be hit with penalties and saddled with a higher head count than you wish.

If you have questions about your subcontractor relationships, contact an insurance professional.

Bill Grinnell is president of Northampton-based Webber and Grinnell Insurance Agency; [email protected]

Insurance Sections
T.P. Daley Insurance Navigates a Changing Industry

From left, Tom, Kathy, Anne, and Jim Daley

From left, Tom, Kathy, Anne, and Jim Daley, second-generation principals at T.P. Daley Insurance Agency.

Insurance is certainly in the Daley family’s blood. But their father wanted them to be certain.

“Our father made sure we all worked somewhere else first,” said Anne Daley, one of four principals at T.P. Daley Insurance Agency, along with her siblings, Jim, Kathy, and Tom Daley.

In fact, all four of them were interested in joining the company their father, Thomas P. Daley, started, but he wouldn’t allow them to make the firm their first job. So they cut their teeth at large companies like Aetna, Travelers, and John Hancock.

“He wanted to make sure we liked the business and learned the business; he didn’t want us to come in as the boss’s kid,” Anne added. “That was the message: ‘get a little background prior to coming here. If you hate it, hate it with someone else; don’t hate it with me.’”

None of them, it turned out, hated the insurance field, and between 1985 and 1990, all four came on board, and run the second-generation family business in West Springfield to this day.

“It’s scary that we all ended up in insurance after graduating,” Kathy said, “but we all wound up here.”

They have fond memories of growing up around Thomas Daley’s workplace.

“When we were young kids, Dad used to call on all his customers, and he’d take us with him,” Jim recalled. As it happened, most of those clients were in construction, as Daley focused his business on performance bonds in the construction field. “So we would climb on all the equipment. I don’t remember how many times he’d be talking to the owner, and we’d be climbing on loaders and excavators. I remember coming home filthy, and Mom saying she’d never get the grease out of my coat.”

“We really did grow up with it,” Anne added.

With the help of the GI Bill, their father graduated from the University of Rhode Island, which at the time boasted the only insurance school in the Northeast, Kathy said.

He was a bond manager for Aetna in Springfield during the 1950s when he decided to start an independent insurance agency and become a bond producer rather than work for someone else as a bond representative, Jim explained. So, at the dawn of the ’60s, he and partner Bill Tuttle opened Daley & Tuttle Insurance on State Street in Springfield.

“Then Bill wanted to go to Eastern Mass. and focus his sales pursuits there,” Jim said. “My dad really liked the more parochial nature of Western Mass., so they decided to split up. T.P. Daley started in 1963, just him and one employee.” They moved the business across the river to Park Avenue in West Springfield, then relocated to their current location on Westfield Street around 1981 — the former site of Sweenor’s Candy.

“People come in and say, ‘I can still smell those bon bons,’” Jim said, standing beside a long counter where the Daleys still set out bowls of candy. “This is where the glass was, where they sold candy.”

But it’s not candy running through he family’s veins, Jim said, but insurance; in fact, he met his wife at a four-day-long ‘bond school’ in Texas. Simply put, this is a clan that truly enjoys the business their father started, and for this issue’s focus on insurance, they sat down with BusinessWest to explain why.

Bonding Agents

While the company has diversified considerably since its early days, T.P. Daley still specializes in bonds for contractors. “It’s not really an insurance product,” said Jim. “It’s a financial guarantee that the contractor is going to bid the job according to plan and then complete the job according to plan.

“The key focus for us is still contractors,” he added. “We do an awful lot of construction risk, both in insurance and bonds.”

The industry has changed quite a bit since the 1960s, however, a time when the surety world wasn’t set up to handle very large contracts. “So he had to go out and buy reinsurance for different layers of the contract size.”

Also, Tom noted, “he didn’t go through agents; he went directly to the customer. Now a lot of that is handled through agents.”

Despite the changes, Anne said — and there’s a tremendous variety today of what bond companies will accept — T.P. Daley still succeeds by fostering relationships, even though insurance products are viewed more and more like commodities, with clients in search of the cheapest price. “Although the field has grown and evolved tremendously, it’s still a relationship business here.”

She noted that there weren’t a lot of bond agencies when her father started out, and very few locally. “That has changed over the past 10 years — there are more agents in the area, and more agents in general working in the bond field.”

The agency’s location for the past 30-plus years

The agency’s location for the past 30-plus years is the former site of Sweenor’s Candy, which many customers remember well.

That means a much more competitive playing field, Jim said, which is a far greater challenge today than it was when the construction industry was rolling along throughout most of the 2000s. Even when the financial markets crashed in 2008 and triggered the Great Recession, contractors remained busy for awhile.

“Construction kind of lagged, so the industry was still rolling in ’08, ’09, even into ’10,” he said. “Those were good years for most contractors.”

But once backlogs were depleted, times got tough, and remain so today. Contractors have had to “sharpen their pencils” and cut their margins, he explained, and insurance companies heavily invested in construction have felt the pressure. “If there was more work, we’d see the margins come up, but there’s so much competition for the amount of work available out there that the margins have not recovered to their prior levels.”

The situation has been exacerbated, Jim added, by the fact that the government has been reluctant to access funds from the Chapter 90 Program, which pays for infrastructure-improvement projects in Massachusetts, and cities and towns have been loath to dip into their own budgets, “so you’re seeing deteriorating infrastructure; that’s exactly what’s going on.”

Rest of the Story

Fortunately, T.P. Daley’s array of products has widened considerably since the agency’s early days, encompassing a range of both business and personal lines, including home, auto, and life.

That side of the business has undergone changes as well in recent years, particularly with Massachusetts moving from set auto-insurance rates to a managed-competition system in 2008.

But while the Geicos of the world attract consumers with that last $10 off their premium, Anne said, “people buying online have to be astute.”

“They need to know what they’re getting for their dollar,” Kathy added. “A lot of times, people come in here, and we have to explain to them what they’re getting, what they’re protecting. We find that a lot of younger people buying online don’t know what they’re really getting — they just know it costs $400. You have to be educated, and that’s where we come into play.”

Or, as Jim put it, “we don’t want them to find out the hard way that the deductible was $1,000, when they thought it was $500.” Or that they didn’t include collision among their coverages.

“That’s the importance of an independent agent,” Anne said, “to explain what the coverages are, and then you decide what your needs are.”

Added Jim, “it’s more than just buying coverage. All those coverages mean something. It’s not just about the dollars. At the point of sale, that extra money in your pocket sounds like a good idea, but the financial consequences for saving a few dollars could be dramatic.”

That’s just one example of how customer service remains a valuable commodity at T.P Daley Insurance, Anne told BusinessWest. “That’s probably one of the key elements of this agency, our customer service. When you call, you deal with a family member.

