914 Inc, - 04/26/13
By Dana White
Last fall, as Superstorm Sandy was bearing down on Westchester County and the rest of Northeast, the PURE Group of Insurance Companies was a whirlwind of activity. Employees assembled in the glass-walled “war room” of PURE’s White Plains offices, tracking the storm on monitors and identifying clients in its path. The Communications Team then sent out emails to policyholders with advice on protecting their homes. The seven-person Member Advocate Team worked the phones, offering last-minute coaching to deal with the oncoming maelstrom and lining up temporary living situations, if needed. The Risk Management Team was marshaling resources for the cleanup—particularly arborists—and the Technology Team was getting its connectivity ducks in a row. Finally, the all-important Claims Team was bolstering the number of adjusters in advance of landfall, lining up contractors to help with the cleanup, and preparing itself for the onslaught of claims to come.
“We’re the calm before the storm,” says Ross Buchmueller, president and CEO of the six-year-old insurance company, which covers affluent homeowners and their valuables: jewelry, cars, watercraft, Picassos. Sandy was the second costliest storm in US history, accounting for 125 deaths, $62 billion in damages (mostly to New York and New Jersey), and costing $25 billion in claims for insurers. For its clients, PURE was the calm after the storm, too, as its claims adjusters fanned out across 10 states and Washington, DC, investigating the approximately 1,300 claims that came in, restoring order, making things right.
Buchmueller, 47, can see the “war room” from his corner office on the sixth floor of the Westchester One building. Casual in a sweater and khakis, he resembles Mark Ruffalo’s white-collar cousin. Photographs of his wife, Pamela, and two children abound; they live in Larchmont, where his son and daughter attend public schools. A plaque from 2004, when Crain’s New York Business named him one of its “40 Under Forty,” has pride of place on a wall by his desk.
At that time, he was 38, best known for launching AIG Private Client Group and growing it into a half-billion-dollar division. Now, he is the captain of his own ship, employing 175 people, half in White Plains, the rest in offices in Atlanta, Chicago, Scottsdale, Charleston, and Fort Lauderdale.
Since Sandy, PURE has weathered Winter Storm Nemo and a tornado in Hattiesburg, Mississippi, along with the assorted mishaps that befall people and their possessions: theft and fire, accidents and injury. Down on the street, police sirens sound, a reminder that mayhem—to steal another insurance carrier’s tagline—happens, and, when it does, it’s nice to have backup.
While PURE sounds like a brand of bottled water, it actually stands for Privilege Underwriters Reciprocal Exchange. Unlike publicly traded companies, PURE is based on the mutual insurance model, where policyholders are members and risk management is rewarded with lower premiums—up to 20 percent lower.
Members make a surplus contribution of up to 10 percent of their annual premium for five years into a capital pool, to boost capital assets. At the end of the year, if PURE shows profits or grows its surplus capital, the company allocates those gains into notional accounts for each member, called Subscriber Savings Accounts, or SSAs. If a member elects to cancel all of his or her PURE policies, any monies in their SSA are returned to them. “In 2012, despite the impact of Superstorm Sandy, PURE will make an allocation of $1,500,000 to member SSAs,” says Buchmueller.
While starting an insurance company in a 21st-century climate that seems defined by ever-more-destructive natural disasters might appear, well, risky, when it comes to his members, Buchmueller leaves little to chance. “In our model, we want to be careful. We aim to select those homes and owners that we believe will perform best in a storm. Our view is, we should only let in those people who we think share our values. That’s the best thing we can do to hedge risk.”
Anyone hoping to buy PURE’s High Value Homeowners Insurance must have a home that’s relatively new construction and that would cost at least $1 million to rebuild. They must be “responsible”: Their houses are solid as fortresses; they don’t file frivolous claims; they bring in the lawn furniture if a “wind event” is coming; they don’t see an impending storm as a chance to “lose” the boat they can no longer afford. “They’re very actively engaged in thinking ahead, trying to prevent loss,” says Buchmueller. “They have an ownership in PURE. It’s an ‘ounce of prevention, pound of cure’ issue. They would rather prevent a loss than respond to a loss.”
As a result, applying for PURE insurance is like applying to an exclusive co-op building or country club: Not everyone makes the cut.
“PURE is absolutely more selective than other companies,” says Tom Coughlin, president of the Coughlin Group, an insurance brokerage with offices in Larchmont, Manhattan, and Los Angeles. “They look at the individual more, whereas another company looks more at the risk. PURE takes a view that a client should be a fit with the company.” Coughlin sells PURE “almost like a club of people who are really concerned about buying the best coverage at the best price. It’s a club in the fact that you would only want to recommend it to people who would actually help the company grow. By doing so, you’re helping yourself.”
According to Buchmueller, PURE’s level of service sets it apart. Member advocates are like concierges, helping with everything from filing claims to shipping a pricey painting. If a member totals his or her Mercedes and is too busy or discombobulated to shop for a new one, PURE will find a replacement and have it delivered. After a loss, PURE can not only line up the contractor, but can also kick in $2,500 toward preventative measures, such as a new generator or lightning-suppression systems, to ensure the damage doesn’t happen again. PURE even maintains a warehouse in Florida with tarps and plywood in case of shortages: “You don’t want to find out you can’t cover your roof because there was a run on supplies.”
