Insurance Revolution


Paytrust: Expanding Nationwide

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Prepared for August 16, 2000 edition of U.S. 1 Newspaper. All

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Under the Internet Bubble, Some Apps Flourish

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Insurance Revolution

Like, InsureHiTech aims to purge

gross inefficiencies in its industry. InsureHiTech evolved from a

bricks and mortar business, but don’t call it an Internet company.

"We are an E-business, doing insurance business the old way but

driving the paperwork out of the process," says Rick Maloy Jr.,

telling of dinosaur technology in an industry where every application

is touched 10 times by human hands. "We are still acting as the

insurance broker, but to drive paperwork away we have created a web

platform connecting the broker with the customer and the insurance


With a target market of technology companies with up to 1,000 workers,

Maloy has 175 current clients. "I was watching all my clients

grow," he says, "and got caught up in the entrepreneurial

spirit. I created a new entity from the family business."

From the time he started in the Princeton office four years ago, Maloy

did nothing but insure technology companies. By July, 1999, he had 140

clients, and he started writing his business plan. Now he has built

a fully functional web portal for technology industries, launched

an international agency, and changed the company name from Maloy


to InsureHiTech with Insurance Revolution as the holding company.

Maloy raised $10 million from J.P. Morgan, which values the company

at $45 million. A big public relations and marketing blitz starts

October 1. In September or October the firm is moving from 2,500


feet at 228 Alexander Road to 26,000 feet at the building formerly

occupied by Bovis Construction in Forrestal Village.

"We are about to hit the national map very fast," says Maloy.

Maloy claims he has the only complete vertical platform for commercial

insurance and later plans separate portals for manufacturers,


retailers, and several others. Though he has not yet identified any

potential competitors who are doing what he is doing, he believes

he has a window of opportunity of only six months to a year to


his company as having the de facto standard.

Almost any technology company — life science, biotechnology,


devices, E-commerce, pharmaceutical, biomedical, and even the venture

capitalist market — can use his portal to negotiate for 28

different types of insurance, everything from commercial property and

casualty coverage and directors and officers liability to workers


Though portals geared to small business will take online applications,

Maloy insists on having one of his agents interview each applicant

and to fill out the application. "We are dealing with very


companies with sophisticated technology risks," he says. Call

centers are being set up in New York, Atlanta, San Francisco, Austin,

Chicago, and Seattle, and brokers are licensed in 48 states (soon

in Hawaii). "We get comparative rating quotes from 15 to 20

companies. Then we assess them and push back a quote with a value


on why we choose certain coverages, all completely over the web."

In the traditional way, the agent fills out applications

using an agency management system software, prints it out, and sends

the applications. Data entry clerks at the insurance companies key

it in. The companies underwrite it, rate it, and spit back a quote

to the agent. The agent rekeys the quotes and delivers the proposal,

including all the different quotes, to the customer.

Not only does a web-based system save time and money for the agent,

it also helps the customer, Maloy says. "All their data is in

front of them when they log into the system. Policies are bound and

online. If the customer needs a certificate of insurance, they can

click and get one without even calling the agent."

InsureHiTech University in Princeton will present a full curriculum,

via video conferencing, for sales and service people. Bill Harwood,

the chief operating officer, ran the technology underwriting group

at Chubb; Harwood is doing the training now but is looking for

a full time trainer.

Bob Lane has left the Roszel Road-based Princeton Internet Group


to be chief information officer here. The firm partnered with


a Mount Laurel-based firm, to build a robust "back office"

software system, known as an agency management system. Maloy says

he worked for eight months, 12 hours a day, 7 days a week, to go


every work flow process and build it into the system.

Sometime next year he plans to rent out his platform, and thinks this

side of the business has much bigger potential than brokerage side.

"But we still are niche focused and are basically test


In a month, when three beta tests are complete, he expects to claim

the status of "de facto platform." Then he can rent it to

selected brokers (probably not his arch rivals, at least at first)

and can adapt the system to less complex industries.

InsureHiTech’s marketing strategy is based on relationships with

technology councils across the country. For instance, Maloy is on

the board of the New Jersey Technology Council. Maloy is doing a deal

with CRITA, the Council of Regional IT Associations. "Chubb has

promised we are their unique platform."

