Going all in with Calvin

Calvin Sullivan sat down with Coverager for an interview about perseverance and perfecting a niche, talent and the art of war.

Business is personal so before we get down to business, CM&F was founded in 1919, the same year American comedian and actor Eddie Lawrence was born. Lawrence is best known for his comedy routine The Old Philosopher, a character known for giving quirky monologues (e.g. “Never give up, never give up, never give up…that ship!”). What – in your personal or professional life – haven’t you given up on?

Well, I guess I can give you an example of each: On the personal side, I was born with Cystic Fibrosis, which is a genetic disease that affects the lungs, among other organs, and was often fatal at the time I was born, in 1980. However, my parents got me, as well as my brothers, into sports early and I was able to eventually go on to play Division 1 Lacrosse at the University of Virginia, winning a National Championship in 2003. My condition had gotten significantly worse over my 4 years in college, but my desire to get better and help the team win and not let my teammates down drove me to persevere.

Similarly, in my professional life, there’s a huge challenge in staying privately-owned and not selling out. We owe most of our success to the people who have worked for our firm over the course of the last 101 years, and certainly as my brother and I took control of the firm over the last 10 years, there have been a lot of talented, hard-working people who have propelled the business forward. Our desire to continue to provide a great work environment where everyone is treated like family is something that is unique in private family-owned businesses but the constant onslaught of competitors entering the market with deep pockets and seemingly endless capital streams has made it challenging to say the least. Add that new capital to our existing competitors, who are Fortune 100 companies, and it’s difficult to persevere in the belief that we can grow and compete as a private company.

Today, CM&F Group insures over 100,000 healthcare professionals across the country. In a nutshell, tell us what CM&F specializes in and the carriers it represents?

CM&F specializes in Malpractice (Professional) Liability for basically everything besides Physicians, Hospitals, and Long Term Care.

We cover ~200 Professional Classes and we write both Individuals (such as a Nurse Practitioner in private practice) to a Medical Practice (such as a Physical Therapy Group or a NP or PA Owned Clinic). The MedMal Program is with MedPro Group (a Berkshire Hathaway company). We have a “Needlestick” program that covers healthcare professionals in the event they are stuck with a needle and contract specific diseases, which we write through Berkley. We also have a Cyber Liability program through BRIT that we offer to our Medical Groups.

All of our programs are fully automated and can be purchased online with no human interaction, but we have a fully staffed Customer Service team in the event that a client needs help or would like to pay over the phone, etc.

How did CM&F find its specialty?

CM&F started as a retail shop in Manhattan in 1919 and then in 1947, my grandfather was instrumental in establishing a liability product for nurses with the Royal Insurance Company…

The idea came from his experience in the Navy in WWII, where there was an explosion of nurses coming out of the war effort. Up to that point, Physicians were the primary target for insurance protection and there was a significant gap in exposure for the nurses because the Physician companies in those days wouldn’t add nurses onto the policy so they needed their own protection.

As the healthcare industry continued to grow in the successive decades, we continued to expand the classes of professionals that we write and then started to add Clinics as well in the 2010s, getting up to where we are today.

What parts of the value chain, does CM&F handle?

We write ~80% of our business Direct to the Customer (or D2C in today’s parlance)… However, we also work with over 100 retail brokers and a few wholesalers as well. The value chain as we see it should always benefit the client, so we strive to make the transaction frictionless, whether they are coming directly or through a broker.

We are a broker at heart, so we recognize the important role that brokers and agents play in the buying process, but we also recognize the importance of delivering the product when and where the client wants it. The insurance industry can be very territorial and protective of the distribution chain and I think that has partially led to its lack of innovation up until the last few years.

The preservation of a bad process for the client is always a losing strategy and the clear desire for insurance clients and consumers, in general, is clear messaging on the product and a fast and frictionless purchase path. If the most efficient way for a client is to consult with a broker they trust and then for that broker to facilitate the purchase within minutes and have the client go away satisfied, we are good with that… If a client feels comfortable with the process and the product and it’s easier for them to purchase the product online within minutes and walk away satisfied, we are good with that too.

As an aside, we are built for this type of high volume, low margin business and most retail and wholesale brokers are not, so many brokers choose to do business with us so they can access these types of markets and actually make money on the transactions because we do all the service, billing, tech investment, etc., and they get commissioned, so everyone wins.

Any plans to expand to other lines of business?

Since we have a strong understanding and experience in the digital acquisition of individual healthcare practitioners, we feel that we can easily transition to other Independent Contractors in the gig space, as well as the more established professions like Architects and Engineers, CPAs, Professional Photographers, etc. There has been an entrepreneurial explosion in the last few years, exacerbated by unemployment in the pandemic and we feel that our model extends well to that space.

What works really well for CM&F and vice versa what is on your to-do list to improve?

I think we have done a good job recruiting talented people who care about the clients and enjoy working at a firm that takes care of their people. An industry associate who we know and respect very much has always said “hire talented people” and just fit them in somewhere… So that’s what we do and those people continue to amaze us in their ability to bring different perspectives to our business.

Improving our technology is #1 or #1A at all times… We made the difficult decision about 4 years ago to sever ourselves entirely from our legacy insurance agency management system. That decision led to about 18 months of intensive learning and development in our new platform, which we built within the Salesforce ecosystem. We now have an in-house team of talented developers and a great platform that is now really driving growth for our business, but the process was a tough learning experience. The cost of making such a drastic move was difficult for a Private Business to make but we are now reaping the benefit of that investment.