“We’re literally 24/7,” she continued. “We give out our cell-phone and home numbers. Especially in the bond business, sometimes you need something tomorrow. I think that sets us apart from other agencies — our love of the service.”

Tom said it all goes back to Thomas Daley never turning anyone away. “Even if it was a tough situation, he always tried to help. He said, ‘give me your papers, and let me see what I can do.’”

Anne said she advised a client on insurance products for six years before writing a policy. “They’d call with questions, and I’d help out any way I could. I knew them from high school. Ultimately, when they needed to make a change, they came to us.”

The Daley siblings hope customers keep coming, and they sense some interest among their own children in turning the business into a third-generation affair someday, but they also know it’s a challenging field, and, like their own father, they want their kids to be sure.

“This is a changing industry, and I think there’s a lot more pressure on people now than there was 20 years ago,” Anne said. “It’s not an easy business, but it’s rewarding.”

Jim agrees. “There have been some dynamic changes from the old-school days to now,” he said. “That’s not to say it’s lost all its luster; it’s still got some positives that make you want to come to work. And I think people here enjoy coming to work.”

Even if they don’t get to climb on heavy machinery anymore.

Joseph Bednar can be reached at [email protected]

Insurance Sections
Long-term-care Insurance Is Crucial, but Often Expensive

LongTermInsuranceHourglassPatricia Grenier doesn’t miss an opportunity to talk about long-term care — and the insurance products available to pay for it.

“I talk about it with every client who crosses my desk,” said Grenier, general partner with BRP/Grenier Financial Services in Springfield. “I discuss how they’re going to take care of themselves, what their plan is for long-term care, and we discuss all the options; they can self-insure. They could give away all their money and live off the state, but who wants to be poor? That’s not the goal. They could move in with family — usually their kids — but nobody wants that.”

As Baby Boomers surge into their retirement years and Americans are living longer, on average, than ever before, the rising cost of long-term care — which may include everything from home care to assisted living to skilled nursing care — is not a matter to be taken lightly. The cost projections, for all tiers of care, are daunting.

In fact, according to Genworth Financial, the largest seller of long-term care policies with roughly 35% of the market, the median annual costs of care in Massachusetts are:

• $126,290 for nursing-home care in a semi-private room, or $134,320 for a private room, with costs rising about 4% per year;

• $62,964 for a one-bedroom assisted-living unit, rising about 4% per year;

• $57,200 for a home health aide, or $52,625 for homemaker services, costs expected to remain fairly steady; and

• $16,900 for adult day healthcare services, with costs rising about 3% per year.

In other words, the costs rise steeply with the level of care required, and these are numbers that most Americans are simply unable to handle on their own.

“Unfortunately, very few people are prepared to deal with this risk, as less than 8% of people have long-term-care insurance, and only 10% of people in the U.S. have a long-term care plan in place,” notes Jamie Hopkins, who writes about retirement-income planning for Forbes. “This lack of planning is extremely troubling because long-term care is a very real and expensive risk, as nearly 70% of people will need long-term care at some point.”

Frank Carrazza, director of Financial Planning at St. Germain Investment Management in Springfield, said there are many reasons why people put off buying long-term-care insurance.

“We all know that, once we get older, it would be nice to protect ourselves so we don’t have to lose our assets,” Carrazza said. “The ideal time to buy, for most people, is probably between 50 and 55, when premiums are reasonable. But at ages 50 to 55, they’re not thinking about retirement that much, and they’re still accumulating for retirement. When people get to age 65, 66, 70, they may re-evaluate.”

By then, however, premiums are more expensive.

“Let’s say you want to buy a long-term-care policy in the area of $250 to $300 a day. It’s very expensive. On average, a 65-year-old couple, if they’re in good health and non-smokers, might pay $6,000 to $8,000 a year, depending on the benefits. A lot of people can’t fit that into their budget. Or, people with substantial assets, who can afford it, might not pay for it, but figure they can use their own resources later on.”


Tough Decisions

Dan Caplinger, director of Investment Planning for the Motley Fool, says the idea of decades of ‘sunk costs,’ never to be recovered, worries people, especially when rates go up.

“Insurance agents typically advise people to obtain long-term-care insurance as early as possible to reduce costs, as premiums are much lower for younger policyholders who are less likely to need benefits in the immediate future,” he writes. “What that means, though, is that those who’ve held onto their policies a long time have already paid tens or even hundreds of thousands of dollars in policy premiums without having gotten a dime in benefits to show for it.”

And when faced with possibly hundreds of dollars in extra premium payments each month, many people — especially those on a fixed income — find themselves trapped by the spectre of the rate increase. “That will prove an impossible task, and they will have to accept lower benefits or even give up their policies entirely — thereby having essentially wasted all the money they’ve spent on premiums for years.”

Howard Krooks, an elder-law specialist in Florida, told the New York Times that he advises clients faced with an increase of 20% or less to “bite the bullet” and pay it, even if they think it was unfair. If the increase is much higher, they may consider reducing their benefits — for instance, by accepting a daily benefit amount of $250 a day rather than $350 — to keep the premium down.

Pat Grenier

Pat Grenier says she makes a point of talking to virtually every client about long-term-care insurance.

And those rate increases keep coming. Genworth began seeking increases on its existing policies in 2012, with the goal of raising between $250 million to $300 million in additional premiums by 2017. Meanwhile, Grenier said, John Hancock is raising rates by up to 50%. “That’s amazing. And I think Genworth is going to gender underwriting, where before it was unisex. Now women are more expensive — because, statistically, women still live longer than men.”

A new trend, Carrazza said, is an option for a large lump-sum payment — say $50,000 — which is refundable if it’s never used, as opposed to a monthly premium, which customers typically don’t get back.

Whatever the product, he added, the market is becoming tougher for customers, with higher rates, lower benefits, and fewer options available than there were years ago.

“Fewer companies are offering the product, and those fewer companies are now underwriting the product,” he explained.

“What that means is, if someone wants to apply, instead of just filling out an application and having a telephone interview, in most cases, people are required to complete a paramedical exam — the same type of exam taken for a life-insurance policy. Insurance companies are losing money with the product, so they’re raising premiums and underwriting the product to improve their claims experience. And, from a customer point of view, that makes it harder to get the product.”

Insurance companies say the changes are necessary. Caplinger noted that they paid out almost $7.5 billion in claims for long-term-care benefits in 2013 — a 13% rise from the previous year, with benefits going to 273,000 policyholders across the nation. He cited another study projecting that current benefit payouts will double by 2023 and rise to $34 billion by 2033 as more people start accessing their policy coverage.

Expensive — but Necessary

Despite the expense, long-term-care insurance remains a critical product, said Grenier, who said the ideal age to purchase it is in one’s late 50s or perhaps early 60s.

