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Connecticut is rich in millionaires, but poor in tax credits for them — at least when they act as investors in local technology businesses.

And that combination could spell doom for the state’s startups searching for capital to build their businesses, experts warn.

For years, “angel” investors — wealthy individuals who invest in early-stage businesses — have clamored for state lawmakers to grant them tax credits for a portion of the money they invest in Connecticut’s fledgling businesses. Last month, the General Assembly failed to pass a proposal that would have created a 25 percent tax credit for angel investments in Connecticut startups.

It’s the second straight year the legislature has turned back an angel investor credit.

One group of investors took their dollars to metro Boston, the traditional haven for New England startups.

“Within a week, we immediately closed on funding for a company in Cambridge,” said Liddy Karter, executive director of the Angel Investor Forum, an East Hartford-based coalition of 76 angel investors.

Although she stopped short of blaming the absence of a tax credit on the decision to invest outside the state, Karter said the creation of a tax credit “would have given us an extra incentive to invest here, instead of somewhere else.”

That decision-making process underscores the bigger picture of what’s at stake in the debate over tax credits for angel investors. Startups depend on the cash — and often, savvy and experience — injected by these individuals into their young companies. Over the past decade, as venture fund managers have become increasingly wary of investing in early-stage businesses with unproven products and ideas, angels have become even more critical to companies just out of the gate.

Recognizing that trend, some states have created angel investor tax credits as basic pieces of their economic development strategies. In Rhode Island, credits are as much as 50 percent. In Maine they’re 60 percent. In New York, they’re 25 percent. In Massachusetts, tax credits are only 3 percent, although there have been moves to raise that amount to 25 percent.

“It puts us at a significant disadvantage vs. other states,” said state Sen. Gary D. LeBeau, D-East Hartford. “If we are going to have a chance to grow new companies, we need these credits; it’s really essential.”

The number of formal and informal angel investor groups has grown nationwide over the last decade. There are now about 250 formal groups, according to the Angel Capital Association, compared with an estimated 50 groups a decade ago. And as their numbers have grown, so has their willingness to work together, said Paul Silva, managing partner of Angel Catalysts, a Western Massachusetts firm that helps build and run angel investment groups.

At least once a quarter, angel investment groups from all over New England, including two from Connecticut, meet up and review what they see as the best investment opportunities from their respective areas.

There’s little information about the total value of deals put together by these groups, but Karter estimated her group invests several million dollars over the course of the year. Often that money is pooled with investments from other groups. Last month for instance, Karter’s group invested $250,000 in Cambridge, Mass.-based software firm Crimson Hexagon; counting other angels, the company received $2 million.

It’s that potential for multi-million dollar investments that has enticed many states to create tax credit programs.

Critics of the credits say the public has no way of tracking how taxpayer money is spent.

“Increasing amounts of economic development resources are deployed through tax credits, which lack state oversight in how funds are spent,” said Shelley Geballe, president of Connecticut Voices for Children, which opposed the most recent incarnation of the bill and has questioned the state’s lucrative, 30 percent film credit.

The bigger concern, she said, is that the goals of private angel investors may conflict with the state’s economic development agenda.

“Someone who is not elected is setting economic development priorities,” Geballe said.

But in Connecticut, the nation’s richest state per capita, advocates argue the credit would tap into the state’s strength.

“One of the benefits to being in Connecticut is there are a lot of successful people who know how to evaluate a company for what it’s worth, and to make wise investments,” said Ernst Renner, founder of Manchester-based software startup, VGO Software.

Renner is looking for investors to take his company global, and said the appeal of angel investors is that “they provide a lot of coaching, mentoring and business savvy. It’s not just the money, it’s also the intangibles. Without the tax credits, they are being lured to make investments out of state — and it makes business sense for them to do that. It’s just unfortunate for Connecticut’s startups.”

Of course, the absence of a tax credit won’t necessarily stop angel investors from working with companies in Connecticut — it just makes it a little costlier.

Kevin Bouley, founder of research firm Nerac in Tolland, created a small incubator inside of Nerac that works with about a half-dozen startups. He’s is part of an informal group of eight angel investors who look to invest and work with startups in central Connecticut.

“On a personal level, I continue to do it and have been doing it for years in the absence of a tax credit,” Bouley said. But he added, “The absence of a bill that levels the playing field with competing states leaves us at a disadvantage.”
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Copyright © 2008, The Hartford Courant
Original: http://www.courant.com/business/hc-angelinvestors0621.artjun21,0,6433208.story

Poised for the largest expansion in its 39-year history, Enfield manufacturer Control Module Inc. has returned to its roots in an effort to build its future.

Those roots live in the person of Jim Bianco, the tenacious, 72-year-old inventor who founded the company in 1969 and ran it for 30 years. All along, he has remained owner of the business, which makes electronics for transportation, inventory control and workforce management, but he just returned as president last year.

