Age and Wisdom

Top 100 Agency Profile
Agency Name: Marshall and Sterling Enterprises Inc.
Headquarters: Poughkeepsie, N.Y.
Year Founded: 1864
Additional Locations: 17
2008 Total Premium Volume: $342 million
Property/Casualty: $289 million
Other than P/C: $53 million
% Commercial: 65% of total
% Personal: 19% of total
Other: 16% of total
2008 Revenues: $49 million
Principals: John O’Shea, chairman; Timothy Dean, president; Tim Rychcik, chief operating officer; James Tunick, executive vice president
Number of employees: 345

145-Year-Old Marshall and Sterling Stays True to Its Privately-Held, Employee-Owned Roots

Today’s struggling economy has not held back Poughkeepsie, N.Y.-based Marshall and Sterling Insurance Inc., an Insurance Journal Top 100 Agency that takes great pride in being 100 percent employee-owned. Though they have evolved into a firm counted among the largest privately-owned insurance agencies in the United States, they have not forgotten their roots.

Marshall and Sterline opened its doors in 1864, founded by Joseph Marshall and Graham Sterling, two sled-makers by trade, who happened to sell insurance on the side. The agency has come a long way since then, both in technology and in business. John O’Shea, chairman of the board, who has been with Marshall and Sterling since 1955, remembers the firm in simpler times.

“Back then, we didn’t have computers, we didn’t have copy machines, we didn’t have calculators, O’Shea says. “Everything was done manually. Today, so much is automated … the whole way of doing business is different.”

Billing was done manually, and a type-written copy of the bill was set aside in the event bills were not paid. Eventually, the firm began using the IBM Service Bureau. “For a fee, they (IBM) would process all of the work that you needed and produce your accounts receivable and your customer statements and everything for you,” O’Shea says.

There were no competition rates in the early days. Every firm filed general rates. “You sold yourself more than you did on price,” O’Shea recalls. “You sold yourself on the level of service you could give, or the fact that they know somebody else in the business and you can refer them for a reference… You just happened to be there at the right time when something is needed. It was a whole different way of selling than it is today.”

O’Shea says one minor negative aspect of the changes from the ’50s is the quality of customer service they’re able to give on a more personal level. “We weren’t more efficient, but the personal contact was certainly greater at that time than it is today, at least in most cases.

“Nowadays, the sales people are making arrangements with the customer and deliver the policy, and after that, very often, it’s the customer service rep … who does a lot of the service. Back when I came in, you were in touch with your customers for everything they wanted or needed, even down to a routine change of car. Very often they called you and you did all that stuff as well.”

When O’Shea came to Marshall and Sterling, the firm had just two offices and 25 employees. Today, they have close to 20 offices with 345 employees.

Now nearly 80 years old, O’Shea still does his best to keep current with modern technology.

Betty Fanelli, senior vice president, who has been with the firm for 35 years, says it has always been important to O’Shea to stay abreast of changing technologies. “He wasn’t old fashioned,” Fanelli says. “Even though … he knew the old ways were good, he always knew that we had to keep moving, and I think that’s been the secret to our success.”

Tim Dean, who stepped up as president in January 2009, says the most significant change for the better in Marshall and Sterling’s history is the firm’s transition to an ESOP (Employee Stock Ownership Plan). In 1977, Charles Smith, the acting president, was at an age where he was ready to retire, and wanted to perpetuate the agency to assist employees.

“He could have sold it at that time,” Dean said. “It was successful. He could have sold it to a larger insurance company, one of the alphabet houses or something, but because of his care for the community and the employees of the firm, he decided to make the transition to an ESOP firm, where the employees over time, bought the shares from him.”

Marshall and Sterling have always been privately-owned, and remained that way after the transition. It appears to have paid off. They have been recognized by Independent Insurance Agents & Brokers of America as one of the nation’s top “Best Practice Agencies.”

Opportunities for Growth

No opportunity goes unnoticed at Marshall and Sterling, which is one reason why the firm remains strong today. The agency’s gives its staff every opportunity to grow and learn. Most associate credentials exceed industry standards, Dean says, and the agency encourages staff to attain professional insurance designations.

Not only is Marshall and Sterling open to hiring from outside, they allow even those at the bottom tremendous opportunity. That is one why Dean and Fanelli are where they are today.

Dean began his career working for an office equipment company. Marshall and Sterling was one of his customers. “I didn’t want to sell office equipment my whole life,” Dean says. “I wanted to be involved with something that was more professional and required expertise. Just from coming in and visiting with the president at that time, I just could tell that people were very happy here, so I just thought it would be a great place to work.”

However, Dean admits he knew nothing about insurance at that time. “They hired me because of what they felt was my ability in sales and my ability to work with people, and, I cared about it. So they trained me in insurance.” That same philosophy continues in the agency’s hiring practices today.

“We look for people who are good, community-oriented people that know how to sell and we’ll train them in insurance,” Dean says. “It’s really not a bad practice in any business if you really think about it because, if you hire people that are already in your business, the reason they’re coming to you is because they left somewhere else. And that usually means there was a problem somewhere else. That’s the risk you take when you hire people from other firms.”

