Mary B. Harlee runs what may be Baltimore’s oldest financial services company and the city’s best kept secret – Baltimore Equitable Insurance.
Founded in 1794 as the Baltimore Equitable Societyfor Insuring Houses from Loss by Fire, the company specializes in writing homeowner’s insurance. This past February, it celebrated its 223rd year in business surviving yellow fever scares, the bombing of Fort McHenry, the Civil War, the Great Baltimore Fire of 1904, the Great Depression, two world wars and Hurricane Isabel.
“We have learned from our past and our past is our future,” says Harlee, who was named president and CEO in 2014, the second women to head the company since it was founded. “We take that model that our forbearers have given us and we have learned from them what makes a great company.”
Baltimore Equitable has thrived in a special niche in the insurance business. It is the only insurance company in the country that writes“perpetual” insurance, a homeowner’s policy that ends only when the policy is cancelled. Traditional insurers charge a premium, say $1,000 a year, to maintain insurance. But Baltimore Equitable requires customers to pay a lump sum, up front deposit. A $250,000 home would require about a $10,000 deposit, or $40 per $1,000 of house. That can be a tough sell, but there are no monthly payments and when the policy is cancelled because a holder moves or sells their house, they are paid back the entire amount of the deposit.
“In the long run, it is a better deal,” Harlee says.
Harlee, who began working at the company in 1983 after she graduated from college, credits her team – there are 13 employees – and a star-studded board of directors for continuing to build Baltimore Equitable’s fortress balance sheet. A.M. Best Co., an insurance company ratings agency, gives Baltimore Equitable an “A” rating.
Baltimore Equitable’s board is made up of the “pillars of society,” Harlee says. Members include Richard O. Berndt, managing partner of Gallagher, Evelius & Jones; Freeman A. Hrabowski III, president of University of Maryland, Baltimore County; Marjorie Rodgers Cheshire, president and chief operating officer of A&R Development Corp., and John D. Linehan, vice president at T. Rowe Price Associates, Inc.
As of Dec. 31, 2016, the company had $50 million in policyholder deposits, but a total of $150 million in investable assets. This means that if every customer cancelled their policy, Baltimore Equitable could easily pay them back with $100 million to spare.
Harlee has no grand ambition of creating a huge insurance company, she wants to replace policyholders who are either moving or dying off. Twenty percent of the company’s policyholders have been customers for 25 years. But she does envision executives blowing out candles in the year 2294 when Baltimore Equitable would celebrate its 500th birthday.
“We don’t want to be bought up by any other company. We don’t want to be merged with any other company,” Harlee says. “On the contrary, we want to stay a perpetual mutual insurance company for as long as we have members.”
EDWIN WARFIELD: Can you tell us about your background with Baltimore Equitable Insurance?
MARY HARLEE: I was not new to this company. I’ve been here since 1983—right out of college. I started as the accountant here, making $16,000 a year. I thought I was in the fast lane. I was single and thought I was at the top of the world. But then I found this company that was so fantastic that I just had to stay.
I’ve been here longer than I have been married. I have three grown children. 2014 presented me with an opportunity to become President after being Controller and Vice President, and I said, “okay, I’m ready to take on the challenge.” It’s been exciting because this company has been my passion for all these years. I know how this company needs to be run, with truth and integrity and. I just couldn’t see anybody else being the president.
Q. How do you feel about being the second female president in the company’s history?
A I am surrounded by all these portraits of these men that were past presidents, and I moved Sharon’s portrait into my office and, just so that we have the camaraderie and partnership in running this company. I learned from her, and I hope to bring that sense of compassion to our policyholders and to our employees here, and to run this to the best of my ability.
In our old building down on Eutaw Street, we had a room that the president was in. In that room, you were surrounded by portraits of all of our past presidents. They were so serious and stern-looking. Finally, we had our first female president in 1999 in Sharon Woodward. When I became president in 2014, I was the second female president.
