Insurance innovator ; Seven years after Walt Capell launched the Insurance Shop, the business is growing rapidly using online marketing and an… [Columbia Daily Tribune (MO)]

Insurance innovator ; Seven years after Walt Capell launched the Insurance Shop, the business is growing rapidly using online marketing and an innovative way to sell workers' compensation insurance.

When Walt Capell took his pitch for an innovative workers' compensation product to insurance carrier Patriot National Insurance Group, he made a point to go to Patriot's St. Louis offices. Unbeknownst to Patriot, Capell's new company, The Insurance Shop, was still being run out of the Columbia entrepreneur's basement. Capell wanted to keep it that way.

Photo by Don Shrubshell

Walt Capell is the founder and owner of two companies, The Insurance Shop and PaySmart. The Insurance Shop started in 2005 and has grown into a business that manages $35 million in annual premiums.

Photo by Don Shrubshell

Walt Capell, owner of The Insurance Shop and PaySmart, talks to Kami Griffith, director of operations for PaySmart, a payroll company. Both PaySmart and The Insurance Shop are moving to a new location at 3809 S. Providence Road from their space on Buttonwood Drive.

"Usually, we look for a professional agent who's got his name up on the building," Patriot Regional Vice President John Travis admitted.

But Capell, who learned the industry as an employee of payroll company Moresource Inc. and then Naught-Naught Agency, thought he had such a good way to sell workers' comp that he could start his own company with it. And Capell didn't want to rely on the traditional agency model, with a storefront and employees drumming up business with cold calls. He wanted to grow it online, letting customers already looking for insurance come to him.

The tough part would be persuading an insurance carrier, which actually backs the policies sold by agencies such as Capell's, to work with him.

"I thought the idea was strong enough that if I could convince one carrier, it would snowball," Capell said.

Capell was right. Since starting the business in 2005, The Insurance Shop has grown into a company managing $35 million in annual premiums from customers in 49 states. He has launched a complementary payroll company that manages $24 million in payroll, and both are growing about 30 percent annually, he said. He recently purchased a building on South Providence Road to help keep pace with his growth.

It's an unlikely success story. Insurance agencies face high barriers to entry from carriers who prefer to work with more- established companies. And Capell's business model was far from conventional, relying on one product and the power of the Internet to get started.

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Traditionally, workers' compensation insurance premiums are frontloaded, requiring large upfront deposits and three to six payments during the year. At the end of the year, the insurance company performs an audit on the business. If the business's payroll has grown over the year, it can be required to square up with a large payment. Oftentimes, small businesses will underestimate their payroll so they can afford the deposit, only to get killed by an end- of-the-year premium, Capell said. That last payment, he said, "has put many a company out of business."

He wanted to focus on selling workers' comp using a pay-as-you- go approach. It was, at the time, uncommon in the industry because of the extra risk it put on insurance carriers. But for businesses, the model is attractive. They pay predictable monthly installments, verified by payroll information examined each month. That way, startup businesses, for example, wouldn't get saddled with either a large upfront deposit or a large end-of-year payment.

To make it work, though, Capell had to find "a pretty hungry carrier," one that was willing to take on the extra risk and develop processes to administer the new payment method. He found it in Patriot's subsidiary, Guarantee Insurance Co.

At the time, Travis said, Guarantee's Florida office was having some success with the pay-as-you-go approach for workers' comp. He was under some pressure to introduce that type of product into his region, and Capell "just presented the right opportunity at the right time."

Making an upstart agency such as The Insurance Shop the company responsible for selling it wasn't exactly a conventional move. But Capell's persistence made Travis decide to give him a shot.

"He said, 'If you don't write half a million dollars' of premiums 'your first year, I'll cancel your contract,' " Capell recalled Travis telling him. "I said, 'If I don't write half a million dollars, I'll probably be out of business.' "

Travis' gamble worked out. Capell has since turned into one of the largest and most profitable agencies for Guarantee, Travis said, and "our absolute best agent in our region."

"I was skeptical, but I'd say he probably did a couple million" in premiums "that first year, so he easily exceeded our expectations," Travis said.