Dean became a successful producer for the firm. Eventually, the agency’s president at that time noticed Dean’s leadership potential and appointed him in charge of a branch.

“When it came time to lead the entire company, he (Dean) was the guy,” Fanelli says. “He’s only been doing it since January (2009), and we have just made huge, huge strides in revamping a lot of things that needed to be done. He can just get it done.”

When Fanelli first started with Marshall and Sterling 35 years ago, she was an assistant to the accountant. She moved into the human resources department, and the agency’s employees became her customers.

“To that end, I made sure there were benefit packages second-to-none,” Fanelli said.

Fanelli says that all employees own stock in Marshall and Sterling, which gives them a sense of ownership. Fanelli describes it like a profit-sharing plan. Money is put in the employee’s account, and each year, he or she buys more stock, tax-free. “We’ve paid out over, I think the last number was something like $35 million in pay-out,” Fanelli says.

“Employees really feel that they own this company. It’s not just one guy that’s got a lot of stock or a couple of men or women that own the company; we all own it.” Each year, employees obtain shares of stock in Marshall and Sterling, which depends on the profitability of the company and whatever salary an employee makes. Employees do sell their shares back to Marshall and Sterling when they retire.

Marshall and Sterling also offers a competitive employee benefit plan that pays 100 percent of medical, dental and 401(k) benefits. They split the benefits 50-50 for any dependents. “We look at it as, we’re employee owners, and if we’re gonna spend some money, we’re gonna spend it on them,” Fanelli says.

The firm always pays for continuing education of its employees, she added. And, in many instances Marshall and Sterling will subsidize education for a new hire with no insurance experience, such as in Dean’s case.

“When it comes to a sales person, we extensively test and interview before we make an offer to somebody that’s not in the insurance field that we have to go through that expense for, but we’ll do it,” Dean says.

In the last year, Marshall and Sterling has hired more than 10 sales producers, Dean says.

Equine Division

Marshall and Sterling’s Millbrook office, some 60 miles north of New York City, provides a unique opportunity for the firm to serve a different type of clientele — and their farms and horses. Millbrook is a town where affluent people might own weekend or summer homes, as well as breeding farms and horses, a perfect opportunity for business for the firm’s growing equine division.

Mary Moeller, who has been with the firm since 1982, handles the equine accounts within the division. She specializes in hunter/jumper events. The agency sponsors Horse Shows in the Sun (HITS), which produced its first horse show circuit in Gainesville, Fla., in 1982. HITS has since developed a nationwide company with world-class hunter/jumper circuits in California, Florida, Arizona, New York and Virginia.

The equine division also sponsors the Marshall and Sterling League. For more than 20 years, the Marshall & Sterling League has remained at the forefront of hunter/jumper competition. They have grown from 10 member shows and approximately 100 riders in 1991, to more than 1,200 horse shows and 2,300 riders today.

The Marshall and Sterling League will sponsor the League National Finals Horse Show, which will be held on Sept. 16-19, , at the world-class HITS-on-the-Hudson show grounds in Saugerties, N.Y. They will hold finals competition in Children’s Hunter, Adult Hunter, Adequan Hunter, Bit O’ Straw Hunter, HITS Hunter, 3’3″ Hunter Derby, Children’s Jumpers, Adult Jumpers, Pony Jumpers, the M&S Children’s Horse and Pony Medal, M&S Adult Medal and Central Equine Junior Medal. A national points system determines the qualifiers in each division. Those qualified to compete at the National Finals will be counted among the best riders in the country.

The Marshall and Sterling League has approximately 200 horse shows across the country that offer classes within the horse show to qualify for the league finals. If a rider takes a class with the Marshall and Sterling League, he or she can earn points that accumulate for the finals.

Targeting Crime

Marshall and Sterling also targets crime as another unique specialty market. The firm targets check cashers and armored cars, as well as robbery and burglary coverage. They insure check cashing stores who cash checks and money orders and wire transfers.

“We insure the stores themselves, because they’re targets,” Dean says. “They have high amounts of money on pay days. So they’re targets for people to hold them up.”

Related to check cashing stores are armored cars or who deliver the cash. “They also have similar security risks with a lot of money and so, we insure them as well,” Dean says. “We’ve been doing it for over 30 years now.”

Acquisitive History

Marshall and Sterling is always in acquisition mode, Dean says. The agency has made at least one acquisition a year during the past 25 years. “We’re a large company, but we like to operate with sort of a hometown feel to it,” Dean says. “So we keep the branches that we purchase in those new areas.”

“We’ve always been able to find an area where we didn’t have an office, and talk to an agent in the area, and a few years later, they’ll call us and say ‘We’d like to sell to you,'” Fanelli adds.

Dean believes that the current economy has opened up more opportunities for acquisitions. Though the insurance industry is somewhat protected by its necessity, Dean says revenues and profits are down. Even so, Marshall and Sterling has been able to weather the storms well. “We came into this period with no debt, so we’ve been able to weather it,” Dean says.

Dean says they’re committed to remaining independent, and will do whatever it takes to remain that way. “We want to be the buyer, not the seller. It’s in our corporate bloodline to remain independent.”

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