Bianco’s comeback bookended a period of turnover in the executive office, driven largely by health problems among leaders of Control Module. Now, after a year back in the office, Bianco is moving the company to larger quarters in town — to a building Control Module planned to occupy two decades ago.

And Bianco is banking much of the company’s future on a device designed to cut down idling time for big-rig trucks at truck stops.

Bianco left in 1999. A string of presidents followed, starting with his son, Jimmy, who was president for about two years.

Colin Sanders led the company from 2001 to 2003, only to be felled by a debilitating stroke. He was replaced by Jana Moak, who was diagnosed two years later with cancer. She stepped down in 2006 and died last year.

The company had shrunk from a high of about 100 employees when Bianco left to about 65, which is its current level.

When Bianco returned early last year, he reorganized the management structure. He brought in a former IBM executive, Bob Byrnes, to run operations along with longtime manager John Fahy.

That has enabled Bianco to go back to what he does best: come up with new products.

“I’m not very good at being president, to be honest. I’m more interested in creating new things, coming up with new ideas,” said Bianco, a frenetic and prolific inventor who carries a Louis Vuitton briefcase and blares classical music in his office while his dog, Chanel, occupies space beneath his desk.

Bianco sees his main role as visionary-in-chief, a position that has generated a number of breakthroughs and highly profitable devices for Control Module. He patented the first bar code reader for inventory control in the early 1970s, and designed a credit card-reading device used by the Mexican welfare system to distribute tortillas to 5 million people a day.

Now he believes he has the vision that will define much of Control Module’s future: CabAire, a new division of the company that will focus on building a brand of products for truck stops and long-haul truck drivers.

The devices, which mount inside the window of a parked big rig, provide heat or cold air, as well as cable TV and Internet access to truckers who are waiting out their federally mandated 10-hour breaks.

CabAire built the first generation of the devices last year for Tinaco Plaza, a truck stop in North Stonington. Tinaco ordered the devices in part to comply with local zoning demands aimed at reducing emissions and noise pollution, as well as to monitor which trucks are idling their engines too long — an offense that can result in a $5,000 fine in Connecticut.

The major focus for CabAire will be to bring the devices to truck stops nationwide. Bianco said he expects to be in at least 100 more truck stops by the end of next year.

It is a unique opportunity, one the company is well-positioned to exploit, Byrnes said. Big rig drivers must take more frequent breaks under rules that have tightened in recent years. Those requirements dovetail with other local and state regulations, such as anti-idling penalties.

And, of course, diesel fuel has skyrocketed in cost. Taken together, these factors create a growing need for technology that allows truckers to remain in their vehicles and have access to heat, air conditioning and electricity without having to run their engines.

Adding to the opportunity is the collapse of a larger competitor, Knoxville, Tenn.-based IdleAire Technologies, which was the biggest manufacturer of the niche products. Last month, IdleAire filed for bankruptcy and announced plans to sell its assets.

“There’s definitely room for some new players to fill the void in the truck stop anti-idling business,” Byrnes said.

In addition to the growth of CabAire, Bianco expects additional revenue from Control Module’s brand of fleet management products, which are geared toward rental car companies such as Hertz and other entities with large numbers of cars and trucks. Lot attendants also use the technology — which includes bar code readers and windshield-mounted radio-frequency identification (RFID) devices — to keep track of when cars are cleaned, fueled and ready to be delivered to a customer.

Speeding up those processes can save companies hundreds of thousands of dollars. It also means cars are less likely to be stolen off a lot.

He also expects steady growth from Control Module’s more traditional businesses: electronic products used for inventory control and workforce management.

The growth of the newer businesses — some of it real, but much of it yet to be realized — has led Control Module to begin relocating its headquarters to a 44,000-square-foot building in Enfield Industrial Park, one that housed Emhart Glass Manufacturing for seven years. Bianco built the building on Phoenix Avenue in 1989 to serve as headquarters for Control Module, but he never moved the company there.

Bianco said he already has orders in place to significantly expand both CabAire and the fleet management divisions of Control Module, and soon expects to start adding employees. Within two years, Bianco said, Control Module could easily balloon to more than 200 employees, making it one of the largest manufacturers in town and ranking it among the fastest-growing manufacturers in the state.

“I have no doubt that we will get there, and get there quickly,” Bianco said.
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Published: June 19, 2008, Copyright © 2008, The Hartford Courant
Original: http://www.courant.com/business/hc-ctinc0619.artjun19,0,2613413.story

Lawyers for a Connecticut psychiatrist who was sued for malpractice in the death of a 17-year-old girl should have revealed to her doctor co-defendant a secret settlement with a payout that hinged on the outcome of the trial, the state’s Supreme Court has ruled.

The case centered on the death of 17-year-old Audrey Monti of Ellington, who collapsed outside the office door of her psychiatrist, Naomi E. Wenkert, one day after being discharged from the intensive care unit of a local hospital. Despite Monti’s having bluish lips when she recovered — a sign of a lack of oxygen — Wenkert wrongly diagnosed the girl as having a psychological reaction to having been in the intensive care unit and prescribed her a sedative, Ativan. Monti died later that night, Nov. 21, 1996, from what medical officials ultimately concluded was a respiratory viral infection that went undiscovered by her doctor, Mark J. Decker.