Can you name insurtechs CM&F works?

We do business with few insurance startups, such as CoverWallet, but there aren’t too many startups focused on our niche. Many of the insurtechs are focused on personal lines and life insurance, where the processes are more standardized and there is a legacy of technology being deployed to that area of insurance.

Thimble and Next Insurance are similar to our model, with more products to offer, and are very impressive, but we haven’t done business with them. We have been steadily shifting our focus to an API-based model so that we can access products built “API First”… That is really maturing right now, and we are working very hard to be able to offer our own products via an API layer, as well as to bring in other products into our purchase funnel via APIs. When that process is complete, we will have a fully built out CRM, Service, Marketing, Analytics, and Accounting-backend with a fully functional API interface so that we can access any opportunity that comes our way and, most importantly, give our clients the easiest and best possible experience.

How is CM&F creating its sales funnel?

Like our distribution strategy, we utilize a variety of avenues to generate our sales funnel . First, and most importantly, about 80% of our new business transactions are generated off Direct Brand searches, which speaks to the strong brand recognition we have in the market. We have also done a significant amount of work to reorganize and engineer a more efficient infrastructure on our main website to optimize the SEO value of our product pages, again, generating more and more leads off of generic search terms. We also have become extremely knowledgeable and efficient in the Paid Search and Paid Social areas. We are consistently up 40%-60% per month YoY on our core products through our Paid Digital efforts with very profitable ROAS.

Lastly, we have some key partnerships with some Medical Associations, Large Franchise Networks, and some new Healthcare Platforms providing telemedicine and subscription services to patients. We have tended not to rely on large Affinity partnerships, which are typical in our niche, mainly because we want to stay close to the client and provide the best possible product for them. Sometimes those Affinity partnerships become the entire focus of the firm and those often take the focus from “what is good for the client” to “what can I do to please this large organization so they don’t leave”… Those two questions often have very different answers.

Any thoughts on the current insurance landscape?

I think it’s a very exciting time to be in the insurance industry . For decades, there has been very little innovation in our industry and I think that has stunted our ability to attract talented people. The influx of capital and investment in our corner of the financial world has brought different perspectives and a newfound focus on the client and there’s more and more technology being deployed to aid in the distribution process, which is all very exciting.  I think this trend strengthens the entire industry and gives the client or the consumer a better experience overall.

However, I will say that the resistance of the industry to things like high-tech innovation did have its logic historically because insurance is unique from many other industries because becoming more efficient and lowering your prices, doesn’t necessarily guarantee your competitiveness or profitability. You can’t always control the loss environment, try as you might through predictive analytics, machine learning, and risk management. Most of the new capital in the market (as well as many in the industry today) have never experienced a “hard market” and all the indications are that we are entering (or are already in) a hardening market. That will put a lot of pressure on premiums and companies that have burned their way into the market by underpricing business and flooding the space with marketing dollars will be shocked when the demand for their product stays high, but their margins get thinner, and it becomes more difficult to make a sufficient profit.

My last comment on the future of brokers, agents, and carriers – to use an old Mark Twain quote, “Reports of my death were greatly exaggerated”… I don’t believe we will see the elimination of the broker or the agent from the value chain any time soon.  Insurance is as diverse and complex as any industry in the world and the consumers of insurance services (the clients) are as diverse a set of consumers as any product in the economy. Insurance is acquired by every gender, ethnicity, income group, age demographic (other than dependent youths), geographic region, country, and industry in the world and the buying process varies for each person, business, or region. That consumer diversity demands a diverse distribution methodology. That doesn’t mean that brokers or agents will always be able to sell the same products and it doesn’t mean that carriers will always be able to sell every product direct. The insurance industry is huge and if we all continue to focus on the client, the proper distribution strategy, whether it’s through a broker, an MGA, or carrier direct will find its niche.

Any tips for agents who are just now getting started?

I am biased because I am a specialty operator, but I would say new agents should find a niche, become an expert and push to grow within that niche. You should always look to expand your offerings, but not at the expense of what you currently do well. Be profitable first, then use your profits to pursue other opportunities. There’s no substitute for good business fundamentals, even if you have a lot of capital.

Don’t be afraid of technology. Most of us are insurance people, not technology people, but put some effort into learning about tech trends and make investments in technologies that will “future proof” your business.

Don’t be afraid to look outside of insurance for talent. When I talk to prospects from outside the industry – often younger people – they find the industry fascinating once they get the picture of auto insurance out of their minds. We can attract more talented people if they understand how broad the industry is and what success looks like for its top performers.

To end on a personal note:

• Pre-COVID, your favorite place to eat? The Villager in Babylon on Long Island.
• How often do you shop on Amazon? Too often… In all honesty, what an amazing company to have done what they’ve done in the pandemic.
• How do you take your coffee? Black with one sugar.
• Are you currently experiencing ‘Zoom fatigue’? Sort off, but I will say, that it’s more because I would rather see people in person, but when I get on a call with no video now, it seems oddly impersonal… I think ‘video’ is here to stay and calls will become less and less “the norm.”
• Favorite mantra? “Burn the Boats.” It’s a quote attributed to Cortez when the Spanish landed onshore in the New World…he had all the boats burned so the soldiers had no choice but to succeed or die. I think that is an important mindset in life and business… If you believe in something, go all in and never retreat.