Providing all coverages for financial institutions and for others as well
By Dennis Pillsbury
Executives of Lee & Mason include (from left) Charles E. Pritchard, vice president; Ginny Galpin, assistant vice president; Raymond Wahl, senior vice president; Gregg Ryan, president; Craig A. Vermost, CPCU, vice president; (Below) Linda S. Blechman, assistant vice president; Patrick Breen, vice president/operations manager; Christopher L. Muller, vice president; and James J. Finnegan, senior vice president.
With the holiday season coming to a close, many of us have reacquainted ourselves with George Bailey as he finds out that his life really was worth living. Played by Jimmy Stewart in the holiday classic "It's A Wonderful Life," George Bailey sees his building & loan snatched from the brink of disaster through the good will of his friends and neighbors. And those of us who are part of the financial services industry will rue the fact that this movie truly is a work of fiction. The harsh reality is that, when times get tough, financial institutions are more likely to hear from a client's attorney than from the client.
It is out of this painful reality that Lee & Mason Financial Services, Inc., Northville, New York, came into being. Financial institutions need protection from the slings and arrows of outrageous misfortune and Lee & Mason offers a full quiver of protection.
Lee & Mason was formed in 1954 by John Ryan, who developed a number of products for financial institutions. He continued to run the MGA until he passed away in 1993 and his son, Gregg, took over the business. While its focus remains as a full service MGA, offering a plethora of products for financial institutions, Lee & Mason also offers other specialty coverages for markets outside the financial institution arena.
The first GAP policy
One of its claims to fame is the fact that in 1984, the MGA wrote the first GAP policy in North America with Royal Bank of Canada. GAP coverage protects an auto loan when there is a total loss (collision or theft) to the vehicle collateral and the borrower's primary insurance settlement fails to pay off the balance of the loan. Though the lender is the named insured, the coverage benefits both the borrower and the lending institution. In fact, often the coverage will pick up the borrower's deductible loss up to $1,000. Other coverages geared to the financial institutions market include:
Blanket Lenders Single Interest (LSI) protects the lender's interest against uninsured physical damage loss events, theft loss and skip loss. This package of coverages also protects against government confiscation, E&O that arises when the lender fails to protect its security interest, damage or theft that occurs after the property has been repossessed. According to Chris Muller, vice president, "We've been offering that coverage since the 1960s and it's really been our bread and butter." Collateral protection insurance (CPI) protects the lender against uninsured collateral losses when the borrower fails to provide acceptable individual insurance. There are several products in this general category including Creditor Placed CPI for Autos and Master Fire/Hazard for Dwellings and Commercial Real Estate. Additionally, there are blanket portfolio coverages available to protect the real property securing a first or second mortgage or equity line of credit.
Products for Lease Transactions include a residual value product and contingent and excess liability product. Residual value insurance covers against losses that occur when projected vehicle values upon loan/lease maturity are not met. Contingent liability covers lessors against a liability event when the lessee fails to provide or maintain adequate liability coverage, and excess liability picks up coverage to the lessor where the primary coverage leaves off. "Residual value is a big, big market," says Ray Wahl, senior vice president in the West Hartford, Connecticut, office. "We're trying to find an insurance company partner with which we can develop and market that product."
Financial institutions need protection from the slings and arrows of outrageous misfortune and Lee & Mason offers a full quiver of protection.
Gregg Ryan became president of Lee & Mason in 1993.
Lee & Mason also has experience in a very difficult-to-place coverage: loan default insurance. In this very selective and individually underwritten line of business, an auto lender is protected against "deficiency balance" write-off due to the value of the repossessed collateral falling beneath the loan balance. This coverage is employed primarily in the non-prime (lower credit) auto market. And often this coverage is written to pick up losses in excess of an aggregate deductible or self-insured retention level.
Credit insurance includes credit life, credit A&H, and mortgage life. This covers a wide variety of products that protect the debtor or debtor's survivor against loss due to death, or inability to repay loans due to death or disability. Lee & Mason entered this market with the acquisition of Charles (Chick) Pritchard's First Service Group in 1998. Chick continues with Lee & Mason as a vice president.
Expanding to new fields
In addition to the above mentioned coverages and other credit-related products, Lee & Mason also offers directors & officers, errors & omissions and blanket bond coverage for financial institutions. "Nearly everything we do keys around financial institutions," Gregg says. "We have a product for virtually everything they do." He adds, however, that the agency does offer some products that fall outside of this particular area, including professional liability for insurance agents and brokers and horse mortality insurance. The latter coverage is the result of Gregg's avocation outside of the agency. He is a well-known steeplechase jockey.
(From left) Senior Vice Presidents James J. Finnegan and Raymond Wahl, who head up the West Hartford, Connecticut office, which is responsible for the professional liability coverages, join President Gregg Ryan outside the headquarters in the Adirondacks.
"We're always looking for new opportunities," Ray Wahl says in explaining the move into professional liability areas. "Our early goal was to diversify our revenue stream," Jim Finnegan, senior vice president in West Hartford, adds. The initial diversification surge started in 1993 when Gregg assumed the reins (pun fully intended) when Lee & Mason began to expand its portfolio of coverages offered to financial institutions. "Our further goal is to completely diversify both geographically and to markets outside of the financial services arena," Jim continues. "We're looking to develop counter-cyclical products."
The professional liability coverages (D&O/E&O for financial institutions and E&O for insurance agents and brokers) were added to Lee & Mason's portfolio in 2000 and 2001, and are handled out of the West Hartford office. Lee & Mason also increased its geographic spread when it acquired MultiGard in 1999. MultiGard, run by Craig Vermost, also specialized in providing insurance for financial institutions. Its headquarters in Louisville, Kentucky, now operates as a branch office of Lee & Mason. Chick is a vice president in that office.
All told, Lee & Mason insures about 600 financial institutions in all 50 states. Premium volume is about $25 million. The bulk of the premium (about 75%) has come from new sales. However, "The fact that we offer such a wide variety of products needed by financial institutions has offered numerous opportunities to cross-sell," Jim notes. "About 25% of our business is add-on coverages."
Insurance agent E&O
The insurance agent product "has been very well received," Ray points out. "Recently, we've been seeing a hundred or more submissions every month." Some key features of the Agents Professional Liability product include:
-- Policy extended to insurance consulting, premium financing, claims adjusting, and loss control and risk management services.
-- Option for defense costs to be in addition to the limits of liability.
-- Definition of wrongful act extended to include personal injury.
-- No insolvency exclusion (subject to underwriting).
-- No exclusion of punitive damages (subject to underwriting and state law).
-- No exclusion for the sale of variable life insurance, variable annuities or mutual funds.
-- Fraud/dishonest acts exclusion does not apply to innocent persons.
Patrick Breen, vice president/operations manager, says, "The geographic and market diversification will continue. Since Gregg took over in 1993, we've had tremendous but smart growth. Gregg initiated a series of acquisitions and hirings that really expanded our talent pool." Gregg adds that "we're fortunate that we can take advantage of opportunities when they arise. Being privately held, we don't have to worry about results on a quarter-to-quarter basis."
"We're very fortunate to have great people," Gregg says. Lee & Mason employs a staff of about 40 people in its three offices. It has eight sales people. "It has allowed us to build strong, ongoing relationships with producers and carriers. A lot of our people have been presidents of companies and know a lot of people in the industry." He continues that the location of the headquarters at the foothills of the Adirondacks has "proven to be a real plus. This is not a transient population up here. Turnover is virtually nil." *