Monti’s parents sued Decker and Wenkert, and in 2005 the case went to trial.

In the midst of the trial, unbeknownst to the court and her co-defendant, Wenkert secretly entered into a so-called “high-low” agreement with Monti’s parents. The agreement was essentially a verdict-contingent settlement that would pay the parents a minimum of $300,000 or a maximum of $1 million, depending on the outcome of the trial.

The agreement acknowledged that Wenkert’s liability insurer was in liquidation, and that a Pennsylvania court had barred it from paying any claims. The agreement relinquished personal claims against Wenkert and the plaintiffs agreed they would ultimately recover the sum from a reinsurer — if Wenkert could find one — or the Connecticut Guaranty Fund.

The high-low agreement differs from a so-called “Mary Carter” agreement — a secret contract by which a defendant in a multi-party case secretly aligns himself with the plaintiff and works to reduce his own liability in a case by increasing the liability of his co-defendants.

Monti’s parents eventually won the case against Wenkert and Decker, who was ordered to pay a total of $1.75 million to the plaintiffs. It was at that point that the existence of the high-low settlement with Wenkert was revealed.

Decker appealed to the Supreme Court, alleging among other things, that the existence of the agreement hindered his defense by depriving him of the chance to challenge some evidence at the trial and impeach Wenkert’s expert witness.

The Supreme Court upheld the verdict of the trial court. However, it also concluded that the agreement should have been revealed to Decker, but ultimately that non-disclosure did not affect the outcome of the trial.

As a result, the court has adopted a new rule for the state: All verdict contingent settlement — such as high-low agreements — must now be promptly disclosed to the court and any non-settling defendants.
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Published: June 10, 2008, © 2007 Wells Publishing, Inc.
Original: http://www.insurancejournal.com/news/east/2008/06/10/90812.htm

CRM Holdings, which had been a major third party administrator for self-insured workers’ compensation trusts in New York, will surrender its trust license by the end of the summer as part of a settlement reached with state regulators.

The settlement appears to bring to a close a laundry list of charges against the Bermuda-based CRM — which voluntarily exited the New York self-insured group market earlier this year — for the way in which it paid claims, filed proper reports about its business to the state and made adequate cash reserves. The allegations came to a head earlier this year when regulators charged CRM with failing to cooperate with auditors in connection with a review of seven group self-insurance trusts scattered throughout the state.

The settlements call for CRM to surrender to the Workers Compensation Insurance Board its license to act as third party administrator for these trusts by Sept. 8. Terms of the settlement also call for CRM, which has significant operations in Poughkeepsie, to transfer administration of all trust-related claims and accompanying files to the board.

As part of the settlement, CRM admitted no wrongdoing.

In a separate matter, CRM has also agreed to pay $55,000 to satisfy all penalties that previously had been assessed. The fines come on top of a $96,000 fine recently levied against the firm by the New York State Insurance Department for violating licensing provisions.

The company remains under investigation by the New York State Attorney General’s office for its management of some trusts, which combined will have to cover shortfalls in unfunded liabilities estimated in the tens of millions.

The company also faces a suit by former members of one trust, the Healthcare Industry Trust of New York, which allege CRM failed to fulfill its obligations in connection with providing workers’ compensation claims services.

“This result speaks volumes about both the strength and validity of the charges the board brought against CRM,” said Zachary Weiss, chairman of the Workers Compensation Insurance Board. “It also sends the strong message that we will vigorously safeguard the well-being of honest business and injured workers.”

Commenting on the settlement, Daniel G. Hickey Jr., chairman and chief executive officer of CRM, said “the group self-insured trust industry is facing some tremendous challenges in the months ahead and we are committed to helping them find solutions wherever we can… An end to this dispute benefits our shareholders, as well as clarifies our defense of the allegations. The resolution of this matter allows us to turn our focus to meeting the needs of our brokers and end users as we continue to selectively expand our business.”

Private competitors have pounced on the collapse CRM Holdings, claiming it to be the prime example of the dangers of a self-insured workers’ compensation insurance trust.

“These trusts can be a dicey proposition for employers unless they are prudently managed and have the necessary financial strength to pay workers’ compensation benefits to injured workers, who, in some cases, may be collecting them for many years,” said Ellen Melchionni, president of the New York Insurance Association, a trade group for the state’s insurers.

Through its subsidiaries, CRM provides primary workers’ compensation insurance to employers in California, Arizona, Florida, Nevada, New Jersey, New York and other states, and provides fee-based management services to self-insured groups in California.

