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Building a world-class agency

Costello and sons has "something really special"

By Dennis H. Pillsbury

Bryan Costello is passionate about the business. So when he says that "it's no longer about the money, it's about the opportunity to build a world class agency," he speaks with such sincerity that you actually believe him. Of course, that doesn't mean that he has eschewed filthy lucre and joined the Ascetic Group of Insurance Agents (the AGIA is a very small group). It is more of a philosophical shift in focus that quite conceivably could result in even greater profitability for his agency, as it becomes the place to go for those niche businesses that Costello & Sons has chosen to focus on.

Costello & Sons Insurance (CSI) traces its roots back to 1939 when Bryan's grandfather, Frank Costello, established his insurance agency in San Francisco. The agency was a generalist, writing insurance for the individuals and businesses in the area. That continued for the 30 years that Bryan's father was with the agency and was true when Bryan joined the firm 23 years ago. He was joined by his brother and the agency continued to be a generalist with a focus on personal lines. "We grew and did fine, but we never hit it out of the park," Bryan comments. "We'd reach a certain level and then turnover would happen."

Bryan decided that he wanted to develop a more focused approach rather than remaining a generalist. His brother didn't, so they agreed to a split. "My brother runs a successful agency in the area and I'm very happy about that," Bryan says.

The new approach started about six years ago at the height of a soft market that still continues to wreak havoc. In addition to concentrating on certain niche markets, "we also concentrated on people and culture," Bryan says, noting that the idea was to build a team of experts who felt valued. The agency suffered through the soft market by more than doubling revenues in the six years from $2.5 million to nearly $6 million. Obviously, this approach is working and has earned the agency recognition as one of the most innovative in the country.

The specialties

"Specialization makes us more efficient in the way that we process business," Bryan points out. "It's a lot easier when the accounts look similar. The underwriters are the same and we can really shine when there is a claim because we know the contracts inside and out. We can offer 'best of breed' solutions and products. We have risk management programs targeted to each of our niche areas. In short, every day, we are actually adding value for every account that we write."

The result is that "service is great and clients are happy," Bryan maintains. "At the same time, our people are having a great time because they are actually helping clients be more successful. It has created an environment where every one of our 31 people is having fun. In the last six years, we have had no turnover, with the exception of producers who weren't making it."

The agency specializes in three areas: realtors, innovation (technology companies and venture capital/private equity firms) and high-value personal lines (accounts that provide premiums of $8,000 to $10,000 and up). Each of these areas requires an expertise and understanding of the unique coverages and risk mitigation techniques needed. In order to reach the entire state, the agency now has five locations, with the headquarters in San Rafael and offices in Sacramento, Irvine, Santa Barbara, and Silicon Valley.

The sizzle

Working with realtors provides a unique opportunity not only to provide them with risk management and insurance services, but also to reach new home owners. CSI will work directly with realtors to help them better serve their clients by providing personal policy reviews for the clients. Representatives from CSI also are available to present on insurance and related topics at real estate office sales meetings. The agency also will make its Home Quote software available to realtors who want to offer it as a value-added service.

As a result of these efforts, the agency recently entered into a joint venture with a high-end real estate agency in the Bay Area under which CSI will provide quotes from five insurance companies via the Internet to new home owners as soon as the property goes into escrow. "We'll be quoting some 2,000 homeowners deals this year through this effort," Bryan points out.

In addition to working with realtors across the state to develop personal lines prospects, the agency also provides coverage to 600 real estate offices throughout California.

"We understand the insurance needs of these professionals," Bryan points out, "and can design an insurance program that best meets the needs of the particular broker or real estate office." For example, a variety of coverages can be added to a real estate E&O policy including lockbox protection, discrimination coverage, pollution (failure to advise) coverage, franchisor coverage, real estate seller E&O, sale of agent-owned property coverage, regulatory hearing coverage, and coverage for services provided electronically.

With the high-value personal lines market, CSI provides far more than the initial quote. The agency provides a complimentary inspection of the individual's properties as well as a comprehensive review of current coverage in order to identify gaps in coverage, make program recommendations, and identify the right insurer for the client's needs. If a client has valuables, the agency can provide referrals to several appraisal experts with which it has worked.

If a claim occurs, claims people from CSI work with the insurance company and the home owner from the moment the claim is reported through the rebuilding or repair to make certain everything is done to the policyholder's satisfaction.

Probably more than any of its niches, the Innovation niche fits the agency's culture best. It's a matter of innovators working with innovators. "We have two very passionate teams in this niche," Bryan points out. "We have one team that really enjoys working with venture capital and private equity firms and digging into their unique needs, as well as discovering ways to mitigate the complex risks they face.