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The Insurance Shop started selling the service through small payroll and accounting companies. One of them, Columbia-based Accounting Plus, took up the insurance company's offer early. The pay-as-you-go approach was "fairly cutting edge" at the time, co- owner Denise Nelson said. Actually, her husband worked for Missouri Employers Mutual, the largest workers' comp insurance company in the state. When she told him about the product, "they just thought that was crazy," she said.

But it seemed like a good service to offer to small businesses that struggle to afford the upfront deposits and end-of-year audit payments, Nelson said. Now, about a quarter of Accounting Plus' payroll customers use the pay-as-you-go insurance.

"It was a pretty unique product at the time, and it was a good fit for us," she said. "When you take away that big deposit and that big audit at the end of the year, it's kind of a no-brainer."

Capell was able to get in on a growing trend early. The workers' comp model used by The Insurance Shop has since become more popular around the country, Travis said.

"More and more, the companies that don't do it are getting killed by those that do," Capell said.

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The first couple of years of The Insurance Shop's existence, it only sold workers' comp. It has since expanded into most business lines -- health, commercial property and professional liability, among others -- and now manages more than $35 million in annual premiums for nearly 30 carriers.

Although Capell has a few agents in other cities, the majority of The Insurance Shop's growth has been fueled by generating leads online. Trying to grow a business via the Internet had always intrigued Capell, and he referenced the success of Columbia-based Veterans United Home Loans, another online success story, as a model. He already had experience in insurance and payroll, and the industry seemed a good sector to try his online marketing model.

"I figured agencies would be the last ones to do it," Capell said. "They're really old-school."

As the company has grown and Capell has brought on employees who can handle the insurance side of the business, he has shifted his efforts into doing what he really loves: online marketing.

"I've always been interested in the Internet," he said. "I mean, I only sold insurance because I had to make money."

Now, Capell devotes most of his time to boosting his site's search engine rankings and analyzing the pay-per-click Google ads his company relies on for site traffic. Although he can talk workers' comp and commercial liability, he really lights up when he starts talking about how customers come across his websites.

"Honestly, I'd love to start an SEO company or a pay-per-click management company," he said.

Capell routinely pores over the data that indicate which online ads are working, and he consistently adds content to his websites in an attempt to boost their standing with Google's search engine algorithm -- and, thus, their rankings when people type in "workers' comp" or related terms.

Capell has launched a number of sister websites such as workerscompensationshop.com, generalliabilityshop.com and missourihealthinsurancequotes.com to catch potential Web traffic from customers typing in other search terms.

He has also moved into other businesses. In 2008, he launched payroll company PaySmart to offer more services to his insurance customers. The payroll industry isn't as lucrative as the insurance industry, Capell said. Actually, with the expense of the complex software needed to run the company, it only recently begun turning a profit.

But if customers use both his payroll services and buy insurance from The Insurance Shop, Capell hopes it makes it a bigger decision for them to find another provider for all of those services.

"We're doing enough for them that we'd have to really screw up to make them leave," he said.

Capell's success also has led to a partnership with Patriot on an offshore captive insurance agency, Rockwater Insurance, which basically lets Capell share in some of the profits -- and risk -- with Patriot. It's an arrangement that Patriot only pursues with its "top agents," Travis said.

"We wrote so much damn business that they came to me and said, 'How would you like to own your insurance company?' " Capell said.

Right now, 99 percent of The Insurance Shop's customers come from online leads, with the vast majority from outside the state. Underscoring the irony of the Internet, he now wants to start growing his local customer base. Earlier this month, Capell purchased a new building at 3809 S. Providence Road and should have his 26 local employees moved there from the current office on Buttonwood Drive soon.

Not only does he plan on hiring more people, he wants to have a more visible office so he can start growing the business in a more conventional way.

"Obviously, we're interested in growing and being part of the community," Capell said. "Anonymity has its benefits, but it just seems like the right thing to do, growing the local market."

Reach Jacob Barker at 573-815-1722 or e-mail [email protected].

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This article was published in Saturday Business on page 9 of the Saturday, July 28, 2012 edition of The Columbia Daily Tribune. Click here to Subscribe.

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