The settlement received a mixed greeting from State Assemblyman Joel Miller (R-Poughkeepsie), who maintains CRM is a welcome, key employer in the city. “Through its subsidiaries (CRM) provides jobs and contributes significantly to the local economy. This agreement lets the company go back to focusing all of its time on its future business success. This is good news for Poughkeepsie.”
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Published June 4, 2008, Insurance Journal, © 2007 Wells Publishing, Inc.
Original: http://www.insurancejournal.com/news/east/2008/06/04/90648.htm

A dispute over $6,400 in damage to a Maryland townhouse led to an unexpected court decision that has reversed 26 years of standard industry practice, and left insurers, agents, lawmakers and condominium associations unclear as to who pays when individual units in a complex are damaged.

For more than a generation, Maryland insurance agents have written condo and condo-association policies under a basic concept: In the event of a loss, association policies will pay to restore damaged condo units to their original state, and unit owners would then purchase coverage to cover improvements made to the condo - such as more expensive countertops, for example. Insurance and risk management schemes in the state have been based on that logic ever since Maryland revised its condo act in 1981.

But in April, the Maryland Court of Appeals changed all that, ruling that a condo association’s insurance policy is not “required” to pay for damage to individual units. The decision reverses more than 26 years of standard industry practice in the state. This seemingly simple reinterpretation has massive implications, say insurers and agents.

There’s no easy or quick fix, either. Insurers and lawmakers want to see a legislative solution to more concretely define what gets covered by a condo association and individual unit owners. But that can’t happen until at least early 2009, the next time the General Assembly is scheduled to meet.

Until then, many - though not all - of the condo insurers in the state have agreed to continue operating under the old rules for the remainder of the year.

Agents, lawmakers, insurers and condo groups have started holding town hall style meetings to work out what amounts to a gentleman’s agreement on how condo insurance will play out until the legislature reconvenes.

Until then, however, it’s a wait-and-see game for the industry and condo interests. Or as Jason Ernest, vice president of the Insurance Agents and Brokers of Maryland, put it: “It’s going to be a long summer in Ocean City.”

What Tuckerman Says
To insurance insiders in the state, it’s known simply as the Tuckerman case (Dianne Anderson et. al. v. Council of Unit Owners of The Gables on Tuckerman Condominium, et. al.), a decision by the Court of Special Appeals that centers on two separate claims made under two different “Condocover” policies issued by Pennsylvania-base Erie Insurance Exchange.

Both Erie Insurance and the condo owners filed suits against the respective condo councils for their individual complexes. In both cases, lower courts ruled against Erie. Those cases were consolidated into one back in September.

The first case revolved around a claim made in June 2004 by Dianne Anderson, who owned a two-level condo in a 21-year-old complex in Rockville called The Gables on Tuckerman. The claim was for water damage to her ceiling, carpet and kitchen caused by a broken water heater on the top floor of her condo. It affected only her unit.

The bill for the damage came to $6,358. When the council for The Gables declined to pay for the damage, she filed a claim under her own, Erie-issued policy. Erie and Anderson then sued the council for The Gables to recover the money. A circuit court ruled against Erie and Anderson.

The second case centered on a claim made by Charles and Cindy O’Carroll, who owned a condo at the Bridgeport Condominiums in Laurel, which they rented to a woman named Velma Kiawu.

Kiawu was cooking in the apartment in March 2003, when a grease fire triggered the condo’s sprinkler system. Fire, smoke and water damaged the walls, carpet, blinds cabinetry and microwave, requiring $12,157 in repairs. As in the case with Anderson, the damage was only to the O’Carrolls’ unit and, again, the council of owners declined to pay for the damage.

Erie and the O’Carrolls sued to recover the money, and, as in the case with Anderson, a lower circuit ruled against them.

In upholding the decision of the lower courts, the Court of Special Appeals traced the legislative history of the state’s condo act, and ultimately concluded the intent of the legislation was to ensure condo councils or associations paid for and insured damage to common elements, of a complex. However, ruled the court, the intent of the law was not to make associations liable for damage to property that was owned only by unit-owners. In keeping with that logic, the court ruled that condo association policies are not required to pay for those damages, although they can if they so choose.

Agents See Problems
The decision creates a number of problems for insureds and agents in the state, many of whom have policies written under the understanding that master policies for a condo would cover more than necessary. Now, after Tuckerman, that’s all changed.

“One of the big problems right now is that you may have lots of individual condo owners who are underinsured, with policies that only cover $5,000 or so,” said Jason Ernest, vice president of the Independent Insurance Agents of Maryland.

Ernest said that means, in the event of damage, a many condo buildings could end up having unit owners who can’t pay to repair their units. The end result could be condo buildings that fall into disrepair or slip in value because of damage to underinsured units.

The agents group plans to lobby the General Assembly when it meets in January to modify the state’s condo act so that Maryland insurance can go back to the way it was before Tuckerman.

“Everybody realizes there’s a problem, and not everyone is quite seeing eye-to-eye yet,” he said. “But we think the best to handle is to go back to the way things have always been done. Of course, nothing can be done legislatively until at least January.”