“It’s absolutely a necessity,” she told BusinessWest. “A couple could spend around $250,000 a year [on care]. That’s a lot of money. So I do talk to everyone about it.”

There are some creative options for families willing to sacrifice together, she said, noting that she and her siblings actually pay the premiums for their parents’ long-term-care insurance.

“Many times, people who are retired have a hard time making ends meet. For me, I’d rather pay a premium now on a monthly basis than come up with tens of thousands of dollars later on. I look at it as a family issue.”

Grenier joked that the decision was partly a “selfish” decision, to avoid huge out-of-pocket expenses later, but quickly got back to the idea that her family wants to make sure their parents are cared for.

“Obviously, we want them taken care of well, and that could be more expensive than just paying a monthly premium today — and, of course, I have siblings helping out,” she said, adding that, in many families, especially those scattered around the country, one child takes the lead in caring for — or financing the care of — a parent, which can cause rifts and resentment in the family.

“It’s very difficult when one lives in California, and you’re in Massachusetts. How do you handle that care?” she said. “In the old days, our elders lived with us. Now, that doesn’t happen. And the government doesn’t have the money it used to have; we are responsible for ourselves.”

Other options exist for paying for long-term care, Hopkins notes in Forbes, including reverse mortgages and income annuities.

“While self-funding, long-term-care insurance, Medicaid, and family-provided care will continue to be the primary sources of long-term-care funding for the foreseeable future, the market is changing, and more people are becoming aware of these new and alternative ways in which to pay for long-term care,” he writes. “Whatever avenue you decide to take, having a plan in place is crucial.”

Grenier agreed. “It’s a rising trend. It’s a need for more people, I think more people are aware of it, and more people are buying it.”

Even as rates continue to rise.

“Long-term care is going to get more expensive,” Carrazza said. “That’s the really sad part about it. It’s difficult.”

Joseph Bednar can be reached at [email protected]

Insurance Sections
Nathan Agencies Have a Host of Client Needs Covered

Glenn Allan, Anna Holhut, and Dean Paddock

Glenn Allan, Anna Holhut, and Dean Paddock offer a diverse array of insurance products to individuals as well as business owners.

Ron Nathan says many people think they are secure, while others don’t worry about their financial futures in the event of a calamity. But the first assumption can be erroneous, and the second approach can result in financial devastation.
“I’ve grown up seeing a lot of people who are totally unprepared for a catastrophic situation, like a death in their family,” he told BusinessWest. “Others save for something specific, such as their children’s college education, but don’t think about their own retirement because they are so focused on one goal. Then, when it comes time to retire, they realize they never planned for their own future.”
Thus, he has dedicated his life to preventing such scenarios from becoming reality, and is proud that the Nathan Agencies in Amherst, which began as a small firm 45 years ago, have grown steadily over the years, offering one-stop shopping to meet people’s insurance and financial-planning needs.
Three companies — Amherst Financial Services, Amherst Insurance Agency Inc., and Andrew Paddock Insurance Agency Inc. — make their home under the agencies’ umbrella on 20 Gatehouse Road and have well-educated employees who strive to help clients plan for and protect their financial futures. Together, they offer comprehensive services and products that range from financial planning, investments, and estate planning to life insurance; long-term-care insurance; auto and home insurance; renter’s insurance; business, health, and disability insurance; and other forms of commercial insurance.
Nathan said many clients do all their business under the umbrella, but others have policies with different agencies or have their own financial advisors. But his passion for helping people has no boundaries, and if he discovers they don’t have adequate coverage, he makes them aware of what they need, then advises them to call their own agent.
“You need to look out for people’s best interests and help them,” Nathan said, adding that he is concerned that schools don’t provide young people with the education they need to manage their finances, “never mind how to invest money. And it’s so important.”
Nathan said exceptional customer service is the foundation of his firm’s success and accounts for the extensive number of awards it has received. “We go above and beyond and do things such as assisting people with insurance appeals to avoid a surcharge,” he said, as he spoke about services provided following an auto accident.
Anna Holhut agrees that clients need help whenever they suffer a loss. She worked for Nathan for decades before she and Glenn Allan purchased Amherst Insurance Agency from him in 2012. “We’re not related to Ron, but we still run it like a family business,” she told BusinessWest.
She recalled going to the scene of a house fire immediately after receiving a call from the building inspector. The homeowner had given him her name and number as he was readied for transport to the hospital via ambulance.
After leaving the house, Holhut visited him in the hospital. “I wanted him to know that his pets were in good hands as well as how he could get back into the house,” she said. “When there is a loss or problem, we really come to the plate.”

Growing Enterprise
In 1969, Nathan founded the Nathan Agency. He had moved to Western Mass at age 21, was selling life insurance to college graduates and graduate students at UMass Amherst, and liked the area.
At the time, the young agent faced significant competition, but he worked four nights a week as well as during the day, which soon led to success.
In the early years, life insurance was his primary product, but by the ’70s, Nathan had begun to expand his product lines. As a result, the firm experienced steady growth, and in 1978, he moved from Pray Street in Amherst to his company’s current location.
A year later, when the owner of Amherst Insurance and Real Estate Agencies became ill and left town, he purchased that business and changed his company name to the Nathan Agencies.
Although he had earned his stockbroker’s license at age 23, it wasn’t much use to him at the beginning of his career, as the college students to whom he sold life-insurance policies did not have money to invest. But after the move to Gatehouse Road, Nathan began thinking long-term.
“I envisioned creating a one-stop shopping place where people could get competent professional help in all areas of insurance and financial planning,” he said.
To that end, he persuaded an attorney to move into the building, and in 1987, he earned a degree as a chartered financial consultant from the American College of Financial Services.
In 2001, the Nathan Agencies expanded again when the Andrew Paddock Insurance Agency Inc. moved into its building. The expansion came about as a result of relationships Andrew’s son, Dean Paddock, had formed with Nathan, Holhut, and Allan. “I had taken over my father’s business in 1990 when he retired, and in 2001, I decided to move the business from Hadley and join Ron, Anna, and Glenn,” Paddock explained.
Today, even though Nathan has realized his dream and is proud that Nathan Agencies offers a wide array of products and services, he still focuses considerable energy on the product he started with — life insurance.
“It should be part of everyone’s financial planning, but many stockbrokers and people with investment backgrounds don’t believe in it or really understand life insurance and its benefits,” he explained. “But people need to have a lot of things in place to be secure — an attorney, a will, guardians for their children, and insurance coverage for their mortgage if they die.
“They also need to think about disability insurance, and, as they get older, they should think about long-term-care insurance,” he went on. “And if they accumulate wealth, they need to make sure they have proper liability in their auto and homeowners’ policies because, if someone sues you after an auto accident or after they slip and fall in your home, you could lose all your assets.”
The trust he has built with clients, a hallmark of the Nathan Agencies, is reflected in relationships formed by employees in all three companies. The businesses continue to grow, and Nathan attributes part of this success to the fact that his broad enterprise is family owned.
“Many family-owned auto and homeowners’ insurance companies have been purchased by other firms and become more of a retail business,” he noted. “But I believe very strongly in personal service, which started with the fact that I grew up in the life-insurance business and brought the same concepts I used with those clients into the property and casualty agency.”
Today, his continued focus on educating and protecting people has made him concerned about people who purchase insurance via the Internet.
“I don’t think it’s necessarily by choice or because they want to,” he told BusinessWest. “It’s because they don’t know where to go, and, as a result, an enormous segment of the population is not getting any financial planning advice or help with insurance.
“But we are a source for that,” he continued. “We have developed trust on both sides of the agency, and because most of our staff has been here for so long, they have had the opportunity to grow in the direction they enjoy the most, and are experts in their field.”

