“Don’t quit your day job.”
Good words coming from James Brakke, one of the founders of an Internet start-up that is jumping into an online insurance brokerage industry already crowded with up-and-running online brokers.
Of course, Brakke has a pretty good day job. He’s founder and president of Brakke-Schafnitz Insurance Brokers Inc., an independently owned property and casualty brokerage firm, with annual premiums of $120 million.
In fact, while this is an upstart venture, it’s hardly a bunch of upstarts doing it. Brakke’s been in the insurance business for 35 years, and co-founders Ian Crockett, Brian Horn and Richard Gartrell are all well-established in their fields.
The group started Goapply.com last year, not to compete directly with the online insurance brokers, but to expand the online insurance industry to reach mom-and-pop firms and other smaller regional companies.
The company also sees an opening for its services among independent brokers affiliated with large firms, and banks and other financial services firms freed up to enter the market by last year’s regulatory reform.
The company is selling fill-in-the-blanks insurance web sites to bricks-and-mortar insurance brokers, putting them online without having to develop a site, establish relationships with insurance carriers and fulfill legal requirements. It launched its first e-commerce marketing attack on Sunday night, via mass fax.
Goapply’s goal is to sell 1,000 web sites in its first month and 10,000 by the end of the year. Horn said he also expects Goapply to be profitable by year’s end.
Goapply has been valued at $25 million by VCers, lawyers and investors, Horn said.
For the past year, the company has been running on funding of $400,000,$100,000 from the four founders, and the rest coming from three private investors.
“All three wanted to give us more,” Brakke said. “But we didn’t need it (then).”
Now, Goapply is looking for more,$3 million to $5 million, preferably from a non-venture-capital source. The partners have talked with VCs and angel groups, Horn said, but “we tried to steer clear of that. We are not necessarily looking to give up half the company.”
Goapply is looking for an equity play through a partnership or alliance with an insurance carrier or an investment group. And Brakke said several insurance companies such as Citigroup, Transamerica, New York Life, Alexander Hamilton Life and Explorer Insurance have expressed interest as an equity play or a partnership.
Regional Business a Target
Though the web sites seem to be a better fit for smaller, independent shops, Brakke said individual brokers in larger regional firms might want their own web sites, too. Over the past decade, many of the national insurance brokers have de-listed their agents as employees, giving them independent classifications and lowering their commissions.
“There are many out there,” Horn said, and included Pacific Mutual, Allstate and Transamerica in the group of insurance brokerages “that ceased the career-agent channel.”
The change gives agents the freedom to sell insurance for other companies or by other means.
“They have to find other ways,” Brakke said.
Horn said that Goapply has developed a list of about 150,000 insurance agents it will start soliciting in the next few months.
“There are a lot of them out there,” Horn said.
Horn said the company also wants to sell the insurance web sites to stockbrokers, accountants and whoever else may want one, now that the financial-services field has been opened up by the banking overhaul bill passed last year.
Goapply has two independent banks, Pacific Mercantile Bank and Commercial Capital, interested in insurance web sites and partnering with Goapply for banking services. Citibank is also interested in partnering with Goapply to swap online banking and online insurance services.
Ripe for Possible Abuse
To get a web site and sell insurance online, an individual needs only an insurance broker’s license, which makes some industry veterans wary of insurance malpractice.
“This is ripe for a scam,” said Art Schuler, a senior vice president with Aon Risk. Schuler warns that some sites may not be run by legitimate brokers although he is more wary of poor business practices.
“They may not address all of your exposures,” Schuler said.
But Aon Risk has an Internet presence and, according to Schuler, it is working on selling insurance online.
“Eventually everything we do will be Internet-based,” Schuler said.
Goapply’s web sites provide all things necessary for an online insurance web site, from the products and underwriting, to compliance, delivery and collections,all for a start-up fee, a monthly service fee and a percentage of each policy written.
Goapply’s web sites offer permanent and term life, prepaid legal, and a newly added health insurance. Horn said that Goapply should have property and casualty, auto and homeowners insurance in the next month.
“It’s coming on pretty quick,” Horn said.
Goapply has partnered with about 20 insurance carriers, such as Travelers, Transamerica, First Colony and West Coast Life, Horn said, and is pursuing partnerships with about 40 more.
The idea for Goapply was hatched by Horn and a colleague of his, Lisa Zimmermann, who has since taken a part-time position with Goapply so she can spend time with her two children and her husband.
After they decided to start the company, they went looking for a solid management team.
“We didn’t have enough lead in our britches,” Horn said.
“All roads kept going back to Jim Brakke.”
Brakke, also a founding director of Pacific National Bank, is on the board of advisors for Pepperdine’s Graziado School of Business; a director of Commercial Capital Holdings; director of California Acrylic Industries dba: Cal-Spas; a director of the Busch Firm; director and officer of Professional Alliance.com; director of Spectrum Hotels; and a director of Maury Microwave Corp.
“We would not have met,” Brakke said. “but we’re big on golf.” Brakke and Horn were guests of Travelers at the 1999 Masters Tournament in Augusta, Ga. last April, which was co-sponsored by Travelers and Cadillac. “It gave us an extreme amount of time to talk,” Horn recalled.
The duo flew on the plane together, stayed at the same hotel and played a few rounds together.
“He jumped at the chance,” Horn said of his pitch for Goapply.
Goapply also recruited Ian Crockett, who is a basketball teammate of Horn’s at Sports Club Irvine. Crockett is the president and part owner of Hunter Barth Advertising and heads up the Goapply’s marketing efforts.
For its CFO, Goapply recruited Richard Gartrell, a forensic CPA who owns his Costa Mesa firm, RA Gartrell & Associates. He has been in the accounting industry for 20 years, working for companies like Arthur Andersen and Deloitte & Touche.
Horn is senior VP at Goapply, and is Chief Executive Officer of Horizon Financial Resources, an estate planning firm that also provides life insurance products. Of the four, Brakke will be the only one actually keeping his day job, though Gartrell, Horn and Crockett will remain in charge of their respective companies.