Until then, Ernest said, many town hall style meetings have been taking place between his group, lawmakers and insurers, trying to work out a holding pattern for how to handle condo insurance and condo claims.

Reese Cropper, owner of Ocean City-based Insurance Management Group, an agency specializing in master insurance policies for condos, said a revision of the law to codify the way things used to be makes the most sense for condo owners and association.

“Since the appellate case has come along things are very helter skelter,” he said. “Most of the carriers I have talked to said they would continue to do things as they have. But when policies come up for renewal, the agents, owners and insurers all need to get together and do some due diligence to figure out the best way to keep insuring condos.”

Added David Rosenkilde, chairman of the IA&B of Maryland: “We’re optimistic that we can reach a quick and painless resolution.”
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Original: http://www.insurancejournal.com/news/east/2008/06/03/90588.htm
Published: June 3, 2008, Insurance Journal, © 2007 Wells Publishing, Inc

In business, as in trash heaps, plastic outlasts paper. The town of Portland might take comfort in that fact, along with the Middletown-area injection-molding industry.

Amid a boom in demand for surgical equipment and medical devices, ProMold Plastics, a longtime Cromwell plastics manufacturing firm, has relocated to the Portland building formerly occupied by Sweet Waverly Printing Co.

The move to the 43,000-square-foot factory represents something of a business coup for ProMold. The company has more than doubled its warehouse, office and manufacturing space, now in the Brownstone Industrial Park beneath the Arrigoni Bridge, which connects Middletown and Portland.

And it’s a coup for the town. ProMold’s move last month came nearly three years to the day after Sweet Waverly — which was one of Portland’s largest and oldest employers — abruptly closed its doors, laid off its entire workforce and became the target of a protracted legal effort by the state to recover unpaid benefits and wages for former workers.

“The old building in Cromwell was just too small for what we needed,” said N. Richard “Rick” Puglielli, president and co-owner of ProMold, which was founded by Puglielli’s father, Riccardo, in 1967. “We have been growing very steadily, and when I looked at the numbers, I figured it would be a little more overhead, but we would definitely be able to afford the new space.”

Injection molders like ProMold have specialized in manufacturing equipment that uses metal molds and many tons of pressure to form and cut melted plastic into shape. ProMold employs 65 and caters largely to the surgical instrument and medical device industry. Its clients include major manufacturers such as U.S. Surgical — now part of the North Haven-based surgical devices division of Covidien Ltd. — for which it makes parts for surgical staplers and suturing tools.

ProMold’s niche is part of an industry that “is going gangbusters in Connecticut,” said Peter Gioia, economist for the Connecticut Business & Industry Association. Along with those that cater to medical devices, plastics manufacturers in energy equipment, aerospace and defense equipment also are booming, Gioia said.

A falling U.S. dollar benefits those companies because it makes American-made goods cheaper to buyers overseas. Even though they are not selling products directly to overseas manufacturers, companies like ProMold supply products to companies that do, so the demand trickles down, Gioia said.

State data show how much exports are growing. Between 2005 and 2007, exports of plastics and rubber products by Connecticut companies grew by 18 percent, from $178 million to $212 million, according to the state Department of Economic and Community Development.

In addition to the weakened U.S. dollar, demographics in this country also benefit medical equipment-makers, Gioia said. As baby boomers age, they will need those products more and more, meaning good times for medical device makers for the foreseeable future, he said. “It’s a big, important, growing piece of the state’s economy.”

And that’s particularly true in the Middletown-area, where plastics-related manufacturing has a generations-long legacy.

“There are quite a few of us in the area, but it seems like we all specialize in a different niche,” said Yvonne Ledoux, vice president and co-owner of Plastic Design International Inc. in Middletown.

Ledoux’s firm, 31 years old, is part of that legacy. It’s one of the town’s larger manufacturers, with 55 people, and it occupies nearly 60,000 square feet between its two buildings on Industrial Park Road. “We may be working in different industries and have different capabilities but it means we can all succeed without stepping on each others’ toes.”

That has bred a tight-knit community of plastics manufacturers — an industry cluster in the true definition of the word.

Even when they compete against each other, some of the nearby plastics firms do it as a cooperative effort, said Ed Organek Sr. of Precision Plastic Products in Portland, which he founded in 1980.

Precision is also an injection molding firm that caters to the medical device and surgical equipment industries — and therefore a ProMold competitor. But Organek, whose firm employs 11, is sure the relationship between ProMold and his company will be cordial.

It’s with good reason: The Organeks and the Pugliellis have a two-generation-long relationship.

“I started off working for Rick’s father,” Organek said, referring to Riccardo Puglielli and a company that was known then as RPM Industries. The older Puglielli hired him to help run one of the company’s first efforts at plastic manufacturing — building pliers handles for Stanley Works.

Puglielli was so pleased by the job Organek did, he bought him a van. The two families became close friends, Organek said, and would often spend summers swimming and fishing together near Watch Hill, R.I.

