Today's Guest

John Morlan is the CEO and founder of Smarter Risk. John has been in the insurance and risk management industry for over 20 years. He’s worked with numerous companies, saving them millions of dollars in insurance costs through the development of risk control and safety programs. John believes risk management is a simple formula: reducing your risk of having a claim lowers your insurance cost. His company, Smarter Risk, has developed an app that automates the process of creating these programs, allowing businesses to qualify for the best insurance rates. By putting controls in place to reduce your risk of incidences, you are effectively decreasing your cost of insurance by becoming a healthier operation. Listen to today’s episode to learn more about the unexpected costs you may face if you do not have the correct systems in place to manage your risk, and the importance of risk management. 

Resources Shared

• John Morlan | LinkedIn
• Smarter Risk: Overview | LinkedIn
• Smarter Risk
• Thryv
  

Episode Transcript

(Please excuse grammatical errors due to transcription)

Gordon Henry:

Hey, hey, this is Gordon Henry, winning on Main Street. As an entrepreneur or a small business owner, you love to think about new products, and how to grow revenue, but you also need to think about what can go wrong. This week's guest can tell you all about that.

Our guest is John Morlan. He's with Smarter Risk. He's been in the insurance and risks management industry for over 20 years, and specialized in what's called the InsurTech space, like insurance technology.

He's worked with numerous companies, saving them millions of dollars in insurance costs, through the development of risk control and safety programs. His company, Smarter Risk, which we'll talk about, has developed an app that automates the process of creating these programs, allowing businesses to qualify for the best insurance rates, which I'm sure you want to do.

In addition to his impressive career achievements, he's an advocate for small businesses. He understands the unique challenges they face, and he's passionate about helping you succeed.

He's speaking to us from his hometown of Winston-Salem, North Carolina. And what of you, our listeners, get out of this episode?

Well, again, as an entrepreneur, you need to think about what can go wrong, as well as what can go right. And John can tell you about the insurance you need, and how you can save money.

So excited to meet you, John. Let's dive in. Maybe you could just start by walking us through your career journey, and what led you to being with us today?

John Morlan:

Oh, wow. So we'll have to go back in time a little bit. I actually didn't know anything about insurance when I applied for a job with Mutual of Omaha. I thought, "Hey, this seems like an interesting business."

I was young at the time. I was like, "Let me give it a go, and see how it goes." So I got the job with Mutual of Omaha, worked there for a couple years.

Then I got a chance to go and work with a commercial insurance carrier, Century Insurance. Worked for them for several years, and that was when I was really first exposed to risk control.

Just for the audience, so they understand how this kind of works, when you apply for insurance, you'll get with your agent, they fill out an application, they send that to an underwriter.

Underwriter takes a look at the application, gives them a limited amount of information, but usually, it's enough that they feel comfortable writing the risk. So they'll quote it. The insurance agent comes back to you, and then they bind your insurance.

Now something's happening, kind of in the background, after the fact, just for practical reasons. But many times the underwriter will say, "Well, we want a risk control consultant," or sometimes, called a loss control consultant, "to go out and do a risk assessment." And this is where things can kind of go wrong for insureds, small business owners, and for agents, too.

And I remember, as a young agent, one of the first visits my insured got did not go so well, and they got hammered. So I had the job of going back to that insured and explaining to them, "Hey, the insurance company actually wants more premium, so you're going to have to pay a little bit of additional premium."

Me being the curious person I was, I was like, "Well, how does this risk control thing work?" I didn't know much about it back then. So I asked them, I said, "Well, will you give me copies of the reports, so I know what you're looking for?" And so they did.

They gave me copies of the reports, and I thought about it, when I started going through the reports, and started talking with some of the loss control, risk control people. And I was like, "Wow, this sounds like, maybe a career path that I'd want to take. I'm not really that good at sales. Maybe I'd be much better at this."

But yeah, and that's where I got my start, and so, I learned the ropes. I spent five years with ISO, seven years independently, primarily focused on small and middle market accounts, but honestly, I was kind of burned out at that point. I had been doing it for 13 years. I didn't feel like, professionally, I was really going. It was kind of the same thing over and over again. I wasn't growing.

The other frustration was, while I was working with these small business owners, and a lot of times they would say to me, "John, you leave me with these list of recommendations, and I have no idea how in the heck to put these in place. I mean, what is a bloodborne patent program? I don't even know what that is, and you're telling me I need to write one."

So I would always give them the same answer we always gave them, "Hey, go back to the recommendations, they'll give you guidance." And that always felt like a half answer to me.

