Arbella CEO On Succeeding In A Hyper Competitive Industry

Former Massachusetts Attorney General Frank Bellotti was the one who brought in John Donohue to Arbella Insurance Group, a property and casualty insurance company.

Bellotti, who was the AG under Massachusetts Governor Michael Dukakis, was hired by the Kemper Insurance Companies to start this new insurance company in Massachusetts. He recruited Donohue to the law firm Bellotti was a partner at to help set up the insurance company. “I jumped at the chance, you know, the chance to start a company from scratch and try to mold it and strategize and figure out how to make it successful,” Donohue recalls.

By 1988, Arbella Insurance Group was established and Donohue worked in an advisory capacity while he staying on as a lawyer at Bellotti’s firm. After 10-15 years of advising Arbella from the outside, Donohue decided he wanted to be full time with the insurance company and took on an executive role. The rest is history. The Quincy, Massachusetts-based Arbella recently celebrated its 30^th anniversary and pulls in $800 million in revenue with $1.5 billion in assets.

Donohue spoke with Chief Executive about the growth of the company, how the company overcomes its various day-to-day challenges, the hyper-competitive nature of the insurance industry and more. Below are excerpts of this conversation.

What have been some of the keys to the growth of the company?

It really comes down to effective communication because when we started Arbella, as it is everywhere in the country with property casualty insurance for homes, small businesses and commercial and personal auto, there was—and is— lots of competition. We were selling our products through independent agents, which means they had lots of other markets in their offices for their customers. So the first part of the communication was to convince the agents to take a chance and put their customers’ business with us instead of more established companies.

We also took on a bunch of employees, about 200, from Kemper. And obviously, we had to convince them it was worth it taking the chance to come with this new company as opposed to staying at Kemper, which had been around for 100 years or something like that. So convincing people to take a chance with you, obviously, means you’ve got to have a good story to tell, a reasonable argument about why it’s worth that risk, and then you have to be effective at getting that story out there and getting in front of people and having them listen. So that was a big part of the beginning of the company.

We ended up starting with about 200,000 customers, probably 300 or 350 intended agents and 200 employees. And so that was the kind of startup phase. And then as we’ve gone on, the importance of communication has always been there.

The strategy that we built Arbella on and we think has made it successful is that we really focus on giving both our customers and our agents what we call exceptional levels of service, not just kind of okay service or good service, but exceptional levels, being very committed to their best interest. To do that, you have to have employees that are very engaged. They’ve got to really buy into that concept, that brand, that strategy and they’ve got to live it every day. So again, that comes back to communication and for employees to make sure they understand what that strategy is, why we’ve chosen that as our strategy, and to get them excited about it and buy into it.

What are some of the big challenges you guys are facing, whether it’s in the insurance industry or just in general?

Let’s start with the insurance industry. Obviously, it’s very competitive out there. There’s lots of companies trying to chase all the same customers. So that you always have to be, very much on your toes to make sure you’re getting your story out there, to make sure that you’re managing your costs so you can be profitable and making sure that you’re giving your customers a reason to stay with you. Because if you think about it, with all those companies out there, it means that any individual customer could leave one company and go to the next without a whole lot of trouble. So you have to convince them that they should not only choose you, but then stay with you. And so that’s a big challenge.

Then in this period of very, very low unemployment, both keeping and retaining good employees and attracting new ones is a big, big challenge because again, they have lots of options of places to go. And so trying to attract and retain those employees, those are the big challenges.