The insurance world, especially the mutual insurance world, is very male-dominated, so it’s very unusual to see female presidents in this world, but what I think that I bring as a female and a woman to this world is compassion: compassion for our policyholders, compassion for our employees. I’m there to listen and to try to understand what their needs are, and if I can at all fulfill those needs—that’s my job as a president.
Q. How did the company get started, way back when?
A. In 1794 our founder, Joseph Townsend, looked to Philadelphia, where he had a friend named Benjamin Franklin who had started two insurance companies. Joseph Townsend had just recently moved to Baltimore from the Brandywine area. He was a Quaker and an abolitionist, and he said, “I’m not going to reinvent the wheel. Ben Franklin actually has two insurance companies.” He adopted some of the ways to run an insurance company from Benjamin Franklin, and brought it back to Baltimore and started our insurance company. That was 223 years ago.
Think how amazing this was—we are sitting almost a couple of blocks from where our original office was. Right at the time when the British bombed Fort McHenry, federal troops marched through Baltimore streets before they started on their way to their first battle in the Civil War. We survived the Great Fire of 1904, and the Great Depression in 1929—which wasn’t so great for us—two World Wars, and just even recently Hurricane Isabel. But after all those, we’re still in business here in Baltimore. To have that proud history gives us something to really want to tell people about.
In our history we’ve given out fire marks all along, since our first policy. We actually have policy number 3, here in the office, that was made out of wood and had two clasped hands that stand for the bond between our policyholder and our insurance company.
Beginning in 1926, we actually started using this fire mark, which is made out of aluminum and has gold leaf hands. It has the gold leaf “1794,” when we were founded. You might see some of these in the Baltimore area, because they are on many houses around the area, and a lot of people say, “Oh, was that house built in 1794?” And no, it that they were insured by Baltimore Equitable and had a perpetual policy with us.
Q. Can you walk us through perpetual insurance and how it differs from other policies?
A. Perpetual insurance, by definition, means that it’s never-ending A policyholder takes out a policy and when they sell their home, then they cancel the policy, so until then it remains in effect. But how we differ from traditional insurance companies is that we work on a deposit basis. When you take out a policy from a traditional insurance company, you might pay $1,000 a year, but with our policy you would give us a deposit upfront. Now, for a $250,000 home you might give us $10,000 and that’s based on a rate of about $40 per thousand, and you lock in that rate when you take out your policy, and the only time you ever give us any more money is if you need to get more insurance than $250,000. Say you need $5,000 more: you might give us another $200. And then when you hold that insurance until you cancel your policy and you say, “I want to cancel my policy,” you get the entire amount back. You get a check for $10,200. One hundred percent of your deposits are fully refundable, unlike a regular insurance company for whom every time you give them money you never get anything back. Our deposits are 100% refundable.
Perpetual insurance means that you take out a policy with us and you give some money upfront. You have that policy until you decide to cancel it, and that time is when we write you a check for every dollar that you’ve given us over all the years. In my example, I said that for a $10,000 deposit, you would have a $250,000 policy. Now, as long as you want $250,000 coverage on your home, you would have that coverage. It would never end. If you decided you no longer needed that coverage, we would write you a check for $10,000. And you might have had a couple of claims during that time, and we might have paid you out over $50,000, but that does not affect that refund that we give you. We still give you every dollar that you’ve given us in deposit, refunded to you.
Currently, we’re the only perpetual homeowners’ insurance company that writes perpetual deposits in the whole of the United States. There were many others when I first started here. They no longer write that business model because they wanted to expand and do other things. Their boards of directors actually decided to maybe write automobile insurance—that became less profitable for them and actually hurt their balance sheet. Our board of directors has actually stayed true to our business model to write homeowners’ insurance in Maryland, and now in Pennsylvania, and that has what has led us to have so much strength and balance sheet strength and business strength. We did not get deterred and write other types of insurance, and so, we’re the only one now that is in business in the whole of the United States that has this business model.
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