I felt like, "There's probably a better way to do it." Of course, that's what spawned the idea for the app, and that's kind of why we're here.

Gordon Henry:

Great. Well, we'll get into the app in just a minute. When did you know you wanted to be your own boss? Did you have early entrepreneurial influences? I

John Morlan:

Always, ever since I started selling commercial insurance, I always admired entrepreneurs. I always thought, "Wow, this is someone who went out on their own and did it on their own."

I mean, I went out on my own, after being with ISO, and was an independent consultant for seven years. So you learn a lot during that process, but I was always fascinated by entrepreneurship.

Gordon Henry:

Before we get into the details of the new product, I have heard that you're sort of a tech junkie, that you're very interested in computers. How did you become passionate about technology, and using that in your career?

John Morlan:

Well, I hate to say it this way, but I'm kind of lazy. And I'm lazy in a good way. I think, especially, when you're exposed to a process that's faster and more efficient, I mean, why go back and do it the other way? Why do it the hard way? And.

I think that influence actually was early on. I remember, I was probably eight or 10 years old. I've never really told this story, I don't think, but my mom bought me a book called The Life of Benjamin Franklin.

I read him, read about his life as a young child, and was totally fascinated by him, and then, later, Nikola Tesla and other folks, Edison. And I was just always fascinated with technology, and with, kind of, futurist viewpoints.

But yeah, I always loved technology. In my early twenties, I started building computers, I got online, found a YouTube video, and was like, "Hey, let me order a bunch of parts and build a computer."

I did that, and just was always interested in software and hardware, and thought, "Hey, this is a way in which we can make our lives better, and so why shouldn't we embrace this," right?

Gordon Henry:

Very cool. So let's shift a little bit to insurance and small business.

What are the insurance needs of small businesses, the average small business, who's an electrician, or a plumber, or a roofer? What do they need, in terms of insurance? What should they be thinking about?

John Morlan:

Well, as far as insurance goes down, I'm not a licensed agent any longer. But I can tell you from my past, and most small business owners require some of the basics.

Almost every state in the Union, unless you're Texas, if you have five or more employees, some states are even more stringent, you have to have workers' compensation insurance. So you have to insure against the risk of worker injury.

Most small businesses, they'll have a building, so they need property insurance. They can get sued, so they need liability insurance.

And then, a lot of small businesses will have a fleet exposure. So you've got to have some kind of fleet insurance, some kind of commercial auto insurance.

Gordon Henry:

Okay, so that's-

John Morlan:

Typically, that's what we run into for most small businesses.

Gordon Henry:

Pretty substantial, several things to think about there. So what is risk control for small businesses? What does risk control really mean, and its impact on their insurance premiums?

John Morlan:

What we're focused on is controlling insurable risk. Then that begs the question, what is insurable risk? Insurable risk is really easy, anything you can buy insurance for.

So I'll give you a common example. If you're a small business owner and you have a building, you have the risk of fire. So what are you going to do? You're going to buy property insurance.

Risk control is concerned with, "Well, how are we trying to control that risk? What are some practical things we could do?"

We could install a fire alarm, we could install smoke detectors, we could install a sprinkler system, we could make sure fire extinguishers are available. So those are just some of the things that you could do to control your risk.

Gordon Henry:

Okay. What are some common risk areas a small business owner might overlook? Are there things they should pay more attention to, than they might first think about?

John Morlan:

I'd probably say that the challenge, in a lot of ways for small business owners, is having the documentation in place. There's a reason most small businesses don't qualify for the best insurance rates, and it's because they don't have their programs or policies, they don't have that documentation in order.

And the documentation isn't there just for documentation's sake. Policies tell us as a company what you're going to do, and procedures are how you're going to do it. This is really, really important, that you have those clear expectations laid out, and that you have a system and a process in place.

We find that companies that have those systems and those processes in place have what we call lower loss ratios, which just means, you have fewer claims. And those companies who have fewer claims, they pay less money for insurance.

Gordon Henry:

So let's get into the Smarter Risk app. You came up with an app that is supposed to help small businesses. Why don't you just tell us what it does, and why small businesses should really care about this?

John Morlan:

The big challenge for business owners, and it's the same thing they told me for years, is, "Hey, I don't know how to write a policy for that. I don't know how to put a program together. If you can tell me what goes in it, I can read it, I can implement it." But that's the heavy lift for them.

With our app, we use the Assess, Improve, Share, and we break it down into three basic steps. In 15 minutes, you can do an assessment, you understand what your risks are. You can make improvements, because we have a list of recommendations that are generated.