There is no shortage of achievement in the Buchmueller clan. Ross was raised in the Boston suburb of Westwood, Massachusetts. His parents, who live in El Paso, Texas, have been married for more than 50 years; his father, David, was a hospital administrator; his mother, Flo, a philanthropist and community volunteer. His older brother, Thomas, a professor in the University of Michigan’s Stephen M. Ross School of Business, is a leading health economist who served on President Obama’s Council of Economic Advisors from 2011 to 2012. Younger sister Susan, a former presidential intern, now works for the Social Security Administration.
Buchmueller attended Trinity College in Hartford, Connecticut, where he played on the varsity golf team. (A single-digit handicap, he belongs to the Scarsdale Golf Club and still plays in the occasional tournament.) After graduating with an economics degree, he went straight to work for Chubb as an underwriting trainee. He rose quickly through the ranks; by his late 20s, he was national sales manager for Chubb Masterpiece, the company’s high-end division; in 1995, at 30, he was dispatched to London for four years to oversee Chubb’s personal insurance business in Europe. (His wife was a British employee of Chubb.)
In 1999, when he was 35, AIG recruited him away to start AIG Private Client Group. Over seven years, he built it into a highly profitable $500 million business, signing 18,000 clients, including one-third of the Forbes 400.
By 2006, however, AIG was in turmoil. Its CEO, Hank Greenberg, had resigned under SEC scrutiny, accused of misleading insurance regulators. “The company was in a process of change,” Buchmueller recalls. “There was an enormous amount that went on that impacted the culture and energy of the place.
Lots of investors had reached out to me saying, ‘If you want to start your own insurance company, we would like to be your partners and make sure you have the capital to make it happen.’”
With the backing of Greenwich, Connecticut-based Stone Point Capital, Buchmueller and two other AIG executives, Martin Hartley and Jeffrey Paraschac, took the plunge. Their first move was somewhat counterintuitive: They chose to launch PURE in Florida, after Katrina, when other insurance carriers, stung by large payouts, were limiting coverage or refusing to insure homeowners altogether. Buchmueller and his partners saw an opportunity. In their prior experiences, they had found that the newer the home, and the larger it was, the less chance it would sustain storm damage—40 percent less, in fact. (Turns out the farther apart the four corners of the house are, the less impact by wind pressure.)
“If you built a new house to the highest standards, with roof wrappings that would never fly off and missile-resistant glass, you couldn’t get insurance. We said, ‘This is a classic example where the best of the best is either not getting coverage or paying more. And this will be our first play.’”
And it’s played out well. Six years later, PURE is licensed in 47 states, using a network of 500 independent insurance agents and brokers. “We’ve grown at more than 40 percent for six straight years, and we’re at 48 percent growth through February.” It has 20,000 members so far, with a goal of 50,000: “That would be a $500 million business. Our business will do more than $250 million in premiums this year.”
Buchmueller’s reputation in the industry served him well in his new venture. “We were not looking for another company until I heard that Ross was involved because anything Ross does, he does it carefully, he does it wisely,” says Roz Binday, founder and president of Advocate Brokerage Corp. in Scarsdale.
“PURE is a boutique company, they don’t want to be on every street corner. They have a terrific product and it’s very well priced.”
Binday has had plenty of opportunity to see PURE at work, from Hurricane Irene to the unexpected Halloween snowstorm of 2011 to Superstorm Sandy.
“When you have a newer company, you want to sort of ‘test’ them, and boy, were they tested. You have to understand, on the first day of a loss, everyone has a chip on their shoulder; they figure no one’s going to take care of them. They’re nervous, they’re in trouble, there’s a hole in the roof, and it’s snowing. This company really lived up to its promises. They were quick, they were fair, they were gracious, and they didn’t stint.
PURE didn’t stint on its offices, either. It moved into these 27,000-square-foot offices a year ago, after outgrowing its space in a building near the White Plains train station. Befor moving in, Buchmueller and his team remodeled the office space using research and information. He hired sociologists to study how his employees worked together and created “team rooms” packed with technology. SMART Boards abound. The communal area has a Ping-Pong table and a kitchen that’s model-home chic. This is no accident: “There was a good deal of studying what was wrong with typical offices, and the kitchen was where it all got jammed up.” Video monitors mounted high on walls inform his employees about everything from birthdays to how many clients they signed in Texas last week. “As the organization gets bigger, it can be harder to have everybody stay engaged the same way. So we put up digital signage that everybody, no matter where they are, can follow.”
Indeed, the PURE offices have a level-headed, take-charge vibe where little is left to chance. He draws a comparison to Commercial Union Insurance, a British insurer whose motto was, “We won’t make a drama out of a crisis.”
Says Buchmueller: “There’s a certain element of keeping your head. Now we can get pretty fired up about stuff during other times, but at a time in which the stress is the highest is when we are at our calmest. We get fired up in calm times, trying to figure out how to be better and smarter.”
Dana White, a frequent contributor to 914INC., profiled Schott North America CEO Linda Mayer for the Q1 issue. White and her husband are probably underinsured.