"The other team loves technology. It includes some of the people who made it possible for us to go paperless 10 years ago. Here too, the coverages that are needed are unique and, in some cases, didn't even exist when we first started working with this market. We actually consulted with AIG, London, and ACE to assist them in the development of first party business interruption, a coverage that is absolutely imperative in the technology field. Imagine how much a search engine provider could lose if it was down for even a short period of time."

In the private equity area, CSI is one of the 18 members of TechAssure®, a global group of insurance brokers endorsed by the National Venture Capital Association (NVCA). CSI, TechAssure and NVCA have partnered with four A+ rated insurance companies that specialize in insuring this niche to provide NVCA members with superior protection and pricing. The cornerstone of this insurance program is the Venture Capital Liability policy and the D&O liability policy for portfolio companies.

"Our seasoned professionals use these policies as the starting point in developing a holistic plan that includes risk mitigation in addition to insurance coverage," Bryan points out. "Most of the more than 50 firms we currently insure don't have risk managers on staff. That's our job and our people have done a great job. Our clients now consider us as an important member of 'the club' and are being recommended as risk management experts to other firms in this niche. I can easily envision our having more than 100 policyholders in this niche in the near future."

CSI provides coverage to more than 350 software and Internet companies and has developed an expertise in this area that allows the agency to identify those "must have" coverages in each situation. "This is a dynamic market that requires an agency that has a proven track record of working with the insurance companies to develop new coverages as the needs change as well as tweaking current coverages to reflect new developments. We have a team of experts who have been involved in those activities for years," Bryan maintains.

"We have also found that there are common insurance needs for most of the smaller technology companies (those with revenues of less than $3 million) and have developed an online London product for IT firms that is available on, which has endorsed CSI." The coverage includes property and general liability for the office as well as professional liability that includes coverage for: technology E&O; breach of contract; intellectual property infringement; loss of documents and media in the care, custody or control of the insured; and computer virus and hacking attacks. Firms can obtain coverage after filling out a questionnaire that takes about 10 minutes to complete. It can be paid for by credit card and a policy will be e-mailed within 24 hours.

The secret

"What has made all of this possible is the people that we have," Bryan says. "They are involved in all the decisions we make and know exactly how we are doing. We have a group that wants to help. All I had to do was make that possible. By focusing on niches in which they had an interest, we were able to create a culture where we are helping each other and helping our clients, insurance companies, and community."

To accomplish this, the agency "shares everything with everybody. We have two team retreats a year—a business retreat in January where we review the numbers and talk about what worked and what didn't; and a three- or four-day team building retreat in August where we get away from the office and just talk. Each retreat centers around a book that we recommend."

During the retreat last August, the team members were asked to talk about reasons they were thankful. "It was especially poignant at a time when so many people were having a tough time because of the economy," Bryan says. "Almost every person had tears in their eyes as they discussed how lucky they felt to be involved in a place that respects them and allows them to do something they enjoy.

"Following that meeting, we asked them to write a brief essay (100 to 500 words) about our corporate culture. The stories that I got were amazing. We're planning to turn this into a book that will first be shared with the staff and then our customers. After that, we're planning to share it with the independent agency marketplace.

"We've really got something special," Bryan says proudly.

Rough Notes magazine agrees completely with Bryan's assessment. We are proud to recognize Costello & Sons Insurance as our Marketing Agency of the Month.


The Costello & Sons Insurance Executive Team (from left): Michael Grant, CPA, Principal; Bryan Costello, Chief Executive Officer; Mike Wardenburg, Principal-Private Client Group; Nicole Finn, Chief Operations Officer and Commercial Lines Account Manager; and Dan Carraher, CPA, CPCU, Chief Financial Officer.


From left: Paula Buchholz, Executive Assistant and Human Resources Assistant; Jessica Cano, Commercial Lines Account Manager; Kathleen Brabo, Commercial Lines Account Manager; Jessica Ford, Commercial Lines Senior Account Manager; Sheila R. Morley, CPCU, Commercial Lines Senior Account Manager; Debbie Blitz, Commercial Lines Account Technician; Lindsay Poole, Commercial Lines Account Manager; and Greg Milholland, Commercial Lines Account Manager.


Sitting (from left) are: John Burke, Personal Lines Account Manager; Adrianne Peixotto, Vice President-Private Client Group; and Kim Buckley, Personal Lines Senior Account Manager. Standing (from left) are: Michele Frias, Personal Lines Account Manager; Lisa Hobson, Personal Lines Account Technician; Peri Ellison, Personal Lines Account Technician; and Moira McNeill, Personal Insurance Sales Executive.


Mike Wardenburg and Bryan Costello stand in front of the newly painted mural that welcomes clients to the agency.





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