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to Control the Insurance Pest October 13, 2003 Dear Pest Management Professional, Although we may not have met, I think I know you pretty well. That’s because I’m a PMP myself. My family has been in the pest control business for 75 years (J. C. Ehrlich Co., Inc. of Reading, Pennsylvania). I am third generation and have been in this business for over 30 years (long enough that I still am not quite used to referring to myself as a PMP as opposed to being a PCO). A long time ago I came to the conclusion that there were some things I couldn’t control about this business we are in. The big headache things. Environmental regulations. Economic conditions. Unfavorable weather. I used to put “insurance” in that category, but I don’t anymore. If you’re interested to know what we did to make the “insurance problem” much more manageable (and no longer a big headache), I invite you to read this letter. I used to face what you may be facing now. My insurance agent, a very fine man in my home town, active in civic organizations, and a friend, really worked hard for us. When the insurance company would raise our rates 25%-35% in a given year, I was grateful because he went to bat for us and got the rate increase reduced 5%-10%, so it was only a 20%-25% increase. And one year, despite the fact that we had good claims experience, the insurance company simply chose not to renew because they were not going to insure pest control companies anymore. Sure enough, my friend the insurance agent scrambled and got us insurance (at the very last minute). At that point, even though I was grateful to him personally, I realized that we were being jerked around. We spend our working lives trying to satisfy customers who pay us as little as $35 a month. Yet when we were the customer spending hundreds of thousands of dollars, we were treated with a “take it or leave it” attitude. I learned that other pest control companies were being treated exactly the same way. A small group of us - all PMP’s - concluded that we just did not want to face either the uncertainly or the problems of insurance year in and year out. What we decided to do was to band together and form an association that would offer insurance to its members. That was nearly 25 years ago. In July 1980 after two years of research, we formed the association which is now known as PestSure. This is not a traditional group insurance program. This is a program owned and directed by PMP’s who own their own reinsurance company. When we opened our doors, we had 20 companies to start. Nearly 23 years later, every single one of the original companies is still in the program (with the exception of a couple that have been acquired). Today we insure 73 member companies representing 39 states with revenues of $800+ million and with 8,000+ vehicles. They are mid-sized to large firms with minimum yearly revenues of $2 million on up. This is not a fraternity of good old boys. These are some of the best in our industry looking for every economic advantage they can find. We banded together as PestSure to make sure we will never again hear the phrase, “Your insurance has been canceled.” We banded together to fully understand rate structures and what we can do to keep them in line. The truth is, we found out that rates don’t always have to go up. Several times over the last 23 years we have lowered rates to our members (to ourselves, that is!) We banded together to educate each other about insurance issues related to our industry. Every single member and insured is in the pest control business. We have a loss prevention program that gives all of us guidance about work procedures, driving practices and hiring systems that reduce claims. And, of course, we primarily banded together to bring some stability and predictability to this aspect of our operation. When you look at the list of insureds, I think you will see that quite a number of us compete ferociously with each other for customers. However, we have come to realize that when it comes to purchasing insurance, the only people we want to have to rely on is each other - fellow PMP’s. To quote a fellow Pennsylvanian, Benjamin Franklin, who said at the time of the American Revolution, “If we don’t hang together, we will surely hang separately.” We are not completely immune to the insurance cycles. However, every member gets their own rate structure based on their own history. You won’t be getting a “group” rate. If you have consistently low claims, you’ll get our lowest rate. As you have undoubtedly gathered, I am writing to invite you to consider whether PestSure might be the direction for your company. This process has several steps. The first one has already been taken. We have screened our industry and come up with just 275 prospects. It is critically important to the health of our association that we select only the leading companies of our industry and those with good loss experience. In addition, we require a minimum of $2 million in annual revenue to keep our administrative cost as low as possible. The next step is yours, You simply have to decide whether you would like to learn more about PestSure. If you do, I would encourage you to contact Rex Jennings. Rex has run the PestSure program for us since 1980. Rex will be happy to spend as much time with you as you need discussing the broad picture or the details of how this all works. PestSure offers its members General Liability, Auto Liability, Auto Physical Damage and Workers’ Compensation. Rex is with Arthur J. Gallagher, the insurance brokerage firm we partnered with, to manage all the insurance and administrative aspects of our organization. Through Gallagher, Rex can arrange for almost any other type of insurance that you might desire If after talking to Rex you are still interested in PestSure, we will then need to have more information about your firm, claims history, etc. We are very selective and all applicants require approval from our Board of Directors to be admitted to the PestSure group. If you should decide to join us, you can feel confident that we will not be looking to grow the PestSure organization simply for the sake of size. Our strength has come from selection of good insureds and those who are looking for a long-term relationship. Rex can be reached at 800-326-6203. Or, feel free to contact me or any other member of our Board of Directors listed below. We look forward to talking with you. Sincerely,  Victor H. Hammel President |
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