Community Service
Nathan has seen many people suffer as a result of their failure to protect themselves financially.
“So we try to protect people on all sides; the whole concept of our agency is a one-stop place to shop,” he reiterated, adding, “I started from scratch and was the smallest agency in Amherst. Today, we are not the largest property and casualty agency, but between both sides of our business, we do as much business as anyone in the Pioneer Valley.”

Insurance Sections
If the Answer Is ‘No,’ the Consequences Could Be Costly


By MICHAEL LEVIN

When it comes to cyber security and data breaches, no system is infallible. Some of the largest companies in the world have been victims of data breaches.  Recently, the Swansea, Mass. Police Department contracted the CrytoLocker computer virus, and paid ransom to gain access to their files.

While large breaches like those at Target, Neiman Marcus, and Yahoo! receive great media attention, smaller breaches occur daily without much fanfare. A common misconception is that malicious hackers target only large companies. However, small and mid-sized companies are often perceived — for good reasons — as easier targets due to their limited IT resources.

What is the incentive for criminals to steal data? There is a large black market for stolen identities. Some estimates put the value of stolen personal identifiable information (PII) and personal health information (PHI) at $5-$10 per record, depending on the information. Malicious hackers who gain access to computer systems have the potential to modify accounts-payable data and change bank routing numbers.

Human Error

Another common misconception is that most breaches result from a hacker sitting behind a computer in some foreign country. Malicious hacker activity has and will continue to occur; however, some studies estimate that approximately 50% to 60% of breaches result from simple human and system errors.

For example, unencrypted laptops and smartphones that are lost or stolen pose a large threat, as do data backups brought home by an employee for off-site storage. Lost or weak passwords continue to be an issue as well. It’s fairly common to see a sticky note on an employee’s computer monitor with their username and password to access the enterprise software system (hopefully not the controller).

In addition, people often mistakenly send e-mails to someone other than the intended recipient. How many times have you replied to an e-mail that started with, “I think you meant to send this to another person?” If the e-mail contains PII or PHI, this may be a breach.

Not understanding the technology in your office can also result in a breach. Affinity Health Plan Inc. settled with the U.S. Department of Health and Human Services (HHS) for $1.2 million when it returned leased photocopiers with 344,579 personal health-information records on the copier’s hard drives (yes, modern copiers have hard drives that store data).

Human error breaches are not limited to digital data. Improper disposal of documents that contained PII or PHI has led to breaches. The list of exposures on the human-error side alone is limited only by one’s imagination.

Cyber Risk Management

Implementing preventative measures, best practices, and a strong backup solution help reduce, but not eliminate, the risk. An incidence-response plan that details responsibilities and vendors is crucial to quickly address a breach and to avoid panic buying. Many state laws have time deadlines for certain actions.  The clock is ticking once a breach has been identified. A written policy and plan detailing security measures will be of assistance should you be interviewed by the Office of Civil Rights, HHS, or the state attorney general.

Potential Cost of a Cyber Incident

Expenses from a data breach or a cyber incident vary and can be quite high. Beyond the intangible cost associated with the loss of consumer confidence, organizations may face lawsuits, regulatory expenses, regulatory-defense costs, notification costs, and business-interruption losses.

In order to limit the damage, organizations often hire public-relations firms, outsource call centers, provide credit monitoring for at least a year (required by law in some states), and provide identity-fraud insurance.

Forensic specialists may be required to identify and remediate the source of a breach that results from an organization’s computer systems. Again, the clock is ticking. Not finding and resolving all the issues with a system creates further exposure down the road.

As discussed earlier, part of a comprehensive cyber risk-management program is to have a good backup solution and to monitor it regularly to ensure that data is consistently backed up. Without a solid backup strategy, organizations may incur data-restoration and computer-program-restoration expenses — assuming the data and programs can be restored.


Cyber-liability Insurance

It is important to understand that a general-liability insurance policy typically does not respond to cyber exposures. Available cyber-liability insurance coverages include network and information-security liability, security-breach remediation and notification, hacker damage, crisis-management expenses, business interruption, cyber extortion, media, data restoration, and computer fraud.

Today’s cyber-insurance policies are flexible so that you can choose coverages based on your unique needs, exposures, and risk tolerance. Developing a meaningful cyber-insurance program requires an understanding of an organization’s IT systems, data-security best practices, and level of employee education.

In Summary

Whether or not they realize it, most organizations, no matter the size, have some sort of cyber-security or data-breach exposure. If you store personal identifiable information or personal health information, your risks increase exponentially. And these risks are here to stay.

There are far too many cyber-security exposures to be covered in a single article. It is important to work with an insurance agent who is capable of understanding your exposures and who can match insurance coverages and carriers to meet your unique needs. A properly structured cyber-liability insurance policy can be an important element to an organization’s overall cyber-risk-management program and long-term sustainability. n


Michael Levin is an account executive at the Dowd Insurance Agency, a full-service agency providing personal, commercial, and financial-planning needs, with six offices in Western Mass.; (413) 538-7444; [email protected]

Insurance Sections
At Webber & Grinnell, the Devil Is in the Details

Bill Grinnell

Bill Grinnell says his job is to protect businesses, and education is a big part of that.

The sales pitch at Webber & Grinnell Insurance often comes down to one simple question: what are you not covered for?

“That’s part of our renewal process, focusing on what coverage is lacking,” said William Grinnell, who, along with Richard Webber, has led this Northampton-based insurance agency to steady growth for almost two decades. “Business owners get a sense of where they’re exposed, and what they really want to know is what they’re not covered for.”

Take, for example, the broad realm of business-practices liability.

“That’s a huge one,” said Mat Geffin, vice president of business development. “They think, if they’re sued by an employee, their general liability coverage protects them. It won’t. There are exclusions for employment-practices types of claims, like sexual harassment and wrongful termination — those are a totally separate type of policy, completely excluded under your general liability.”