And then we have some automation tools you can use. That will help you generate your policies, give you a forms library, so you have all the forms you need to implement those policies.

You can even generate what we call a dynamic risk report, and what this does is, it's a risk report that just reflects your latest risk profile. Once you get your business in good shape, you're a good risk. You can then leverage this report with your carrier to get better rates, and that's what it's all about.

That's the problem we see with businesses. A lot of times, it's not only just putting all these processes in place, and our app is kind of a step by step guide. It walks them through the whole thing, but then, it's communicating those improvements to the insurance carrier, which is really, really important.

When you do that, and you communicate those improvements to the insurance company, you'll see savings over time. It's just the way it works.

Gordon Henry:

Okay, so a small business should care about this, because if they use, or any business should use the app, and at the end of the day, it's going to save them money on their insurance premium.

John Morlan:

Well, yeah, and we don't actually say, save them, we say it's going to help you qualify for the best rates. Everybody has a different scenario, right? Everybody has a different specific situation.

But that's the goal, is to help them qualify for better rates. And as a bonus, your employees go home with all their fingers and toes.

Gordon Henry:

Got it. So is this something a small business owner could do on their own? They can go to, I guess, smarterrisk.com, is that your website?

John Morlan:

That's it.

Gordon Henry:

And just access the app, and fill out the information themselves?

John Morlan:

Yeah. That's how it works. When you go to the website, you can sign up for an account. Once you start the process, it takes 15 minutes to do the assessment.

At the end of the assessment, it generates recommendations for improvement, so you know what you need to do, to improve your risk, it'll give you a risk score, and it'll give you the ability to generate a risk report. So it walks you through, step by step, how to do everything.

As you complete your recommendations for improvement, your score improves, and your report updates automatically. So that's the step by step. Then if you want the automation tools, we have a subscription product for that, and you can automate the development of your safety and risk control program.

For a lot of small business owners, they can do it, but it typically takes about six months, a lot of Googling, a lot of meetings. With our app, it takes about six seconds to build a policy.

Gordon Henry:

You focused on the improvements. I'm a homeowner, and one improvement I've been thinking about is a leak detection system, because when I'm away, you want to know if maybe you sprung a leak in your pipes, or your, I don't know if you have an ice maker, or something like that.

Leaks can happen lots of places, and that can cause devastating losses, if you have water damage. Is that the type of improvement you're talking about?

John Morlan:

No, no, this is traditional risk control improvement. These are proactive measures you can take as a company to improve your risk. For example, as part of your safety program, you should have a bloodborne pathogen program, you should have a hazard communication program, you should have safety rules with disciplinary procedures.

These are the things that you need to implement as a company. Again, I go back, when you write policies, policies tell us as a company what you're going to do. So this lays out for everyone, "This is our safety and risk control program," and this lays out for the insurance carrier, "This is what we're doing to control our risk."

I actually was talking with an insurance agent the other day, and he put it better than I ever could. He said, "Business owners need to stop focusing on getting quotes for their insurance. They need to start marketing their risk."

Because, guess what? Insurance companies want to partner with companies who are doing a good job controlling and managing their risk. Our system, it's just plug and play, and our system just helps small business owners do that.

Gordon Henry:

Now, some of those things you just mentioned, bloodborne pathogens, and stuff like that, I don't imagine your average business owner or contractor knows how to put in place a bloodborne pathogen system. Do they need a consultant to help them do this?

John Morlan:

That's the great thing about the app. Instead of paying $5,000 to have a consultant write all your policies and procedures, you could just use our app. So what happens in the background, this is why the assessment is so important.

We always start with the assessment. Because, as you answer these questions about your risk, we're building a risk profile in the background, so we know what policies you need.

Then we know the details that should go into creating that policy. And then, the app can do it for you.

Gordon Henry:

Got it. Maybe it would help if you could share a success story of how Smarter Risk has reduced risk and saved money for a small business that you've worked with.

John Morlan:

I have a really interesting case study. There's a company, they install, and they fabricate these big beautiful wooden beams. They design, install and fabricate these big beautiful wooden beams.

They put them in high-end homes or small commercial properties, they'll put them in, and they're a case study for us. So we set them up with the software. They're going through the process of implementing all the changes that they need to make, putting all their policies and procedures in place.

They're about maybe three months from renewal, at this point, with their insurance carrier. They've had two fairly serious workers' comp claims. They get a notice from their carrier, they're being non-renewed. This is not good.

