Originally published in Business Digest, March 1998

Union Jack

by Julia Lynam

[John McLaughlin] John McLaughlin joined Union Mutual Fire Insurance Co. in 1963 and spent the next 29 years working his way through the ranks of the company. In 1992 he was named president and CEO. (Photo: Jeff Clarke)

When I looked back at the notes I made while arranging to interview Jack McLaughlin, president of Union Mutual Fire Insurance in Montpelier, I found that I had written, "Here today, gone tomorrow." Nothing, I thought, could be less true of this company, which has been providing insurance services to Vermonters for nearly 125 years. My note, as it happened, merely meant that McLaughlin was in his office today, but away tomorrow!

With total assets approaching $75 million and annual premiums in the region of $50 million, the Union Mutual group of companies does business with thousands of individuals and companies in New England through more than 350 independent insurance agencies. Most of their policy holders -- known as "insureds" -- are home owners, although Union Mutual also covers commercial properties, churches, schools and other public buildings.

The world of insurance is complicated: "It's a very exciting business," McLaughlin muses. "We like to think we're conservative but we are really risk takers: You've got to be a bit of a gambler in the insurance business. Spreading the risk is the important thing."

Over the years, Union Mutual has refined its expertise and diversified within narrow limits, tapping into various sectors of the insurance market. In 1962 it acquired State Mutual Insurance Co. of Rutland, renaming it New England Guaranty, and converting it to a stock company that currently brings in approximately $20 million in premiums annually. Union Mutual also has a position in the auto insurance market, with a 45-percent stake in Champlain Casualty Insurance Co., housed at National Life of Vermont, up the hill from Union Mutual's State Street location.

As a mutual company owned by its policy holders, Union Mutual depends on careful investing to maintain a reserve. "On the insurance business itself, we're happy to break even," McLaughlin says, "although, in 1997 we did make a little there, as well as increasing our surplus by about $5 million."

Chief financial officer Doug Wacek is in charge of the company's investment portfolio and he echoes the "spread the risk" philosophy: "Anybody who manages money professionally does that," Wacek says. "We buy a bit of everything. Our portfolio currently includes about $43 million in high quality bonds, and $13 million in stocks." Union Mutual also has real estate investments that were worth approximately $3 million at year-end 1997.

Growth was strong last year, at 8.5 percent compared to an industry average of 3.5 percent, and is projected to reach a similar level in 1998.

Wacek joined Union Mutual in 1994 after a four-year stint as finance commissioner for the state under Govs. Richard Snelling and Howard Dean. "I was the one dealing with the everlasting deficits of '91 to '94," he quips. Prior to that he spent four years as chief financial officer at Vermont Gas Systems Inc. New to insurance, he finds the industry fascinating. "As a mutual company, we're owned by our policy holders. We don't have shareholders," he explains, "so we keep our rates as low as possible while building up a surplus to cover for shock losses. We have to have reserves, so if we do have a nasty storm, we'll be able to pay the claims."

The severe ice storm in January is a case in point. Union Mutual has, so far, received approximately 1,000 claims from across the region, totalling $1.2 million. Many of the claims are small: roofs and fences damaged by falling branches or the sheer weight of ice and snow, and some fires resulting from the storm. "But claims are still coming in," says Wacek. "We'll have people in upstate Maine who'll go to open up their cabins in May or June and find damage from the storm." In magnitude, the ice storm caused a blip on the scale comparable to severe winters like those of 1994 and 1996.

The company's gallant response to ice storm claims came as no surprise to agents like Don Boss Jr., president of the Williston Insurance Agency. "Our relationship with Union Mutual started when my father founded this agency in 1967," he says. "In those 30 years we've experienced nothing but excellence and a fine business relationship with Union Mutual.

"Often in our industry the market gets hard and all of a sudden companies tighten up on their policies and their underwriting," Boss says. "Union Mutual always seems to come to our aid. In the recent ice storm, for instance, they were right there settling claims as quickly as they could.

"We know the company well and we know the people there. They have staff who've been there for as long as we've been doing business with them. There are a lot of insurance companies out there, but our confidence level in Union Mutual is beyond comprehension."

The accolades from Boss are corroborated by a recently coined phrase at Union Mutual, "over 900 years of Union Mutual experience" -- describing current employees' total years of service with the company.

Boss also says he "applauds" McLaughlin for "joining the company as a field sales representative and working up to president."

Gerritt Crowley, president of Crowley Insurance Agency in Burlington, is equally lyrical in praise of Union Mutual: "They know the state like the backs of their hands," Crowley says, "and they come up with good useable products that fit. They're relatively small, compared with the large national insurance companies, but they write a lot of business in Vermont, because that's where they shine."

The Crowley Agency was established by Crowley's father in 1947. "When I joined in 1966 we were certainly already doing business with Union Mutual. When we place business with them, we know they're going to pay the claims."

Even compared with other mutual companies, Union Mutual is special, he adds. "The Massachusetts mutuals we deal with don't begin to stand against them,"Crowley adds. "They're just good people."