And, in an ever-more-litigious society, that’s no small matter for an employer.

Those suits are frequent; my clients have seen a lot of those this year,” Geffin said. “The more employees you have, the more turnover, the more likely it is that these suits will occur.

“It’s a huge risk,” he added. “I’ve had clients who have done all the right things in terminating a problem employee, but nothing’s stopping them from going to Mark E. Salomone and filing a lawsuit. That’s where that employment-practices policy steps up to protect the company.”

Sometimes, Grinnell noted, employers think they’re doing everything right and don’t believe they’re exposed. “But anyone can sue for any reason, and defense is very expensive and time-consuming” — often to the tune of thousands of dollars small businesses just can’t spare.

Fortunately, he added, the agents at Webber & Grinnell are trained to think like underwriters; in fact, even the most dynamic salespeople won’t get hired if they aren’t able to dig into the fine print of an 80-page policy, understand its strengths and weaknesses, and make sure clients understand them, too (more on that later).

“We help them understand that everyone out there has different risk tolerances,” Grinnell told BusinessWest. “Our job is to help them make an informed decision about what insurance they’re going to purchase.

“Our obligation is, obviously, to protect those businesses,” he added. “They had better be protected right, or we’re exposed, too.”

Digging Deep

Grinnell said his agency focuses on the property/casualty market. “Our main lines of coverage are workers’ compensation coverage, commercial property, and general liability,” as well as home and auto insurance.

On the business side, he said, some nuances have changed the game over the past decade or so. For example, workers’ compensation has become much more complex, and many employers’ policies are fraught with mistakes in classification or experience modification calculations — although companies are becoming more savvy on these matters.

Mat Geffin

Mat Geffin says cyber liability is one of the hot insurance trends that companies of all kinds need to be aware of.

From a liability standpoint, said Geffin, there’s more of a trend toward cyber liability, with more companies, especially retailers, doing business online. “It’s an area of growth in the insurance industry — you see all these lawsuits; you see Target losing millions of customer records,” he noted. “What happens when small businesses in this area are being hit with some of those exposures? They’re not all covered for it, and that’s the new thing we’re talking to people about.”

On the personal-lines side, Grinnell said business is always changing. “It’s been ever-more competitive with the introduction of competitive auto rates several years ago, so we battle with that.”

In the midst of such competition, Geffin said, “I do believe a differentiator for us is our knowledge, being a pure coverage insurance agency. We’re not out there just hawking prices. We really do take a hard look at the coverage, talk intelligently, take an underwriter’s approach to it. Bill and Rich were both underwriters, and were trained to look at risks like underwriters.”

Indeed, Grinnell’s first job after graduating from college in 1984 was with United States Fidelity and Guarantee Insurance in Boston. He received in-depth training there, which provided him with advanced knowledge of how policies are constructed. Webber had similar training experience at Aetna as an underwriter, and Grinnell attributes most of the company’s success to an ability to carefully examine policies, because, while clients are expected to read their policies, he realizes that they don’t always understand them.

Grinnell purchased his father’s agency, then known as Woodward and Grinnell, in 1997, and soon after teamed up with Webber. Their relationship has been synergistic, with Grinnell focusing on sales, and Webber spearheading office adminstration, technology, and relationships with larger carriers. Last fall, Grinnell became the company’s sole owner, and Webber is now vice president of operations.

Unlike insurance agencies that use a cookie-cutter approach to policy writing, Grinnell said, his salespeople are required to take a highly individualized approach.

“Everyone has different problems, and you’ve got to identify what the issue is and then capitalize on it,” he explained. “It might be a service issue, it could be a problem they had with a claim, a coverage issue … any of these things.”

One of the firm’s advantages is the number of commercial markets it represents, he added, and the leverage that brings. “As opposed to a smaller agency, we have dozens of different commercial insurance companies to approach, and we can get a good, competitive package from one of them.”

Knowledge Is Power

But Webber & Grinnell brings knowledge and information to its clients beyond crafting their policies.

Significantly, the company sends clients something called Business Digest, a national insurance newsletter agencies personalize according to their own needs. “Sometimes it contains timely topics concerning insurance coverage,” Grinnell said, “and sometimes it focuses on insurers and best practices and what we’re doing well to manage a particular risk they might have in their business.”

Over the years, the firm has also established informational hotlines for OSHA and human-resources matters, a workers’ compensation hotline staffed by an attorney in that field, and seminars on topics ranging from sales fundamentals to hiring rights to corporate leadership — all these efforts geared toward moving beyond the insurance relationship and becoming more of a partner with clients, to help their businesses run smoothly.

All those efforts are part of growing Webber & Grinnell, both in size and in scope of services, Geffin said. “We have a lot more competition that has come in with the direct writers, like Geico and Progressive. But we’re trying to grow.”

One reason that’s a challenge, Grinnell said, is that the agency is extremely cautious in its hiring process. “We’re very selective about who we take on. We’re trying to find a salesperson who fits our culture, and it’s very difficult. We get a lot of people in the door, but we don’t take many.”

The reason has to do with the dual nature — personal and technical — of what the company demands.

“You’ve got to be bright, and you’ve got to work hard,” he told BusinessWest. “And you’ve got to be a person who’s able to handle the technicalities of the insurance world and all the little details in the policy, and, at the same time, get along with people, communicate well with people, and build firm relationships.”

Geffin agreed. “It’s very much a hybrid type of role,” he said. “A lot of salespeople are not good at the technical standpoint, that other side of reading the contract language and interpreting the contract language. There might be hundreds of pages, and 100 ways you can write it depending on the risk. You need a very special person, and it’s very hard to find that mix.”

Even for employees who don’t deal directly with clients, the standards are high, Grinnell said. “Internally, we’re looking for a slightly different skill set, but, again, we test everyone who comes in here, interview them several times, check their references. We’re very selective about hiring. And I think that gives us an advantage.”

Giving Back

With so many human needs in Western Mass., the company also has to be selective about its charitable efforts, which Grinnell said have long been a part of the agency’s culture. These days, for example, Webber & Grinnell heads up campaigns for United Way of Hampshire County and United Way of Pioneer Valley, among other efforts.

“I don’t know if this is true for a lot of agencies, but we do a lot philanthropically in the Valley,” Geffin said. “It’s a huge commitment. Bill and Rich have always led by example, by giving back to the community that supports us. I think that’s a good message.”

It’s just one more detail that this insurance company strives to get right.

Joseph Bednar can be reached at [email protected]

Insurance Sections
Phillips Insurance Agency Specializes in Surety Bonds

Joseph Phillips

Joseph Phillips says the bonding process, while complex, should be considered an opportunity for businesses, not an obstacle.