Big insurance companies such as Atlantic Mutual, St. Paul, and AIG

have provided funding at least in part because they need a turnkey

solution; when they drop their data into Maloy’s platform, their


can "rent" the platform to process the applications.

Other vendors that sell management systems are Marsh (based in


AON (a global firm), and Gallagher (in Boston and Chicago). "Most

of the industry is concentrating on personal lines and small business

portals over the web. Nobody is trying to build out an


he says. "We are doing business the way we have always done it,

but we have built the correct technology."

Maloy is using an Oracle database, Sapphire Web technology done by

Bluestone Consulting (whose founder has invested $500,000 in Maloy’s

company), Sun servers, and hosting of the servers is by Qwest in


with dual redundancy in both facilities. Auditing is by Equifax.

A history major at Wake Forest, Class of 1991, Maloy vigorously


working as the fifth generation in the family business; the roots

of this business go back to his great-great grandfather in the 1880s.

His father, also named Richard A. Maloy (Villanova, Class of 1968)


the business from Staten Island to Princeton in 1981.

"I had worked at Maloy Insurance since I was 15," says the

son. "I was the janitor my first summer, and I spent one summer

in the basement, throwing out dead files. I called myself the mole;

I was the palest kid in school. I cursed my father every day for five

years, but now I thank him every day. It was a great motivation. He

taught me everything I know about the business and was my first


capitalist. Now he has line responsibility and is to be our


— Barbara Fox

Maloy/ Inc., 228 Alexander Street,

Princeton 08540. Richard A. Maloy Jr., president. 609-924-2226; fax,

609-924-5086. Home page:

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If Steven Spielberg were making a film about how a tiny

Internet start-up manages to reach an IPO, it would have lots of


characters, exotic locales, special effects, and heart-warming family

reunions. As it happens, Jim Klein’s true-life script reads pretty

much the same.

A marketing guru from Hollywood and, coincidentally, a friend of


Klein came east six months ago to be the CEO of, the

Kingston-based online game ball vendor. The former president of


Studios Consumer Products Group, Klein was responsible for the $1.5

billion merchandising campaign behind "The Lost World," and

earlier was the driving force behind brand names like Avon and Swatch.

He replaced founder Jim Medalia as CEO of Justballs in February and

emigrated back to his native New Jersey.

The world’s only website devoted to selling balls, Justballs was


in 1998 and is expanding from 2,600 square feet on Route 27 in


to 10,000 feet at 100 Canal Pointe in early September. In 1998 there

were five employees. In 1999 it had doubled in size. Now it has 30

employees and expects to grow to 50. (Sales or investment figures

are not available.) The lead investor and chairman is Internet guru

David Wetherell, the CEO of Massachusetts-based CMGI, known for his

smart Internet picks.

Justballs’ has gained national recognition, but rather than push the

company to the edge with an advertising blitz, Medalia has remained

committed to building up the company’s infrastructure. Thus the



Although he brings lots of experience to the company, Klein also


that Hollywood flair for drama and storytelling, right down to his

enthusiasm for balls. "The essence of a parent/kid relationship

and team balls is a forgotten story," he says. "Balls are

a $5 billion a year category, and we are the ball people."

Then there’s the story of Klein himself — how he gave up his home

in the mountains of Malibu for a cramped hotel room in New Jersey,

traded prestige and power for a vision. "When you’re the head

of a division of a major entertainment company, I have to admit you’re

at the top of the world," he says. "If you’re going to do

a start-up you have to give up the limos, fancy hotels, and you have

to roll up your sleeves and get things done. I’m more of a populist

anyway, so that’s O.K. I come from the world of politics and not


very well together, and everyone here is like family. These people

are committed to making it work. "

For E-commerce to work, flexibility is a must, and Justballs has


changed its business plan. It is no longer pursuing the retail market

with the same energy it did last year. "When you are a startup,

you start up on one premise and then the market moves to a different

piece," says Klein. "The whole marketplace has changed, and

we have broadened what we are. We are not at all de-emphasizing


we are just not putting money behind it. The economics of retail don’t


The revised business plan: To continue to focus on supplying balls

to colleges and institutions, but also to help colleges raise money.

