May 13, 2013
Shop Talk
Q&A With Richard A. McGrath, McGrath Insurance Group
PHOTO/MATT VOLPINI
Richard A. McGrath, President and CEO, McGrath Insurance Group Inc., Sturbridge
By Rick Saia
As the third-generation owner of the insurance agency that bears his family's name, Richard McGrath runs a business with more than 20 employees. With annual premiums in excess of $20 million, it ranks among the top 10 insurance agencies in Central Massachusetts.
What do businesses need to know about insurance that they usually or sometimes overlook?
A lot of the industry and buyers of insurance look at it as more of a commodity, and price has always been the most important component. What is being overlooked in some respects may be ... the terms and conditions in the actual agreements of what they're buying. What needs to be done is a focus on each business's own inherent risks and evaluating those risks and then prioritizing those risks into three different categories.
Your company has been in business for 86 years. What has stayed the same about your market over that span?
The business of insurance in itself is an industry which is the backbone of the American economy. What's happened over time is that risks have changed, businesses and their operations have changed, and insurance has had to evolve along with it. But keep in mind insurance is such that, without it, no one would perform any of the business occupations or perform any of the functions of operating a business. You wouldn't have workers' compensation. You wouldn't want to hire employees knowing they could come back and file litigation against you for a particular workplace injury. A doctor wouldn't want to perform an operation knowing the fact that he doesn't have anything backing him in terms of liability insurance.
What's changed would be the types of products, because insurance has evolved as society and American capitalism (has) evolved.
You sell business interruption insurance. What are the most common forms of interruption a company must guard against?
It's pretty much the risks of your property insurance and continuing as a business. Business interruption is … just like disability insurance would be (for) an individual. And different types of business income would vary based upon different types of industries or businesses that you would be underwriting. For example, a person who has a significant amount of investment property in commercial real estate, his business income loss would be the exposure of the loss of his rental income from multiple sources. In the manufacturing sector, it would be more or less in gross sales and continuing expenses that would have to continue even (if) the business was destroyed or partially destroyed.
We just saw the impact on businesses in Boston after the marathon bombings. How much of an impact do things like terror and cyber terror play into business coverage today?
(For) terrorism, there's a federal “backstop” system right now. One of the key ingredients today … is what is the definition of a terrorist attack versus just random violence or vandalism? Cyber terrorism is a new product that the insurance industry is having to address. Cyber-security protection is now becoming a highly discussed topic.
Your company also helps businesses with employee benefits. What’s their biggest concern today for which they reach out to you?
Cost containment. The rising cost of health insurance has been exponential over the last 10 years. You have a lot more higher deductibles, a lot more in the way of co-pays. With that (has come) wellness programs. (Companies are asking) 'How can I reduce my costs if I can hire or maintain healthy employees?' So, wellness is now becoming a very important ingredient in a lot of programs that we offer.
We see many companies that grow by acquisition. You’ve acquired more than a half-dozen agencies during your tenure. What’s the best way to assimilate an acquired company into your company’s culture and processes?
Assessment of staffing and personnel is important, communication on what your goals and objectives are, what you plan on achieving and what you would like to achieve, and the methodology by which you're going to do this are critical.
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Shop Talk - Richard A. McGrath, McGrath Insurance Group Inc.
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