Even now, he said, the two companies work closely together, often borrowing tools and buying raw materials from each other.

“I wish him well — I think they’re going to do great in that new location,” Organek said.

For Puglielli, the expectations are high. “We have lots of space, plenty of room to grow and the town and state have been great to work with in helping us get set up.”

He spent nearly six months portioning, painting and organizing the building, and he moved in March and April.

He even found a interesting piece of artwork: an aerial view of the former Waverly Printing Co., which he hung on the wall of ProMold’s main office.

“They left it with the building,” he said. “I cleaned it up and put it on the wall. I know, it’s not our company, but it’s a good way to show the history of the place.”

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Copyright © 2008, The Hartford Courant
Original: http://www.courant.com/business/hc-ctinc0522.artmay22,0,3535499.story

No tool is more indispensable to an insurance agency than a computer; after all, it’s where the rates come from.

So imagine what went through the heads of thousands of Massachusetts independent insurance agents after they learned the state’s top regulator would with breakneck speed deregulate the state’s one-price-fits-all private passenger auto insurance market, a market in which they write more than 80 percent of the business. How would they give a quote under a totally new and competitive rating system? How would they rate policies with different rules and variables? How would this change the day-to-day running of an agency?

Perhaps nowhere in the state did these questions ring louder than in a small, 8-person office in the center of Needham — headquarters of Boston Software, makers of WinRater, the auto-rating software used by more than 90 percent of Bay State insurance agencies.

“The last six months has been a wild ride,” said Charles Walsh, who co-founded the company back in 1995 with business partner Tom O’Connor. “The commissioner made a decision and we were on the hook. We had to throw out our old product and start anew. We had benefited because we also sell a similar comparative auto product in Connecticut and Rhode Island, but we had to modify it because the rate structure wasn’t as complicated here. Basically we had a new product to make.”

And not a lot of time to make it. The changes to the state’s auto market were finalized at the tail end of last summer, with an April 1 implementation date. That left the company with barely eight months to redevelop and redistribute its comparative auto-rating program. Comparative rating software is a key tool for agents who use it to produce quotes for customers and to match policies to declarations pages to find discrepancies in coverage.

Producing a new comparative auto-rating program was only part of the battle. The biggest challenge lay in acting as a go-between among carriers, regulators, the Registry of Motor Vehicles, other vendors and the more than 1,500 agencies where WinRater was installed. Each of those entities was trying to figure out how to change business practices to perform under a new and fast-approaching Bay State insurance regime.

“So much of the work we had to do was going back and forth between carriers to get rates to quote accurately,” Walsh said. “It had more to with rolling up our sleeves and working with carriers at first.”

Complicating the problem was that carriers didn’t have to file their rates until Mid-November. “So we didn’t know what we had to build,” Walsh said.

Once those rates came trickling in, the software-making started; and the April 1 deadline loomed.

It wasn’t cheap. Boston Software was forced to double its staff to 16, hiring programmers to build out the new version. They worked nights and weekends. They went back and forth with the state, the companies and their insurance agent-clients.

“We had to work around the clock and babysit this thing,” Walsh said. “The fact of the matter is this is a rating product and should be as accurate as possible, as close to the dollar as possible.”

While the core of the new rating product was ready before April 1, much of the functionality that had been in previous versions — like motorcycle rating, for instance — had to be left out until after the deadline, and updated through software patches the company added later — and continues to add, said O’Connor.

“We decided the best way to do this was to get the software built as best we could and then prioritize adding in the updates,” he said.

To get the message out, the company started a blog (”Lane Change”) and sent out e-mails and blast faxes alerting agents as the new changes to the software — sometimes several times a week — became available. Then came the phone calls — thousands of them.

Twelve phone lines flow into the main office of Boston Software. For 10 hours a day every day for six weeks, every single line was in use as agents called in with questions about installation and rating. It got to the point where Walsh and O’Connor had an employee spend all day fetching messages from the company’s general voicemail box, where callers would be directed when no staff member could be reached. Those calls were returned on employees’ cell phones, since it routinely took two hours for an office phone line to open up.

“It was beyond crazy,” said Office Manager Heather Concannon. “Agents were getting very frustrated by the process, a lot of them were unfamiliar with some of changes — not just the software, but the way auto insurance is rated under the new system — so we had to walk them through it in some points.”

Carol Bender, who worked on the software, said the changes to the system and to the software amounted to “a total upheaval” for agents. “When these changes were first announced, I couldn’t imagine what the changes would be like,” she said. “It was a little messy, but I am proud of the way we handled it.”

In the end, said Walsh, it all meant a wholesale change for his own company - from the number of employees, to the cost of the product, to the way Boston Software interacts with agents. “It meant a major upheaval on our end as well, but there are so many agents — and ultimately drivers — who depend on our product that we had to do it,” Walsh said. “And I think, for the most part we’ve done a good job.”
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© 2008 by Wells Publishing, Inc.
First published: Insurance Journal Magazine, May 19, 2008
Original: www.insurancejournal.com/news/east/2008/05/21/90225.htm

Connecticut lawmakers could vote as early as this week to create a 25 percent tax credit for wealthy individuals who act as so-called angel investors for startup companies, a move venture insiders say is key step in aiding new companies’ efforts to get off the ground.

