Dovetail aims to revolutionize small- and medium-sized business insurance market

Up on the sixth floor of a Main Street office tower, workers at an insurance IT company have quietly launched a revolution.

The revolution, says Steve Francis, CEO of Dovetail Insurance, could allow the company and its new owner to cash in on the $40 billion medium- and small-business insurance market.

“We’re trying to revolutionize as a company the way this type of business is transacted,” Francis said a few days after Marsh closed on its acquisition of Columbia-based Dovetail.

What Dovetail has done, said Francis, who founded the company in 2006 with Tony Mattioli, is develop an advanced cloud-based technology platform that enables independent insurance agents to obtain online quotes from multiple insurance providers and bundle those insurance policies in just minutes for small business clients.

“There aren’t many opportunities that companies have to actually do something to be a first-mover in an industry,” said Francis, 57. “We’re the first company that’s really changed the way that small business insurance is transacted.”

Marsh, one of the world’s largest insurance brokerage and risk management companies, acquired Dovetail, headquartered at 1333 Main, on Aug. 17. Terms of the transaction were not disclosed; however the acquisition offered another example of how Columbia has grown to become a leader in the insurance IT industry.

Adding Dovetail “is part of Marsh’s global strategy to provide expanded services to the small- and medium-sized enterprise (SME) segment,” said John Drzik, president of Marsh’s Global Risk & Specialties unit.

By combining Dovetail’s technology platform with Marsh’s data, distribution and access to insurance capital, “we will create an innovative online intermediation mechanism for the small commercial insurance market,” Drzik said.

Leveraging technology

Francis said a majority of businesses fit into the small commercial insurance market, defined as companies with annual premiums totaling less than $25,000. These are businesses like a corner grocery, a restaurant, a small construction company.

“It’s, interestingly, an underserved market in the insurance industry,” Francis said.

That’s largely because it’s very labor intensive for an agent to put together a package of policies that a small business owner needs.

A typical small business will need at least three policies – a business owner’s policy, worker’s compensation insurance, and a commercial auto policy, Francis said.

An agent has to research each policy, gather information from the client to underwrite those policies, do his own investigation, and get at least two quotes for each policy, Francis said. On average, it will take an agent four hours to complete the work needed to offer a bundle of policies for the client to select, Francis said.

In a week’s time, an agent might be able to average 10 proposals and “if they’re lucky, sell two of them,” Francis said.

At 10%, the commission on $2,000 is $200. So agents are likely to focus on large commercial companies that might pay $200,000 a year in premiums because the commissions are much larger.

Dovetail’s technology, though, cuts the time an agent needs to assemble policies and quotes to about 15 minutes.

Dovetail’s patent-pending technology saves time by searching the Internet, looking at the business owner’s website and social media outlets to gather information that can be used for underwriting a policy.

For example, if a carrier doesn’t want to sell a policy to a restaurant that has a fryer in the kitchen, the agent had to go to the restaurant and investigate if a fryer existed. Dovetail’s technology, instead, needs just seconds to find the client’s menu and search for words like “french fries” or “onion rings” – foods that most likely are deep-fried.

Another example might be a gardener seeking a business policy. While the profession might appear to be low risk, Dovetail’s technology will search websites like Angie’s List looking for words such as “roofs” and “gutters.” A gardener who will clean roofs and gutters is at a higher risk for injury than someone who just mows the yard, Francis said.

“We’ll determine if the risk you’re writing is actually what you think you’re writing,” he said. “We’re creating a proposal that’s fully underwritten by electronic methods using Big data.”

No end to runway

Francis has been a veteran of Columbia’s insurance IT industry since 1981 when he joined what then was PMSC, founded by local insurance entrepreneur Larry Wilson. Francis left PMSC, which later was rebranded as Mynd and eventually sold to CSC, to join InsLogic Corp., an insurance brokerage firm. In 2004, Francis moved over to Trumbull Services, which provided back office services such as premium collection and policy management for first-tier property and casualty carriers.

Francis’ former boss at PMSC, Wilson, has played a role in Dovetail by providing financial backing and serving on the company’s board.

Wilson also has been a backer of another Columbia insurance IT company, Duck Creek Technologies, which in 2011 was acquired by Accentures, a global management consulting, technology services and outsourcing company.

Duck Creek is a strategic partner of Dovetail’s, Francis said.

“We use their rating engine as a piece of our technology,” he said.

It isn’t a coincidence that innovation such as Dovetail’s was created in Columbia, Francis said. “There’s a lot of deep-rooted expertise in Columbia related to insurance.”

The highly competitive, close-to-the-vest industry has more than 15,000 employees in the region and packs an annual economic impact of nearly $7 billion, according to a study for iTsSC, Columbia’s insurance technology and services cluster. The industry pays an average salary of $62,000 a year.

Another plus for the community is the graduate program in International Business at the University of South Carolina, Francis said. Marsh, which has approximately 27,000 employees serving clients in more than 130 countries, plans to take Dovetail technology worldwide, he said.

As far as Dovetail’s future, there doesn’t appear to be an end to the runway, Francis said, adding that he and the company’s 70 employees have joined Marsh’s Global Risk & Specialties unit. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies, a professional services firm with annual revenue of more than $13 billion.

“We expect this business to grow in the double digits for many, many years. There’s a potential for growth that’s just astronomical,” Francis said.

By Chuck Crumbo
ccrumbo@scbiznews.com

 

Click here for more information.

Comments are closed.