This typically means, you're going to go somewhere else, and you're going to pay more for insurance, if you get non-renewed by your carrier. Well, their agent scrambles to find them another carrier, and finds them one, at about the same rate, and about the same coverage.

But guess what it's contingent upon, Gordon take a wild guess? A risk assessment.

Gordon Henry:

Okay.

John Morlan:

So they send out someone to do a risk assessment, and right before she leaves, she says, "Oh, you guys are doing a great job." But she said, "There's an exit sign in this interior office. You guys need to put an exit sign up." And before she left, she said, "You guys aren't going to get any other recommendation from me," which is kind of surprising, because at the office they call me the High Risk Queen.

I put more companies in the high risk category than anyone else in my office, which was fantastic for us. So they passed with flying colors.

They had been implementing our system for the last three months, and they were ready for that. So they're really looking forward to next year, and going through that process.

Because that process, for them, has always been a very stressful process. "Oh, we're coming up for renewal. How much more are we going to have to pay?" And this, using our system, they're now in control of a lot of that process.

They're really excited about next year, about getting a discount. And I think they will.

Gordon Henry:

Okay. It also sounds like, in addition to putting yourself in position to get better rates, or save money that you're improving your business, can you talk about that a little bit? Does this lead to business improvements that overall, help the business?

John Morlan:

What we're doing is we're creating a plug and play system for small businesses, to create safety and risk control programs, which have been proven, for the longest time, to drive down claims. That's just how this works.

But what we find in that is that oftentimes, when businesses are putting these in place, there's normally process improvements, and so they end up saving time and money. It's just like when you implement SOP, Standard Operating Procedures.

Gordon Henry:

Right.

John Morlan:

You end up finding the safest method for doing something, and you also find the cheapest method, typically, the one that requires less labor inputs or whatever. So yeah, we do typically see improvements like that.

The other thing to take into account, I think people often overlook, is the uninsured costs. So let's say you have a loss, and let's say you have a machine, and three people on your staff can operate this machine.

One person gets hurt, so the medical bills are going to be covered through workers' comp, right? But what happens if you lose a sale, because you can't get production back up fast enough? What happens if you need to pay overtime to the other two employees?

What happens if you need to pull somebody in from another department and train them? Or you need to go and hire outside, to bring that person in, to bring someone else in? So there's a lot of uninsured costs people don't think about, that will really, really impact your business.

Gordon Henry:

Yeah, that makes a lot of sense. I was also thinking, maybe more basically, about hiring and retaining, that most people want to work in a safe environment. If I see that you're a company that's really careful about the work environment, and I feel like this is more professional company as a result of that, I'll be more attracted to working for you, and staying with you, than a place that might feel a little bit like it's flying by the seat of the pants or wrist.

John Morlan:

Yeah, yeah, absolutely. I worked for a company, and when I went around and did assessments of their different locations, I remember just walking in, and the housekeeping was godawful. I mean, there were tripping hazards, there were fire hazards everywhere.

I would take the manager aside, and say, "Look, if you bring a new employee on, and they walk out here, what kind of company do they think you're running? What kind of business do they think you're running? They're not going to have a lot of confidence."

If you talk to them about safety, how seriously are they really going to take you, when the place is an absolute mess? So yeah, employees pick up on that, for sure.

And I think it's really important, if you want that long term retention, you have a safe place for people to work.

Gordon Henry:

Good stuff, John. We're going to take a quick break.

We'll be back in just 30 seconds with more from John Morlan. Don't go anywhere.

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Gordon Henry:

And we're back with John Morlan, of Smarter Risk, talking about this interesting app that he has developed, that helps small businesses improve their business, and in turn, get better rates on their insurance. Are there certain small businesses whose needs are greater?

What's the sweet spot in terms of your ideal client profile? Who are the typical clients who come to you for the Smarter Risk cap?

John Morlan:

Yeah, so typically, it's small, mid-size businesses, and they're in what we'd call medium risk category. Just to make it concrete, think about any kind of repair shop, auto body, shop, warehouse, restaurant, hotel, light manufacturer, anything like that.

Where we're not really good, or there's not a real use for our product, is on the extremes. If you're a hair salon, a product really just isn't going to help you. You don't have enough risk, really, for a risk assessment to make a huge impact.

On the flip side, if you have a chemical plant with 5,000 employees, you need a different solution. That's not what we built this for.

Gordon Henry:

Got it, okay. So it's for the average small to medium-sized business that has a certain amount of physical activity going on that could create the risk.