Justballs will link the institutional market and the corporate partner

by using a powerful symbol — the regulation ball. So if you attend

a sports banquet, you can go home with your very own regulation ball

imprinted with the college’s name, the sponsor’s name, and your own


"These are high quality commemorative items," says Klein,

who refers to the ball as the "affinity symbol of sport" and

the "tool" used for linking sponsors with colleges and


"The colleges need balls for sports programs, but the marketing

director also has to put people in seats, and the promotional tools

can be the balls. No one else is doing a personalized ball experience

with full-size authentic game balls."

Late entrants to this market would need to acquire rights (this


already has exclusive rights with 500 universities and major college

conferences) and expensive in-house laser engraving equipment.


on fundamentals and marketability, we are winning," says Klein.

"We do this very well."

The retail trade, he says, is going to grow naturally by itself.


have loyal customers and are creating great brand awareness in


markets, so our brand name is getting out there. The Little League

coach also has a daughter playing soccer and he comes to us to buy

her ball."

A baseball player himself, Klein grew up in Bergen County, where his

father was an FBI agent prior to working with Merrill Lynch. Klein

majored in history at Rutgers, graduating with the Class of 1974,

and studied marketing in an MBA program at Columbia. While there,

he did a case study on Avon, the multi-national cosmetics company,

which led him to the company after graduation.

At Avon, Klein became the youngest vice president in the company’s

history. In addition to leading a $750 million division of beauty

products, he helped the company break away from its old image as a

home-based distribution method to a true, market-driven beauty



In 1988, after 12 years with Avon, Klein was hired by SMH Inc., the

Swiss makers of Swatch watches. When the company wanted him to move

to Switzerland, he opted instead to turn around a struggling West

Coast toy company called Applause. "I’m a bit of a control freak

and I like running things, and Applause had probably the best


of children’s products around," says Klein. "I have to like

the product to

get into it," he explains. "I love cosmetics because that’s

pure marketing, and kids stuff is fun because I have kids myself.

It adds to the whole career experience when you can watch your kids’

cartoons and it has meaning for your profession."

In 1991 Klein rescued Applause from the brink of Chapter 11,


the corporate culture, and turned it into a toy and gift company with

annual sales of $150 million. Along the way, he helped the company

cope with a major earthquake. "When you come to work one day and

your headquarters is destroyed by an earthquake what do you do?"

he says. "You learn about business in business school but how

do you help people get their lives back together? It was a real



In his last job, at Universal Studios, Klein created the product group

that was responsible for tying movie characters in with everything

from Burger King meals to Kodak cameras. "When Seagram’s purchased

Universal Studio they felt that they had great assets, with great

libraries of films, but they had never accomplished what Disney had

accomplished in terms of having brand value," says Klein.


brought me in to be the head of global consumer products, which


retailing." Klein opened the first Universal Studio stores —

one in Orlando and one in Los Angeles — and delivered one of the

top three entertainment licensing programs supporting Spielberg’s

Lost World and Jurassic Park release. The retail campaign included

toys, fashion shows in Bloomingdales, and the largest promotional

tie-in in Burger King’s history. "We generated $250 million in

free advertising," Klein says.

As headhunters began recruiting key Hollywood players for some of

the big Internet companies, Klein was turning down offers daily. Then

one day Klein got a call from Spencer Stuart, the world-wide executive

search firm, with the Justballs offer. "When they call, you answer

those calls, because they represent only blue chip opportunities,"

he says.

That wasn’t the only reason Klein decided to join the New Jersey


however. "I’ve thought long and hard about the Internet because

I believe that’s the new economy," he says. "The real issue

for me is that there are a million and one Internet start-ups out

there and knocking on my door, and I spent a lot of time kicking their

tires, and the one that struck me in its simplicity the most was


After months of commuting, Klein has moved into a house in Princeton

near Springdale Golf Club, a classic brick Georgian formerly owned by

J. Seward Johnson Jr., found for him by Pete Calloway. He and his

wife, Beverly, have two school-age children.

