Home and fire insurer stands the test of time

March 27, 1994|By David Conn | David Conn,Sun Staff Writer

For the first 172 years of its existence, the quaintly named Baltimore Equitable Society for Insuring of Houses From Loss By Fire plodded along in its characteristically low-key way, unvanquished by the 1812 siege of the Baltimore harbor, the Civil War and even the Great Baltimore Fire of 1904.

It seemed the company, chartered in 1794 and content merely to sell and service its unusual brand of insurance, was immune from the transfiguring forces of time.

Then, in 1966, Stephen J. Bernhardt stormed into the dusty, gray building on the corner of Eutaw and Fayette streets. The young executive had cut his teeth at Baltimore insurance agency Riggs, Councilman, Michaels & Downs, and thought he knew a thing or two about the insurance business. With visions of leading the company one day, the 27-year-old wasn't afraid to make his opinions known.

And so it came to be that after untold years, despite the inertia of generations of tradition and the iron will of a strong but fading old guard, the Baltimore Equitable Society decided to put a fresh coat of paint on its walls.

OK, so the tale of the company is not exactly "Barbarians at the Gate." But when a company manages to stay in business for 200 years selling basically one product, it can't be faulted for not generating much electricity.

Steve Bernhardt, now the 55-year-old chief executive officer, is unapologetic about that. "It's interesting that we are celebrating our 200th anniversary, and we're doing today essentially what we did back then -- insuring homes," he says. "We haven't decided to go into a half a dozen other businesses along the way. . . . It's a business that we know and know well."

As a measure of just how old and venerable that business is, there are only about a dozen other companies in the United States that sell what the Baltimore Equitable Society offers.

What distinguishes the company's homeowner's insurance from most of the rest of the industry's is something called the perpetual policy. Instead of charging an insurance premium every year, as most insurers do, Baltimore Equitable collects one large premium the year a customer signs up, holds onto that premium for all the years the policy is in effect, and then returns the premium if and when the policy is canceled. This perpetual deposit is returned regardless of whether or how often the company has had to pay claims on the policy.

The real price of the policy, then, is the annual cost of not having the money in hand to invest in whatever ways the homeowner sees fit.

For example, a standard homeowners' policy that covers the replacement cost of both the building and contents for a $100,000 house would cost a one-time payment of about $2,600, according to Baltimore Equitable. By contrast, GEICO Corp. quoted an average annual rate of about $370 for a similar policy, depending on the neighborhood. A similar USF&G Corp. policy in the Baltimore area would cost an average of about $240, the company said.

So, after subtracting the annual premium for a conventional policy, a homeowner would have somewhere around $2,300 left over to invest. A person would have to earn more than 10 percent on that money each year to make up the $240 that USF&G charges, or 16 percent to cover GEICO's premium.

"Of course, not many consumers these days are in a position to write a check that size," says GEICO Vice President Robert M. Miller of Baltimore Equitable's $2,600 premium, especially after buying a house. Also, like many insurers that cover both homes and automobiles, "We give a discount in most states -- it's upwards of 20 percent [off the homeowner's policy] -- if you carry both policies with us," Mr. Miller points out. Plus, he adds, it's probably a lot easier to deal with the paperwork and processes of just one company for both home and auto policies.

Mr. Bernhardt has heard these arguments before, and he doesn't dispute them. "I guess you have to assess the value to you of having your homeowner's with us and auto insurance with someone else."

If Mr. Bernhardt doesn't sound much like a high-pressure salesman, that's because his company, which is technically owned by policyholders, doesn't care much for rapid growth.

The company's first policy was sold 200 years ago next month to Humphrey Pierce, a resident of Baltimore Street, for seven pounds, 10 shillings. It took another 190 years to grow to 3,300 policyholders in 1983. That had grown to about 5,000 at the end of last year. Assets rose to $55 million last year from $23 million in 1983, while insurance in force topped $1 billion last year, from $600 million a decade ago.

Even that growth came not so much from marketing, but because Baltimore Equitable in the late 1970s finally changed its product from merely fire insurance to a full homeowner's policy.

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