Most of the Union Mutual group's 80 employees are based at the central offices in Montpelier, where some enjoy a view of the golden dome of the Statehouse. There is also a handful of marketing representatives scattered around the six New England states.

The company's relationship with the Statehouse is strong: A roll call of the Union Mutual board of directors, past and present, includes five former Vermont governors: Franklin Billings, Charles Smith, Deane Davis, Ray Keyser, and Tom Salmon. The latter two are still on the board, where they are joined by former National Life of Vermont CEO Frederic Bertrand; David Coates, formerly of KPMG Peat Marwick; Burlington attorney Allen Martin; dairy farmer John Osha; and former Union Mutual president and CEO Lawrence Reilly, as well the current holder of those offices, Jack McLaughlin.

One of the biggest challenges in the insurance industry, says McLaughlin, is to acquire good staff. He's obviously proud of the team he's put together: "We really value our employees," he says. "We try to provide a good working environment and a corporate culture that enhances productivity.

"We promote from within, but many times we have to bring people in from outside and then we find that the fact that we are located in Vermont is a big attraction."

McLaughlin himself is a living example of both methods: Originally from Greenfield, Mass., he went into insurance straight from graduate school at St Anselm's College in Manchester, N.H., working first in Glens Falls, N.Y., and then in Philadelphia before the magic of the Green Mountain State pulled him into Union Mutual in 1963. "I was just an old ski bum who wanted to work in Vermont," he says. Over the next 30 years he worked his way through the ranks of the company, from regional agency manager to chief operating officer, eventually becoming president and CEO 1992.

He's appreciative of his staff: "It would be very hard to muster quality people like this," he continues. "We try to treat our employees well, and they take good care of us. It's a two-way street." Taking care of employees means, says McLaughlin, "paying top dollar," as well as providing benefits like college scholarships for employees' children. McLaughlin puts a lot of emphasis on maintaining excellent working conditions. A self-described outdoors addict, McLaughlin has designed renovations that are currently underway at Union Mutual headquarters that to include a complete fitness gym to help employees keep in shape. A recent glitch --the shower units caused a minor chaos on delivery when they were found to be half an inch too big!

McLaughlin and Wacek, together with chief information officer Bill Lanzoni and senior vice president John Corning, work very closely together. McLaughlin and Wacek are particularly enthusiastic about Union Mutual's place in the community. "We really enjoy our presence in downtown Montpelier," says McLaughlin "We're a non-polluting business, we enjoy our relationship with the city of Montpelier and we feel that we have a responsibility to support the community and to encourage our employees to do volunteer work." Union Mutual has made generous donations over the years to the Statehouse renovation fund, Montpelier's new civic center, UVM and several Vermont colleges.

[Eileen Conti & Lisa Keysar] Corporate secretary Eileen Conti (left), a member of the management team, oversees communications at Union Mutual with administrative assistant Lisa Keysar. (Photo: Jeff Clarke)

McLaughlin has embraced the computer age with unbounded enthusiasm. "I can't say enough about automation in our industry," he enthuses. As chief operating officer seven years ago, he says, automation allowed him to reduce the staff from 93 to 65. "Also, I didn't believe in having secretaries," he continues. "Managers can write their own letters and get their own coffee!"

Solid company growth has allowed McLaughlin to build his staff back up to around 80 people "And," he is quick to add, "I don't anticipate any further staff reductions due to automation! It takes a long time to bring together a team like this."

Under Lanzoni's supervision, Union Mutual has invested more than $1 million in new computer hardware and software to tackle the year 2000 issue, when many computers' internal dating systems are expected to fail. Mclaughlin's hi-tech enthusiasm shows through as he describes the project: "Some companies are trying to make do with the systems they have," he says, "but our board recognized two years ago that it was important to do this well, and that it provides an opportunity to upgrade our systems so that we can really take advantage of the growing use of direct electronic payments and improve our electronic communication with our agencies."

Union Mutual already has a voice response system that policy holders can call any hour with bill questions. It's part of the company's commitment to superior service. "Insurance is a very competitive business," says McLaughlin. "We have to differentiate ourselves in our service. That's where our people come into play -- when you have an ice storm you want your insurance company to stand up and talk to you. We try to treat all our 'insureds' fairly, and, if anything, we err on the side of giving people the benefit of the doubt.

"Yes, we get a few complaints, but we get plenty of accolades. I think we've got a claims system that's second to none. This January, for instance, many of the ice storm claims were paid out that same month."

Innovation continues: One recent introduction is an arrangement with Burlington-based Workers Risk Services that allows that company to use the Union Mutual network of agencies to offer its product, workers' compensation insurance for companies which, due to their small size, have difficulty obtaining this kind of coverage. "We've struck up a marketing arrangement, and our agency plant is thrilled with it," McLaughlin says, pointing out that the agencies through which they offer their policies to the public are customers of Union Mutual just as much as the "insureds" are.

Approaching its 125th anniversary, Union Mutual is clear about its priorities: keeping premiums down, delivering excellent service, making good use of technology and innovation, caring for its employees and being a good corporate citizen. And as the company approaches the new millennium, McLaughlin is confident their computers will be unfazed by the changes.