The Incredible Mr. Sedgewick

By Bill Rusteberg

The 1980’s and early 1990’s were the Golden Years for brokers active in the group health insurance market.

There were many carriers competing for business back in the day including companies like Progressive Mutual, Durham Life, Firemans Fund, Republic National, Home Life, Minnesota Mutual, Great West Life, Transport Life, Pilot Life, John Alden, Crown Life, New York Life, and many, many more.

The market created enormous opportunities for insurance brokers to earn a fortune. Many became millionaires.

We know a few of them.

One is now a large real estate developer specializing in buying ranches and building country clubs and housing developments. Another owns a grocery store chain and another doesn’t do anything at all except tour with the semi-pros competing in national golf tournaments, something he has always dreamed of doing.

Then there is the incredible Mr. Sedgewick. He owns radio stations.

This is a story about one of his escapades in the group health insurance business back in the 1980’s that made him millions of dollars over a short three year span, enough to buy his first radio station.

Self-funding was becoming a popular method of financing health care, especially among school districts in Texas. Fueled by his out-of-the-box personality and runaway imagination Mr. Sedgewick saw an opportunity.

Sedgewick decided he could build a much better self-funded mouse trap, structured differently and packaged neatly with commissions many multiples of status quo commissions at the time.

He took his idea to the owner and president a holding company in Houston which owned several insurance companies none of which were household names. Bear in mind, Mr. Sedgewick is one hell of a salesman and visionary. He can sell ice to eskimos and snow skis to Saharan nomads.

He convinced the holding company owner his innovative model would make everyone a fortune very quickly with no competition at all.

He structured a quasi self-funded health plan by coupling individual health insurance policies overlayed with specific stop loss. The individual policies would be guarantee issue and include a two year pre-existing condition clause. Claims subject to the pre-existing exclusion would be covered by the specific stop loss policy after the first $5,000 in eligible medical expenses. The only risk the district would assume would be the $5,000 layer which only applied for claims subject to the pre-existing condition limitation. Fixed costs were 75- 80% of total funding whereas in a traditional self-funded plan fixed costs are typically 8-15% of total funding.

In addition Sedgewick attached a guarantee issue whole life policy to the health plan.

The individual health insurance commissions were 35%. The whole life first year commissioners were 110%. The specific stop loss commissions were 22%.

Once he reached an exclusive marketing arrangement with the owner of the insurance holding company, he contracted a San Antonio TPA to administer the plan.

The rest is history. Very quickly, by identifying brokers with political connections, he targeted large school districts. His first sale was a 4,000 life school district. Other districts followed quickly.

Sedgewick had the best and lowest rates in every bid cycle (no need for an aggregate corridor) and a convincing story to tell. Remember, Sedgewick is a powerful communicator and can sell anything to anybody for triple the price on Sunday characterizing it as The Blue Light Special.

His scheme unfolded in a relatively short period of time (that’s another story for another day) but not before he earned millions in commissions. He was set for life.

With this new found wealth, Sedgewick ran into an opportunity to buy a failing radio station for pennies on the dollar which he owns to this day.

Sedgewick is still among the living, running his radio stations and dabbling in the retirement planning business in his home town in north Texas.

Mr. Sedgewick is not his real name. Those who competed with him back in the day will remember his name and his Rube Goldberg insurance scheme.

Note To Mr. Sedgewick: If you read this give us a call. Would love to hear your ideas on how we can build a better health care mousetrap in 2022. Maybe we could have that discussion on your radio show?