As for grand marketing strategies, Klein doesn’t think the company

needs much. "Our philosophy is the best expenditures you can make

on the start-up is customer service, not advertising," he says.

"You’ll see our banners court-side at games, so it’s an

opportunity to touch so many people much more than traditional top

down TV advertising."

Then there’s the name itself — Justballs. "I like the name

because it’s straight to the point," he says. "We have a


asset right there in the brand name. When I fly to L.A., people try

to steal my hat."

Justballs!, 4478 Route 27, Suite 102, Kingston

08528. 609-497-2400; fax, 609-497-0113. Home page:

— Melinda Sherwood

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Paytrust: Expanding Nationwide

Edward G. McLaughlin, CEO of Secure Commerce Services,

is selling time for leisure. His company scans your bills and puts

them online at You can see your bills on your


web page and pay them with a click of a mouse (U.S. 1, August 25,


Paytrust had its pilot program up and running in January, 1999, and

did a public launch in June, 1999. Last August, when

was featured at the U.S. 1 Technology Forum, Paytrust had 20 employees

at Emmons Drive. Now it has a total of 260 people nationwide. Then

Paytrust occupied 6,000 square feet. Now it has leased a total of

113,000 square feet. Last October Paytrust was reported to have 14,000

consumer clients. Now it has more than 30,000.

"Bill delivery and payment is one of the fastest growing


on the Web, and we continue to expand our infrastructure to deliver

world-class customer support, and to capitalize on this


says McLaughlin.

Paytrust lets consumers receive, review, pay, and organize 100 percent

of their bills online. "Our expansion is a direct result of


demand for our service, and we are scaling to meet demand," says

Lina Page, vice president of corporate communications. "Paytrust

has been successful at driving over 30,000 active customers through

a variety of integrated, direct marketing initiatives."

It has also partnered with, and delivered co-branded bill centers

for, such companies as American Express, GEFN, Nextcard, and


OnMoney. "We are seeing significant customers coming in through

those channels," says Page.

Paytrust has its roots in LogicWorks, where McLaughlin met Flint

Lane, the other co-founder, when both were executive vice presidents

at that firm on Campus Drive. (LogicWorks was since sold to Computer

Associates and has moved). Paytrust has also made significant


with other Princeton-area firms. Last month it made an alliance with

College Road-based Princeton eCom to expand E-billing and E-payment

capabilities. It also tapped Nettech Systems to hire another


alumnus, Kenneth W. Zeng, as chief financial officer.

David S. Fortney (formerly of Integrion Financial Network and


was made chief technology officer, and Jack Paladino, formerly a


manager from Citigroup’s e-City unit, was appointed chief operating

officer in April.

The current facilities include a 23,000 square-foot headquarters and

operations center at Quakerbridge Executive Center, a 50,000 foot

operations center on Brunswick Pike — both brokered by Commercial

Property Network — and a 518,000 square foot operations center

in Sioux Falls, South Dakota. Headquarters staffing consists of


for development, marketing, finance, human resources, and


whereas the operations centers are staffed with customer service


and mail processing workers.

The company promises to create at least 500 jobs in

Sioux Falls. There are also field sales and business development


at three locations: Herndon, Virginia; Redding, Connecticut; and



Jim Bruene, editor of the Online Banking Report


gave Paytrust a Best of the Web designation for being the first


services company to provide Web-based statement aggregation, ahead

of competitors such as Cyberbills and PayMyBills. Paytrust’s Smart

Balance service retrieves statement information from bank and


accounts and displays it on the Paytrust site.

The revenue from electronic bill payment will supposedly reach $2.3

billion in 2001, says an analyst for J.P. Morgan, and by 2002


all banks will offer this service. Processing costs for bill payment,

according to federal statistics, will drop more than $20 billion a

year when most consumers pay online.

Secure Commerce Services, 101 Grovers Mill road,

Quakerbridge Executive Center, Lawrenceville 08648. Ed McLaughlin,

president and CEO. 609-720-1818; fax, 609-720-1819. Home page:

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