Critics, however, counter the proposal cedes too much control over economic development efforts away from elected officials and places it in the hands of private individuals.

Under the proposal, the 25 percent tax credit for angel investors would be subject to a $125,000 cap. They could carry those credits over for five years, and even transfer them to another individual. The total credits in a year could not exceed $10 million, although most experts expect that angel investment tax credits — at least in the first few years — would not even approach that total.

The Department of Economic and Community Development would monitor who gets the credits and which companies get investment dollars.

Every state that borders Connecticut offers some sort of tax credit program to angel investors, said Liddy Karter, executive director of the East Hartford-based Angel Investment Forum.

In New York it’s 25 percent, in Rhode Island it’s 50 percent, and in Massachusetts it sits currently at 3 percent, although the Bay State is close to upping that number to 25 percent.

The Connecticut bill has the approval of all relevant legislative committees, although the current version contains a slightly lower tax credit. Initially, the bill called for a 30 percent credit.

It now awaits a vote by the Senate, which must vote on the proposal by May 7, the final day of the legislative session.

It is not the first time that high-tech advocates in the state have tried to get a bill through the General Assembly that could ease the difficulties startups encounter in attracting seed money and early stage investments.

No Shortage Of Investors
“There is a real need out there for investment and this bill helps meet that need,” said Jeff Vose, vice president and municipal services manager for the MetroHartford Alliance.

“Connecticut has one of the highest per capita income ratios in the country, and there are a lot of people with a lot of investable income,” Vose said.

Karter agrees that the bill would go a long way to help harness both the money and vast expertise of the state’s wealthy would-be investors — many of whom have come from the elite levels of the of the state’s most successful businesses.

In the last year alone, the Angel Investor Forum has grown from 25 investor-participants to more than 70. Karter hopes to hit 100 soon and said the pending legislation would make that easier.

“This is crucial for the success of angel investors in the state,” Karter said. “Thirty-seven other states offer some type of program.

“Many Connecticut angel investors want to invest in their own backyards. But if Rhode Island is offering a 50 percent credit and it’s an hour away, why invest in Connecticut companies?”

Bonnie Stewart, vice president of government affairs for the Connecticut Business and Industry Association, echoed those comments. “This has been going on all over the country. People have money they want to invest, but they will invest in companies outside of Connecticut if they don’t get these tax credits.”

Not everyone agrees that the proposed tax credit program is in the state’s interest.

Shelley Geballe, president of the Connecticut Voices for Children, a think tank for public policy and public investment in the state, said tax credit program would create a directionless vacuum in the state’s economic development plan.

‘Reduces Transparency’
“The broad concern is that an increasing amount of economic development resources are being deployed through tax credits, which unlike grants or loans, do not have the same level of state oversight of the funds and how they are used,” she said. “It reduces the transparency and accountability of those resources.”

Geballe also said her concern with the angel investment tax credit specifically is that unlike traditional tax credits — which are usually made available to all businesses or those in certain industries — angel investments are made by individuals with different criteria and goals.

So while the state may want to encourage investment in say, fuel cells, an angel investor might want something different.

By allowing investment in anything — and getting nothing in return for tax breaks — the state’s economic development plan is essentially directionless, and left in the hands of unelected individuals.

“The state should not let someone who is not elected set its economic development priorities,” she said.
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Published: Hartford Business Journal, April 28, 2008
Original: http://www.hartfordbusiness.com/news5279.html
©2007 Hartford Business Journal

Ernst Renner, co-founder of VGO Software, will be in the hunt for an investor at a venture capital conference in Stamford this week.

Since early last year, from the basement of an inconspicuous Manchester office building, Ernst Renner has plotted to take over the world. Or at least the worldwide niche for his computer program.

That’s when he co-founded VGO Software with his business partner Robert Nocera. Its main product, EVO, is geared to the several hundred thousand, mostly large companies that over the years have built custom software using Oracle Forms — essentially a computer programming technology.

EVO makes it relatively inexpensive to convert programs built using this older software into a newer, more Web-friendly technology.

It’s taken off quickly. Renner says he is “blowing out of the water” his only competitor.

But he’s carried it as far as he can. He needs help.

“We need to find a way to grow our marketing and sales, and free us up to do more product development — that’s what we really need right now,” he said.

Fair Pursuit
On Tuesday and Wednesday, Renner will join roughly 70 other startups and more established firms as they descend on Stamford in search of help — chiefly in the form of money — for the 15th annual Crossroads Venture Fair.

The two-day event, billed as the largest venture capital fair on the East Coast, is a chance for local startups to hobnob with capitalists and angel investors in search of the next big deal.

