Last updated on May 13th, 2019 at 02:32 pm
Over the last six years, Acuity, a Sheboygan-based property and casualty insurer, has grown its annual sales revenues from about $225 million to $700 million. This year, Acuity completed a $45 million expansion of its headquarters building along Interstate 43. Leading the company through this extraordinary growth period is president and chief executive officer Benjamin Salzmann. In a recent interview with Small Business Times managing editor Andrew Weiland, Salzmann expressed some strong opinions about the future of the property and casualty insurance industry, the impact of President George W. Bush’s re-election and other issues. The following are excerpts from that interview.
SBT: What did the headquarters expansion project entail?
Salzmann: "We originally had 160,000 square feet. While we didn’t have to rent supplemental office space, we had over 25 managers who didn’t even have cubicles and couldn’t meet with their employees. We were continually competing to get into conference rooms. So, we had outstripped our facility. We expanded, put on the south wing and made it very similar to the north wing, but instead of just two floors, it also had a basement. This is now a 440,000-square-foot facility."
SBT: Do you have any future
Salzmann: "First, we did not finish the second floor to the south wing. So, as we fill up more of the building, we can finish off the upper floor and that will be our next wing for expansion. Secondarily, we have done an entire site plan where we could add two more buildings of similar size, which would also include enclosed parking behind each two-building complex. This growth (plan) takes us out several decades."
SBT: What is the amount of growth in annual revenues and employment that Acuity has experienced in recent years?
Salzmann: "In the last six years, we went from $225 million to $700 million (sales revenue). Obviously, that’s very aggressive growth, which is driven by being able to operate efficiently at lower cost so we can pass those savings on to our customers. We can be more competitive in the marketplace, thus attracting the business that sustained this growth rate. In terms of employee count, you have to understand our efficiency has taken off so astronomically. Six years ago, we had 292 employees per $100 million of sales. Now we’re down to 109 employees per $100 million in sales. While we’ve added just under a couple hundred employees, we’ve grown much more than that."
SBT: Are there any other factors that have led to your growth?
Salzmann: "We really strive to give world class claims service. We have a claims service where whenever someone calls in to report a claim to our headquarters, before we hang up the phone, we can page them, bouncing a message off a SkyTel satellite and get to a claims adjuster who might be just a couple of blocks away, before they hang up. We have signed testimonials from insurers where our claims adjuster arrived at a house fire before the fire department got there. When we had $12 million worth of storm losses in the St. Nazianz area, FEMA (Federal Emergency Management Agency) was telling people they should have bought Acuity Insurance, because we were the very first people on the scene. And we arrived with checks. We were writing checks right at the scene of the (storm) for interim living expenses and settling claims before other insurance companies ever got there. So, a combination of our efficiency, which supports our competitive pricing, and the fact that our technology allows world class service."
SBT: The expansion of your company’s headquarters indicates a strong commitment to staying here in Sheboygan, obviously. What are the advantages and disadvantages of being located in a smaller city such as Sheboygan, which is an hour’s drive from Milwaukee and about 2 1/2 hours from Chicago?
Salzmann: "First, anyone who has driven in Chicago knows the drain on their daily lives. Obviously, Wisconsin as a whole has a vastly superior lifestyle than you’d experience in Chicago. Second, we do benefit in terms of real estate. Like this building design would be so much more expensive in the Chicago market. Challenges? Once in a while, it’s hard to attract someone who is living in a larger city to move to a small community. On the flip side, once they move here and live here for a while, they’re in no
hurry to leave."
SBT: What is your reaction to the re-election of President George W. Bush and what effect do you think that will have, if any, on the insurance industry?
Salzmann: "I like the focus on this country’s security, and I like his approach, which fundamentally empowers the economy to move forward. You know, he’s been criticized for bringing us back into debt, but economists after the Great Depression in 1929 laid out spending plans that stated the very first thing we should do at the beginning of a recession is to stimulate the economy by incurring debt. He replicated the lessons we learned 85 years ago. I guess what’s more important is what didn’t get into office. I respect John Kerry greatly, and I think the way he conceded helped reunite the nation. Interestingly, a Kerry-(Sen. John) McCain ticket might have been the thing that would have won this nation over. Having said that, John Edwards is very one-sided and divisive. He stands up and shouts that he is going to sue the evil large insurance companies. I don’t feel so evil. We survey our claimants, and we are always in the high 90 percentiles of giving very good and excellent claim service."
