Starmount Life Insurance Co. has made Inc. magazine’s list of the country’s 5,000 fastest-growing private companies four times in the last five years, but the growth has little to do with life insurance.
Instead, the growth was largely driven by sister company AlwaysCare Benefits Inc., which offers group benefits including dental, vision, critical illness, disability and accident insurance. That line of business enabled Baton Rouge-based Starmount to boost revenue from $42.1 million in 2007 to $60.1 million in 2010, an increase of more than 42 percent.
It’s also the reason that AlwaysCare President Erich Sternberg expects Starmount to continue growing.
“From a company perspective, we’re looking to double the business over the next five years in terms of revenue, which is aggressive in this economy,” he said.
Although the company’s revenue has grown 10 percent to 15 percent each year, that growth is getting harder to come by while maintaining the desired profit margin, he said. It’s a constant battle.
It’s also a far cry from 1996, when Starmount entered the dental insurance business. An independent insurance agent from Houston asked Starmount Chairman and CEO Hans Sternberg to put together a dental plan for 1,000 Realtors in Texas.
Why did the agent come to Starmount?
“He couldn’t find anybody else who would sell it,” Hans Sternberg said.
At the time, the voluntary dental business, where employees buy coverage through their employer, was “embryonic,” Sternberg said. The potential market was very large, although nothing like today, and he immediately saw the opportunity.
It took a little longer to convince his son. Erich Sternberg was in sales and marketing management for cosmetics giant Estee Lauder in New York and Australia. He had zero experience in the insurance world and about the same chance of resisting his parents’ efforts to bring him back to Baton Rouge. Hans and Donna Sternberg were retail royalty, and until the early 1990s were owners of the Goudchaux’s/Maison Blanche chain. They knew how to sell.
Erich Sternberg began working at Starmount in 1998.
“Literally, I walked in the door, and he said, ‘Here’s the Yellow Pages. Here’s the dental plan. Here are your rates. Go sell dental insurance,’” Erich Sternberg said.
By 2000, Starmount was the country’s fastest-growing life insurance company, with 60 percent growth in revenue, according to Insurance Advocate, an industry publication.
Today the company is licensed in 49 states and the District of Columbia. AlwaysCare covers more than 500,000 people.
AlwaysCare?handles close to 50,000 claims per month. Erich Sternberg said the people who buy the insurance use it; more than 80 percent of those covered?file at least one claim a year.
Hans Sternberg said the rapid growth allowed the family to entice his daughter, Deborah Sternberg, from her position as vice president at Goodman Media International, a New York public relations firm.
Deborah Sternberg is now in charge of the life division and has a partnership role in the health business.
Despite the growth, AlwaysCare remains a very small piece of the entire market, Erich Sternberg said. Some of AlwaysCare’s competitors have more than $1 billion in business in dental insurance.
For example, Delta Dental, the country’s largest dental insurer, says it provides coverage for more than 56 million people.
And more competition is moving into the voluntary market, Erich Sternberg said. When the company entered the dental insurance business, there was very little competition in that space.
“Today you have everybody focused on voluntary everything,” he said.
The movement has been driven largely by the increases in health insurance premiums, and employers pushing more and more coverages to their workers, he said.
The trend is unlikely to change, according to the National Association of Dental Plans. Workers’ share of insurance premiums has steadily risen over the past 10 years.
The association’s most recent survey estimates that 15 percent of employers that now offer dental benefits are likely to move to employee-paid dental benefits, while 28 percent of employers are likely to ask their workers to bear a larger share of the premium.
Some 57 percent of employers offer voluntary benefits, according to insurance and financial industry consultants LIMRA. Nearly a third of employers are considering replacing benefits where the employer pays some or all of the costs with voluntary benefits.
Erich Sternberg said the company expects to continue its growth by doing what it has always done: meeting its customers’ needs.
The company did so with dental insurance, then vision, and most recently critical illness and accident coverage.
“For us, we’re very much a niche player in everything we do. Finding the right partners and the right opportunities to sell our products and the right environments is what makes it work,” he said.
AlwaysCare Executive Vice President Deborah Sternberg said the company has relationships with several thousand independent agents nationwide, and a sales team that works with the agents.
“Not every agent’s going to work with us because not every agent is going to appreciate a family business or a privately owned business. I mean, there are very few of us left in the insurance space,” she said. “The independent agents who get our story and?appreciate our service … they’ll want to work with us and want to do business with us.”
All of the Sternbergs say that service is one of the keys to the family-owned company’s success.
“Service is something everybody talks about, but we feel that we really live it, and that goes back to our department store days,” Erich Sternberg said. “We want the customers to feel like they’re important.”
That means making it easy to get a person on the phone, even senior executives, he said.
“In a commodity-driven space, which is what this (industry) is at this point, that is a very helpful differentiator, especially when you’re dealing with agents and employers, who want everything to be as easy and streamlined as possible,” he said.
Deborah Sternberg said the company’s “flat” organization, where an agent can talk to the chairman or anyone else in management, sets it apart.
Agents frequently say that Starmount is just like insurance companies used to be, she said.
“We like it that way. We can be nimble and fluid,” she said.
Erich Sternberg said the company’s single biggest challenge as it grows is maintaining the personal touch. The fact that the company is family owned and will remain so helps.
Hans Sternberg describes the family dynamic like this: “Donna handles marketing for the life. Deborah handles marketing for AlwaysCare. Erich handles sales, and we all get mixed up in everybody’s business.”
Erich Sternberg said it’s impossible to predict what will happen with health-care reform.
All the company can do is make sure it’s in position to respond to whatever changes come along, he said. AlwaysCare will have to make sure its product portfolio is flexible enough to enable the company to keep growing.
The company expects its accident and critical illness coverages to help, he said. The “gap-filler” products serve surprisingly large markets.
“Even with health-care reform, people are going to have very high deductibles. There are still lots of co-pays,” he said. “These can help narrow the gaps when you have a major medical expense.”
The policies pay a lump sum, cash benefit for a person diagnosed with a serious illness, such as cancer, Erich Sternberg said. With two-thirds of bankruptcies related to major medical expenses, the coverage can help a person pay his bills.