Joseph Phillips is drawing a triangle to illustrate how a surety bond works. One leg is upheld by a contractor, and the other is held by a bonding company. The business owner, city, or agency that hired the contractor sits at the top.

The president of Phillips Insurance Agency in Chicopee explained that a surety bond is a type of guarantee, and if the contractor fails to complete a project, the owner can go directly to the surety bonding company to remedy the situation. “Surety is defined as a third-party guarantee, and the surety bonding company guarantees that the contractor will perform the work as stated in the contract,” he said, adding that this includes paying subcontractors and suppliers.

Although the concept is not difficult to understand, Phillip says confusion and misperceptions exist about the prequalification process required to post a bond. He admits it takes time and can be frustrating, but contractors who complete it have an edge in an industry that has become increasingly competitive. Bonds allow contractors to work in both public and private sectors and thus weather changes in the economy during an era in which more and more owners and banks require that projects are bonded.

Phillips is passionate about his work, and he and his 18 employees have spent close to two decades educating and helping clients complete the bonding process, which many don’t attempt because they consider it too complex or difficult.

But Phillips says it is a good investment of time. “People should not consider it an obstacle, but an opportunity to expand their business,” he told BusinessWest.

He has been dealing with surety bonds since he graduated from college, and today, due to his efforts, Phillips Insurance has become one of the largest bond and construction insurance writers in the Northeast. “We have the same expertise in surety bonds and risk management for contractors as our competitors in New York and Boston, and can respond to needs whether they are simple or complex,” he said.

Although his agency also writes automobile, home, and business insurance policies and serves 150 clients in 12 states, 80% of its work is with bonds.

Phillips does what it takes to attract and retain clients, and that includes meetings at 5:30 a.m. in a wide variety of places, including airports. “I’ve written bonds for contractors in Las Vegas whom I have never met,” he said.

Jocelyn Keech

Bond Administrator Jocelyn Keech is one of 20 employees at Phillips Insurance Agency in Chicopee.

He takes great pride and satisfaction in connecting clients with the companies that offer these third-party guarantees. What sets the company apart from the 38,000 other insurance agencies in the U.S. is that it is a member of the National Assoc. of Surety Bond Producers, Phillips said, adding that the organization has fewer than 500 members due to the difficulty of fulfilling its requirements. He is past president of the Surety Assoc. of Massachusetts, and has earned both his AFSB (associate in surety and fidelity bonding) and CRIS (construction risk and insurance specialist) designations.

Phillips advises contractors who are unfamiliar with the bonding process to visit his agency’s website — www.phillipsinsurance.com — and read the publication link titled “Your First Bond,” as well as other educational material posted there.

Changing Direction

Phillips Insurance Agency celebrated its 60th anniversary last year by giving $1,000 each to 10 nonprofits that were nominated by their clients, then voted on by the public. Winners included the Boys & Girls Club of Chicopee, the Constanza Medical Mission, the Assoc. for Community Living, the Sisters of St. Joseph, Camphill Village USA, and others. In addition, the agency donated $1 to Shriners Hospital for every ‘like’ it received on its Facebook page.

The company dates back to 1953, when Joseph’s father, Cornelius Phillips, purchased the William J. Fuller Agency in Chicopee. The Fuller Agency had been in business since 1898, and Cornelius renamed it and chose to focus on auto and home insurance.

A major shift occurred when Joseph took the helm after his father’s death in 1997 and put his focus on the surety bond market.

He had worked for Fidelity and Deposit Co., which is the oldest bonding company in the U.S, after graduating from college, then was employed as a bond writer for Liberty Mutual before he returned to Chicopee to join his father in business.

The company has always valued its employees, and when Joseph joined his father, there were only two employees. They included 52-year-old Jeanne Jones, who was employed by Cornelius at age 16 and is still working at the agency.

“We also have three employees who work remotely,” Phillips said, noting that he chose to keep these individuals when they moved from Western Mass. to distant states.

Phillips also places a high value on education, so the agency’s website contains a wealth of information about the bonding process. In fact, he finds great satisfaction in helping people obtain their first bond.

“It’s intimidating for small companies — the process can be confusing, and many people don’t think they can get a bond,” he said, adding that the agency receives a number of referrals from local certified public accountants and commercial lenders. “But if the person goes through the steps and understands what is required, they leave behind a slew of competitors who failed to do what is required to bid on public projects.”

Phillips said surety bonds resemble an extension of a line of credit at a bank, and the practice of issuing them dates back to ancient Egypt. They have been used throughout U.S. history as well. In fact, Franklin Delano Roosevelt was bond manager for Fidelity and Deposit Co. in New York from 1921 to 1928 before he was elected president in 1932. Three years later, passage of the Miller Act in the U.S. made it a legal requirement for a bond to be issued for all federal public works projects that exceed $100,000.

Phillips admits that trying to get a bond for the first time can be a frustrating process for people who don’t understand what is needed. “When a surety company underwrites a new account, they are looking for the three Cs  — capital, capacity, and character — or the moral and ethical nature of an individual or business entity,” he said. He defines ‘capital’ as a measure of the contractor’s ability to do the work, their working capital, and bank support; ‘capacity’ as their ability to perform a job, which includes their experience, people, and equipment; and ‘character’ as the contractor’s moral or ethical nature and reputation.

In order to gather that information, his agency becomes deeply involved with clients. “We learn the history of their company, their financials, their capabilities, and their failures and successes. We become trusted advisors, like certified public accountants or attorneys, and we have a very high retention rate,” he said.

After the agency gathers all it needs from the person or company, employees analyze and review the material. When that is complete, Phillips determines which bonding company will best serve the client’s needs. “We have the experience to see that the client is placed with the bonding company that matches up best with their type of construction, size, program, and financial position,” he said.

The final step involves submitting a recommendation and the required documents to the chosen bonding company and working out a program for the client. Phillips has access to most of the top 25 surety companies in the country and also offers complimentary products such as builders’ risk, railroad protective coverage, pollution liability, and more.

Projects for which Phillips Insurance recently executed bonds include:

• An $11 million bond guaranteeing the reconstruction of the William F. Davitt Memorial Bridge in Chicopee on behalf of the Mass. Department of Transportation;
• A $10 million bond for the Central Campus infrastructure project at UMass Amherst;
• A $35 million bond for a state utility company for an infrastructure project;
• An $11 million bond written for the masonry portion of the $100 million Commonwealth Honors College Complex at UMass Amherst; and
• A $12 million bond written for a HUD housing project in Greenfield.

Phillips has also written bonds for clients on projects nationwide. They include various clients at the $10 billion Global Foundries project in Malta, N.Y., as well the granite contractor at the Cosmopolitan in Las Vegas.