John Morlan:

Yeah, yeah. Most of them that are engaged in some sort of manual labor.

Gordon Henry:

Manual labor, yeah. What don't most small businesses realize about insurance? What do you think most people miss?

John Morlan:

They want to get a quote for insurance, instead of marketing their risk, right? I mean, think about it this way.

An insurance company, just like you, wants to make a profit. Well, how do they do that? They partner with companies that are a good risk, that makes sense, where they're not going to pay a whole bunch of claims.

So I think, if they thought for just a second, think like an insurance company, and you'll be okay.

Gordon Henry:

Yeah, makes sense. Just looking back at your company, Smarter Risk, what's next for the company?

How's the app doing, first of all? Has it been well received? And where do you see your company, in the next year or two?

John Morlan:

Yeah, so we're still pretty early on. We only launched a subscription product for small businesses at the end of March, and then, we just released another product for the insurance industry, this is for insurers and for agencies, at the end of July. So we're still pretty on early on.

We are getting some traction. We just signed up another three agencies this week, and we've got a regional carrier who's about to use our assessment technology. I mean, we're still a young company. We're not established, we're still in product market fit, so we're still figuring a lot of stuff out, which is fine.

I'm actually enjoying that ride. I'm not really good at working for big companies. What somebody said the other day, they were talking about startups, and they said, "It's like you're in beast mode." And yeah, it's kind of like that.

It's chaos all the time, and we're making stuff up as we go, and we're learning a lot, and we're getting feedback from customers, and then iterating on the product. So I'm really excited about the future.

We're going to continue to improve the product, and make it better, and make it faster. And we'll also be able to get into some other markets.

Cyber's one we're looking at, builders risk is another one we think we can really bring some value to customers that way, too. So yeah, a lot about to happen. A lot's about to happen.

Gordon Henry:

One last question. I'm just curious about how you market the product. Obviously, you're doing this podcast, that's one way you're marketing, and on other podcasts, and you told me you have your own podcast. What's the name of your podcast, in case listeners want to listen?

John Morlan:

It's The Risk Matrix.

Gordon Henry:

Risk Matrix is your podcast, okay. And are you doing any marketing of the product besides that?

John Morlan:

Yeah, we're doing social media, we're doing some inbound marketing. We have a blog too, which, we write short, concise blog posts, just to help small business owners with all the things we just talked about.

Same with the podcast. The podcast is really there to demystify the world of risk management, safety and insurance. So we're doing those type of marketing, plus we have a channel partner program.

So when we sign up an agency, for example, they'll typically pay for the assessment, and the report, for the insured, or for the small business owner. Then the small business owner has an option to buy the automation tools and the forms libraries, to buy the subscription product.

That's mainly how we're marketing now. We're just taking it slow, we're not trying to grow too fast. It's very purposeful. I think that the thing is, nail it, then scale it, right?

Gordon Henry:

Yeah. One last question about the product. Is there a cost to using the app, or it's really just in the insurance? How do you make money I guess, off the app?

John Morlan:

Yeah, so there are fees. If you want the app for free, we do have a freemium version.

With the freemium version, it's fairly limited. You can do your assessment, it will generate recommendations and a risk score. And you can see all that.

What you don't have the ability to do is update your recommendations to improve your score, and you don't have the ability to generate a risk report. But we do have a very, very inexpensive one-time fee, if you would like to do that.

But if you would like the automation tools, it's a monthly subscription, with a one-year commitment.

Gordon Henry:

What is the one-time fee, and what is the subscription fee?

John Morlan:

The one-time fee is $10.

Gordon Henry:

Okay.

John Morlan:

And the subscription fee is 50 a month, for 12 months, so it's a $600 annual subscription.

Gordon Henry:

Got it, okay.

John Morlan:

We priced it to make it pretty affordable for just about any small business.

Gordon Henry:

Okay, terrific. Well, John, I want to thank you for coming on this show. This has been great, and hopefully, our listeners will check out smarterrisk.com, and get the app. Appreciate it.

John Morlan:

It sounds great. Thanks for having me, Gordon. Appreciate it.

Gordon Henry:

I want to thank our producer, Tim Alleman, and coordinators Diette Barnett, and Daniel Huddleston. If you enjoyed this podcast, please tell your colleagues, friends and family to subscribe and please leave us a five star review, really appreciate it. It helps us in the ranking. Small business runs better on Thryv. Get a free demo with thryv.com/pod, and check out our new free product, our freemium product, Command Center, at thryv.com. Until next time, make it a great week.

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