“Hopefully, there are investors with interest and experience that can help us, with both capital and intellectual investment,” Renner said of the upcoming trip, his first venture conference.

Whether he finds it is a different story. The conference, put on by the Connecticut Venture Group, comes during a confusing time for the venture capital world in Connecticut.

The economy is causing the biggest stresses, and insiders blame it for what many predict will be contraction or nonexistent growth in venture investment this year.

But state government is adding to the confusion, too, having yet to vote on a piece of legislation that would give a 50 percent tax credit to so-called angel investors — a move many say is critical to attracting, or the very least maintaining, the current level of venture investment in the state.

High Stakes
For some startups, the conference can end up being a last ditch effort at success.

“What are the stakes like for those going to the conference? If you are an unprofitable company, they’re very high,” said Joe Ciaudelli, who founded Montville-based photonics startup Rayvel Cor. in his garage five years ago, and now employs four people.

“It could be the difference between survival and doom. Luckily, we’re a profitable company, so we can survive whether we get funding,” Ciaudelli said.

Ciaudelli launched his firm with a $250,000 loan from the state’s Community Economic Development Fund, but is headed to Crossroads looking for cash infusions to build the market for Rayel’s main product — a high- precision measuring device.

Recession Fears
The economy may be working against those in Stamford this week.

Forty-nine percent of firms surveyed by KPMG earlier this month said they believe a recession will lead to decreased venture investment this year.

One in three said they expected venture investment in Northeast companies — which saw about $3.6 billion invested last year — to remain flat in 2008.

For, Connecticut, which lags behind other areas of New England in terms of the number of investments for venture capitalists, this is an ever-present challenge.

“We see far more opportunities in the Greater Boston area than we do any place else,” said Ed Sullivan, KPMG’s Providence-based venture capital champion for New England.

“Having said that, I know there are opportunities in Connecticut, there is just not a high concentration. So when we go hunting, we go where the hunting grounds are more favorable,” Sullivan said.

Active In Connecticut
Of course, there are bright spots, too: roughly half said they expected bigger investment this year in the Northeast’s technology and internet services sector — companies like Renner’s VGO. Forty-one percent said the region has the highest level of quality investment opportunities in the country.

“We have always looked at Connecticut as a strong base for investment, but that is because we have a higher concentration of investments here and are very active in the state,” said Alan Mendelson, of Hartford-based Axiom Venture Partners.

Echoing those comments was Maneesh Sagar, director of investments at Connecticut Innovations, the state’s quasi-public venture investment wing headquartered in Rocky Hill.

The group has made 15 funding deals in the last year.

“I don’t see us slowing down very much,” said Sagar. “We are seeing a lot of good deals. We’re one of the most active, early-stage venture capital firms in U.S. I don’t think anyone does more of those types of deals now than we do.”

And as far as a slowdown is concerned, fears of a recession-sparked venture downturn may be overestimated, said Jay Hachigian, partner in the Waltham, Mass., law firm Gunderson Dettmer.

“We did 854 deals last year — second most in the nation. But our first quarter this year was the busiest we have had in the history of the firm, so I don’t see a slowdown.”

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Published: Hartford Business Journal, April 28, 2008
Original: http://www.hartfordbusiness.com/news5278.html
©2007 Hartford Business Journal

Two New England States lead the nation in terms of having the lowest rate of work-related deaths and most states in the Northeast rank well above the national average, according to a new report from a major labor group.

New Hampshire and Rhode Island lead the nation, with 1.8 deaths per 100,000 workers, according to the AFL-CIO. Three other states — New Jersey, Connecticut and Massachusetts — come in a close second, with 2.1 deaths per 100,000 workers,

The rankings and data are based on federal figures from 2006 — the most recent year available — compiled by the AFL-CIO.

Nationally, the average rate was 4 deaths per 100,000 workers. New York and Maine, which ranked sixth and ninth respectively, both beat that average. Pennsylvania and Vermont ranked nineteenth, each having 4 deaths per 100,000 workers.

Other nearby states fared average or slightly worse. Virginia ranked twenty-third, with 4.3 deaths per 100,000 workers. Delaware and Maryland, ranked fifteenth and sixteenth, respectively, with 3.5 and 3.7 deaths per 100,000 workers. The District of Columbia was not ranked, but was well below average with 2.6 deaths per 100,000 workers.

All told, the data show there were more than 5,800 fatal workplace injuries reported nationwide in 2006, about 100 more than in 2005. The numbers also showed a troubling trend: a significant increase in worker deaths among Hispanics.

Alaska had the highest fatality rate at 13.8 deaths per 100,000 workers, followed by Wyoming, West Virginia and Montana. Officials say those states rank high on the list because they traditionally have high employment in dangerous jobs such as logging, mining and oil and gas drilling

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Published: InsuranceJournal.com, April 28, 2008
Original:http://www.insurancejournal.com/news/east/2008/04/28/89492.htm
©2008 Wells Publishing