“We’ve bonded projects from $100,000 to $50 million, and have written bonds for subdivisions, landfills, and solar projects,” he said.

And new work is expected after a license to build a casino in Western Mass is issued, as widely expected. “We’re excited about it. It will be a $500 million-plus project, and if the owner decides to protect the project by bonding the contractors working on it, we will benefit,” said Phillips. “We’ve also seen a lot of activity in solar-field construction, which we expect to be a big part of our bond writing over the next three years.”


Promising Outlook

The Phillips agency’s business in surety bond premiums increased by 30% last year from the year before, and it continues to acquire new accounts.

Phillips wants to expand across the nation, and to that end, he is creating a new website — mybonddept.com — to help agencies that lack the expertise to serve clients who need bonds. “We want to split the commission without taking the business away from them.”

He acknowledges that bonding is a rigorous underwriting process and says an annual review is important. “But I tell new clients to hang in there, because once you accomplish this, you have an unlimited ability to work. It opens up so many doors.”

Insurance Sections
Severe Storms Are Creating a Trickle-down Effect on Policy Holders

Jim Phaneuf

With past and future storm damage in mind, Jim Phaneuf says, the state attorney general and insurance commissioner are making sure that carrier premiums and rate increases are justified.

When Jim Phaneuf references the weather, he’s certainly not making small talk.
Rather, he’s discussing big business — the insurance business, which he’s been in for more than 36 years, enough time to see everything, or just about everything, in this industry.
Indeed, over the past several years — and one year in particular, 2011 — Phaneuf, president of Bell & Hudson Insurance Agency in Belchertown, and others in this sector have seen things they’ve never seen before in terms of weather calamities and the resulting impact on the companies that write the policies and the consumers who purchase them.
‘Historic’ is the word he and others have used to describe it all — meaning everything from 2011’s ice dams, tornadoes, hurricane, and freak October snowstorm to subsequent weather events such as Superstorm Sandy in the fall of 2012, and the general consensus that this part of the country will see more of the same in the years to come.
But instead of words, Phaneuf and others like to use numbers to get their points across.
“Between 1980 and 2012, there were 123 U.S. weather-related events that resulted in claims of over $1 billion,” he told BusinessWest. “In 2011 alone, there were 12 U.S. weather-related disasters with over $1 billion in claims, and that caused insurance companies to raise rates to attempt to recover their losses. Our experience has been that most home-insurance customers have experienced rate increases in the past two years, largely as a result of the storms of 2011 and 2012.”
Corey Murphy, president of First American Insurance Agency in Chicopee, agreed, noting that 2011 was a banner year for weather-related claims in this region and others, and the impact from those losses will be felt for some time.
“I knew the insurance companies were going to have to respond — it was a catastrophic year; we had pretty much every natural disaster you could have,” he said, noting that rates have escalated for business and residential policy holders alike, between 3% and 6% on average.
The numbers vary, he said, because in many instances, an agency can sometimes shop for and get a better price, even at a time when many carriers are still struggling to recover losses. Meanwhile, agents can work with clients to lower their insurance bills by making sure they’re buying only what they need, passing on what they don’t need, and employing strategies such as bundling policies, taking higher deductibles, and avoiding marginal claims that will nonetheless trigger premium hikes.
Corey Murphy

Corey Murphy and his staff have kept their commercial and residential rate increases from storm damage as low as possible by shopping their policy needs with a variety of carriers.

Overall, he said, this is a time for consumers to renew — and tighten — their relationship with their insurance agency, because if predicting the weather is difficult, if not impossible, so too is gauging and minimizing the impact of all that weather on one’s insurance bills.
For this issue and its focus on insurance, BusinessWest takes an in-depth look at what has become a perfect storm — in every aspect of that phrase — for insurance carriers, and a time of challenge for those looking to protect their assets and manage the cost of doing so.

Climate Change
Recapping recent events, meaning those of the past few decades and especially the past few years, those we spoke with said things have become more unsettled.
They used that word to refer to both the weather — which, in the opinion of many, is being increasingly impacted by global warming — and the fiscal health and well-being of insurance carriers.
Indeed, due to the recent spate of weather calamities, most insurance companies will not write polices for hurricane-prone coastal properties in the Carolinas, Georgia, Florida, and Texas, said Bill Grinnell, president of Webber & Grinnell Insurance Agency in Northampton. So the states have created their own insurance mechanisms and set up rules, collecting premiums from property owners and assessing surcharges to those insurance companies that do business in other regions of those states.
“There is a wide belief that these storms are caused by global warming, which makes the weather less predictable and insurance outcomes less predictable,” Grinnell explained. “As a result, more revenues are needed to create reserves to cover the potential for more disasters, so there’s definitely been an uptick in the cost of insurance.”
According to a 2013 report, “Inaction on Climate Change: the Cost to Taxpayers,” by Ceres, a nonprofit organization advocating for sustainability leadership, the total loss exposure of these state-run insurance plans in the past 20 years has risen by 1,550%, from about $40 billion in 1990 to more than $600 billion in 2010.  Additionally, the report says only 50% of the damages in the U.S. caused by extreme weather events are privately insured, which leaves the federal and state governments (the taxpayers) to pick up the remaining tab.
Insurance companies, said Grinnell, earn revenue in two ways: premiums, of course, and conservative, low-risk investments, primarily in the bond markets.
With the historically low rates of return on bonds, insurance companies are not earning as much as they have in the past, and at the same time, they’re seeing higher bills from their reinsurance companies after paying out billions for just the past two years’ worth of catastrophic storms.
“So the reinsurance companies that provide the insurance for your insurance carrier for big disasters have increased their rates to the carriers, and those rates have been passed right down to the policyholders,” Grinnell explained, adding that the regional carriers in New England that do business in Massachusetts weren’t directly affected by Hurricane Katrina or, to a great degree, Superstorm Sandy. “So the majority of the storm-related increases are due to more localized events.”
Locally, Phaneuf added, state Attorney General Martha Coakley and Commissioner of Insurance Joseph Murphy are making sure carrier premiums and rates are justified.
“The attorney general seems to have served as a watchdog with the insurance issue,” he said, “to keep insurance companies’ rising rates in check.”

Policy Statement

Bill Grinnell

Bill Grinnell says insurance carriers are getting hit with higher rates from their reinsurance companies and passing these increases down to policyholders.

