By Thomas A. McCoy tommccoy@in.net
The CCBSure executive team includes (left to right) Steve Robinson, director of marketing; Scott Schleicher, director of new business; Val Adams, broker relations; and G. Philip Feldman, chairman, Insurance Services Group.
Most companies do not have people on their payrolls who can provide all the information technology expertise they need. So they hire computer consultants or software programmers, for a few days or a few months, to try to maximize their internal computer capabilities.
For the consultants, things don't always go as planned. Take, for instance, a newspaper that recently engaged a computer consultant to design a new circulation system. The system which had been advertised as being available to subscribers wasn't completed as scheduled. The newspaper claims that the delay was the result of continuous errors by programmers at the consulting firm. They're suing the consultants for $220,000 of lost revenue.
Growth figures alone would indicate that the computer consultant and software programmer field represents a potentially lucrative niche market for agents. According to Staffing Industry Report, revenues for the technical/computer staffing industry were expected to grow 24% last year, after nearly doubling over the previous five years.
Professional liability is their most visible exposure, but they face an entire range of property, liability and fidelity risks. They have access to the most sensitive equipment and data of their clients, and work as virtual brain surgeons, sometimes taking equipment and data off premises or coming into the premises after working hours.
Yet, insurance agents who have been successful in this niche market say many of these relatively small, fast-growing computer consultant or software programming businesses are unaware of the exposures they face and that they may be improperly covered.
"I asked a computer consultant who was acting as a subcontractor whether he had coverage for proprietary software if he carries it off premises and loses it," says Jerome L. Glickman, AAI, of Little, Michaels and Kennedy of Festerville, Pennsylvania. "He had no idea."
Technology expertise needed
Glickman says computer consultants who are in the dark about their coverage are often matched by the uninformed agents who are selling them coverage. Agents who treat these accounts like other BOP-type businesses are asking for trouble, according to Glickman. "The agent doesn't know until after a claim has occurred that it isn't covered."
Glickman had been writing some computer consultant business directly with his contract companies when he ran into competition on one account which changed his approach. The competitor was CCBsure, a Cambridge, Maryland-based agency which administers a program for computer consultants and software developers.
CCBsure's coverage, underwritten by Chubb, is endorsed by the National Association of Computer Consultant Businesses (NACCB) and has been available to agents nationwide since last year. "They raised concerns I should have been raising," says Glickman, "and beat me fair and square."
From that point on, Glickman began writing business through the CCBsure program.
CCBsure was founded in 1992 by Phil Feldman as a division of Insurance Services Group, Inc., a retail agency with three offices in Maryland which today writes $37 million in annual premiums. Feldman had spent two years trying to get an insurance program off the ground that could be offered to members of the newly-formed NACCB.
"We approached five companies about underwriting the coverage," recalls Feldman, and none were very receptive at first. "Finally a person at Chubb said, 'This is an industry we can deal with.'"
CCBsure introduced the product underwritten by Chubb in 1992. It includes E&O, third-party fidelity, multistate-single policy workers comp, general liability and business income. CCBsure sold the product exclusively for four years, and then in 1996 they opened it up to brokers nationwide. Today CCBsure's greatest growth comes from other brokers. It receives 10 new applications a week and has more than $7 million of premiums in the program, about 40% of it from NACCB members.
Agents in this market say many computer consultants only become aware of the need for specific coverages when a major client or a general contractor for whom they are serving as a subcontractor asks them to comply with specific insurance requirements. This presents instant opportunities for agents who have utilized the CCBsure program.
Jeffrey Williamson of Rosenbloom & Rosenbloom in Bloomington, Minnesota, specializes in writing computer consultant business through CCBsure, spending 90% of his time on this line. "It's a great niche. The premiums are not huge, but the business is exploding exponentially. And I haven't run into one other agent in the Twin Cities specializing in it."
Williamson notes that, "A lot of Fortune 500 companies are requiring that computer consultants carry E&O coverage, and many consultants don't carry it." He uses the E&O coverage as a door opener and then writes the other lines, such as the general liability, auto, workers comp and other lines through the CCBsure program also.
"The CCBsure program is priced competitively, and it meets or exceeds the computer consultants' needs for everything. If I need a quote today I can get it."
Williamson also utilizes the marketing support materials developed by CCBsure. When he first entered the market, he used his own mailing pieces. Now he sends out customized brochures developed by CCBsure to send to potential clients.
Production of these mailing pieces and other marketing support at CCBsure is under the direction of Steve Robinson, director of marketing. Brochures and other materials are made available for agents to distribute to computer consultants and software programming firms. The brochures ask specific questions about potential loss exposures and provide examples of actual claims paid under the CCBsure program.
"Today we figure there are over 10,000 firms that we consider to be prospects for the program," says Robinson. "But it isn't easy to measure the number of these businesses. List compilers' SIC codes cannot keep pace with such a rapidly evolving industry. Thus, our method of strategic database marketing becomes an enormous asset.
"We pass along the names of prospects to select agents in various areas of the country who write business through our program. We don't require a minimum amount of business from agents who write business with us, but our commissions go up with added volume."
Another marketing support feature at CCBsure is in-house training for agents who want to come to their Maryland headquarters and learn more about this market. After an agent returns from the in-house training, CCBsure can make mailings to desired prospects in the agent's area, telling them about the advanced training the agent has received.
Neil Bordenave, CPCU, ARM, vice president of Brennan & Associates in Emeryville, California, has used the CCBsure program to write the business of computer consultants who find themselves with sudden coverage needs. "We wrote the business of a software developer previously insured by State Farm because one of its major clients asked that they show proof of a $20 million umbrella."
Bordenave says that the quick service CCBsure provides on quotes is important in this market, because "if a consultant needs to show he has coverage to get a contract, he's probably in a hurry."
Bordenave adds that these firms, often run by young techies, are very "bottom line driven" and will act quickly upon coverage recommendations which they can see are in their best interest. "It's not at all like trying to win the business of a company that has had the same agent for 30 years."
Feldman, who was instrumental in the formative stages of the NACCB, realizes that many agents who might want to write business in the program are unfamiliar with many of the concerns of the information technology business.
"We try to streamline the process for them in working with these companies," says Feldman. "We guide them through what they need, and we do it without a 10-page E&O application with 1,000 questions." Feldman adds that CCBsure will contact the client directly if the broker requests it, but this is handled through a conference call with the broker present. *
Further information is available from Val Adams, director of broker relations: 800-336-5659 or http://www.ccbsure.com/brokerzone.html
©COPYRIGHT: The Rough Notes Magazine, 1997