Page 32 - 914INC - Q2 - 2013

Text by Dana White Photo by Stefan Radtke
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 man- agement is rewarded with lower premi- ums—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.
“PURE is absolutely more selective
than other companies,” says Tom Coughlin, president of the Coughlin Group, an insur- ance 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 con- cerned 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
Club and still plays in the occasional tour- nament.) After graduating with an econom- ics 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 divi- sion; 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 execu- tives, 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 net- work 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.”
“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.”
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 peo- ple 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 pre- vention, pound of cure’ issue. They would rather prevent a loss than respond to a loss.”
As a result, applying for PURE insur- ance is like applying to an exclusive co-op building or country club: Not everyone makes the cut.
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 hap- pen again. PURE even maintains a ware- house 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 administra- tor; 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
westchestermagazine.com
31