In this changing climate — for both weather and insurance to cover the damage it causes — Grinnell said agencies need to work even more closely with clients to reduce the impact on premiums while making sure customers’ bases are covered, literally and figuratively.
For instance, when his staff sees a client’s premiums spike significantly, they will attempt to shop that business around to get similar coverage, but at a better rate.
“We try to find a better home for their insurance if we’re able to, which we can some of the time, but not all of the time,” he said. “It’s definitely worth the effort if the insurance is going up more than 7% or 8%.”
Murphy agreed, but noted that there is seemingly less room for negotiating between agency and carrier in this environment, adding that this is another sign of the times and a product of the more adverse conditions within the industry, even though the weather has been much calmer this year.
“There’s a lot less back-and-forth over the last year or two. Now, there’s a lot less room; they’re pretty firm on what their prices are,” he said. “This year, it was a pretty mild year, but there were predictions that storms would increase, so there were a lot of adjustments by carriers based upon that.”
Those adjustments, Murphy went on, have appeared as higher premiums and a much harder look at what policies companies will underwrite. He called it “getting tighter.”
When Murphy and his agents present a potential policyholder to an underwriter — the person at the carrier who will decide how much to charge on the commercial lines, or even if they’ll write it or not — they want a much clearer picture of what they are writing.
“So, as an agent, we’re trying to present the best possible picture of that potential client,” he added. “The more you can make an underwriter feel comfortable about what they are writing, the better they feel about doing it.”
Meanwhile, agents can work with clients in a number of ways to help control their insurance bills without reducing coverage, said Phaneuf, listing several possible ones, including a willingness to accept a higher deductible.
“They generally mean lower annual premiums, but more out of your pocket when you have a loss,” he explained. “Your agent will also make you aware that you can control premiums by bundling discounts for your home and auto and installation of alarm systems, renewing your policies with the same insurer, and maintaining a loss-free status.”
Elaborating, he said that going years without filing a claim can lead to attractive discounts, savings that could more than offset the long-term costs from filing a claim in an instance where the damage only marginally exceeds the deductible.
In addition, Murphy told BusinessWest, he and his agents make sure their business clients are updating their product inventory and specific elements that they need for doing business.
“Business owners have to understand what their business is rated on,” he noted, adding that some standard ratings are based on square footage, which doesn’t change unless there is an expansion or a move, but other things do change, like real-estate values, replacement costs, inventory levels (up or down), or an increase in sales, all of which accurately reflect the business’s exposure.
The First American staff helps educate their commercial clients about keeping up with the current state of their property and business.
“If you don’t respond to your carrier with any updates, then they assume that all remains the same, and you could be paying more when you shouldn’t have to,” said Murphy. “But you don’t want them to be caught underinsured.”

Batten Down the Hatches
Grinnell and others we spoke with said their background is in business and insurance, not climatology or meteorology.
Predicting the weather is more difficult than ever, he noted, adding that even those with degrees in those subjects can’t say what will happen next year or over the next decade. The best thing to do is be prepared as much as possible, and that philosophy extends to the realm of insurance.
Phaneuf agreed, adding that, when it comes to weather patterns that are predicted to cause havoc in the future, protection of one’s home or business is, now more than ever, a complex business transaction.
“It cannot be effectively and appropriately done in 15 minutes,” he said. “In spite of what some national insurance carriers would like to have you believe, it is not a simple transaction like buying laundry detergent or breakfast cereal. If you treat it too lightly, you may not have the protection that you need when you need it … at a time of great loss.”

Elizabeth Taras can be reached at [email protected]

Insurance Sections
How to Reduce Stress and Optimize Outcomes in Filing Insurance Claims

John E. Dowd Jr.

John E. Dowd Jr.

Let’s begin with the premise that insurance companies are in the business of paying claims, pure and simple. However, as most people are aware, the process of filing and then being paid for compensable claims is not always easy or convenient, depending on the size and nature of a claim.
We try to advise our clients at the outset of every claim of the appropriate steps they need to take to make sure things go as smoothly and quickly as reasonably possible. We also try to carefully manage people’s expectations for how the claim process will go, as well as the eventual payout amount they can expect. Unfortunately, some insurance companies handle claims better than others, and you need to rely on your insurance agent/broker to properly represent you both at the time you choose your insurance company and when a claim has occurred.
Many of the complaints insurance companies receive each year are from customers who are unhappy about claims handling. For many years, one of the top complaints people have regarding the claims process is a delay. When people are dealing with the issues that made them file a claim, it can be frustrating to handle the insurance claim on top of that. For this reason, it is important for all policyholders to be prepared. One of the best ways to do this is to make sure all of the information the insurance company would need is always available.
Policyholders should keep this information in a safe place where it will not be lost or forgotten. The following suggestions are also helpful.
• When filing claims, make sure they are submitted promptly. Call your agent/broker immediately after something happens that warrants a claim. Letting receipts pile up can cause more delays. If temporary repairs are put off or are not completed, the initial damage to the home could worsen. For example, water damage that is not addressed promptly could lead to problems that cost more money and may create coverage issues.
• Understand the policy. It is important for every individual to know what his or her policy says. Knowing what is covered and what is not covered makes it much easier to know what to expect when damage occurs. Waiting until a disaster happens to read through the policy will only result in further frustration. Talk with your agent/broker ahead of time so he or she can explain your coverage and answer questions.
• Use correct and complete information for the claim. Using incorrect or incomplete information will result in processing delays. Check all of the information for accuracy twice before submitting it, and make sure everything that is required has been provided.
• Keep records of all forms of correspondence. When making calls, sending e-mails, or receiving letters, make sure each one is recorded. Write down the date, the form of correspondence, the name of the contact person, and the subject of the correspondence. If there are any important details, include these in the notes. Policyholders should always ask questions and address any disagreements promptly.
• Keep records of temporary repairs. Some types of damage warrant immediate but temporary repairs. If this is the case, it is important to document any work that was done and who completed it. When purchasing supplies or services, save the receipts. Taking photos or videos before and after the repairs is also helpful. Homeowners should never make permanent repairs. Policies cover only necessary temporary repairs. Those who want to know how much it will cost to complete permanent repairs should arrange for one or more adjusters to provide quotes.
• Verify any denials. If a claim is denied, politely ask for the language in the policy that reflects why it was denied. Your agent/broker will assist you in confirming the accuracy of the coverage denial.
• Never rush into a settlement. When a settlement offer does not seem fair, contact your agent/broker immediately to discuss the matter.
• Ask for information to be released for health claims. If medical help was needed due to the reason for the claim, it is important to ask a medical provider to release relevant information. When policy holders suspect that a medical provider is overcharging, an insurance company may audit the bill upon request.
The claims process is a stressful one for many people. With proper preparation, this stress can be reduced significantly. The most important thing to remember is that your agent/broker is always available to help during any part of the process, so do not hesitate to contact your agency when questions arise.

John E. Dowd Jr. is a fourth-generation principal of the Dowd Agencies. He is one of three partners at the oldest insurance agency in Massachusetts with operations and management under continuous family ownership. The Dowd Agencies is a full-service firm providing personal, commercial, and financial-planning needs, with four offices in Western Mass.; (413) 538-7444; [email protected]