SBT: Aside from the obvious, how do you think the terrorist attacks on Sept. 11, 2001, affected the insurance industry?
Salzmann: "Sept. 11 was an opportunity for the insurance industry to show we can help rebuild America. I think we did. It drained $70 billion from the industry. Now, Acuity didn’t have any direct losses, but we buy what’s called reinsurance from reinsurance companies in the event of large losses and we have paid a lot more for reinsurance due to Sept. 11. This is a way the insurance industry shares its shock losses. Acuity was proud of how the industry conducted itself, how it responded. We also were able to step up and fill some of the void left by some carriers who were so damaged by Sept. 11 they had to retract from the market."
SBT: What about the hurricanes that hit Florida this year?
Salzmann: "The hurricanes took $25 billion worth of damage. Florida has a hurricane pool, a hurricane fund, that would have paid the first half. The second half hit the insurance companies and the reinsurance companies, hurt results. As a result, you’re going to see national insurance companies charging more for auto and home insurance, where regional companies not located in Florida will continue to price just on their own loss experience. Acuity will charge on how the Midwest is doing. We’re not going to be hitting you with an additional charge to help pay for losses in Florida."
SBT: You think national companies are going to charge us in Wisconsin more for auto and homeowners insurance as a result of the Florida hurricanes?
Salzmann: "Yes. What happens is most national (insurance) companies are also stock companies. If they themselves eat half of that $25 billion, they have to make it up because their stockholders are saying, ‘Wait a second here, where’s my dividend? Where’s the appreciation of my stock?’ Now, they’re going to try to raise rates the most where the losses came from. But Florida also has a very complex series of laws and legislation to protect them. Then the national carriers look at the rest of the nation to make up the difference."
SBT: What lines of insurance do you think are going to increase in demand in upcoming years, and what lines do you think are going to decrease in demand?
Salzmann: "We are wonderfully coming out of a recession. The housing market has always been strong, but business is the area that hasn’t been flourishing enough during the last recession. As we recover, you are going to see an increase in commercial insurance. You are going to see more small businesses starting up and being successful, you’re going to see small businesses growing to mid-size businesses. The commercial sector is an area poised for robust growth."
SBT: Do you see any lines declining?
Salzmann: "I wouldn’t say declining as much as chronic stress. Workers compensation is a broken insurance tool. So many insurance companies have lost money on workers compensation. That’s a result of them assuming more than an adversarial role with the injured worker. Acuity has, currently is and we fully expect to make money on workers compensation, largely because of the way we handle claims with injured workers. As soon as a worker is injured, we ask the employer to contact us immediately. We will actually file all paperwork with the state regulatory bodies. We will contact the injured worker. We will give them a credit card that they can purchase any prescriptions they need because of their injury without themselves fronting money. We will work with them for more rapid return to work, even if that means additional medical cost. Because we found that the more quickly somebody recovers, the more fully they recover. They’re happier. They’re back out on their bowling team or they’re back out deer hunting sooner, and we’re not continuing to pay for them sitting in their home in unnecessary pain and not recovering at the rate they should."
SBT: What do you think lies ahead for your company? Does it have a bright future here?
Salzmann: "We certainly over the last six years have grown. We’ve been able to do it in a profitable manner because of our efficiencies, our lower cost structures and also in the way we can handle the claims. I view our future as wonderfully promising. The biggest factor for our future is our workforce. Acuity was named one of the 100 best employers in the nation by Fortune magazine. We’re the best mid-size employer (in HR Magazine), not just in insurance, but in absolutely every industry. We work to treat our employees with the utmost respect, and they respond by working hard, by really believing in the company and putting forth their best effort. One of the best reasons we are going to be successful is the quality and commitment of our employees." November 12, 2004, Small Business Times, Milwaukee, WI