Passion, Vision and Creativity Spell Success for Terry Duke

Passion, Vision and Creativity Spell Success for Terry Duke

The topic of successful cotton crops—or even agriculture for that matter—may not be common dinner table talk … unless you happen to be Terry Duke.  Providing viable insurance coverage for the industry for more than 40 years, Duke knows a thing or two about the agricultural industry in his home state of Louisiana, and his knowledge and execution of his vision has successfully supported the state’s agriculture business for the bulk of his career.

That vision has its roots in his desire to create a self-insured risk pool for the small Louisiana businesses (growers, cotton gins, grain elevators, and farm supply stores) that comprise this great core American industry, and do so in a way that would sustain an investment return for its members—in good crop years and bad.

The idea that there is insurance for everything (including the agricultural business) isn’t new, but the innovative way in which Duke established the various entities that would ultimately participate and benefit from being in one of five respective risk pools is.

Terry Duke

Terry Duke

In fact, his methods may not always have been the most conventional, but they proved to be creative and successful, and embody the tenets of his long-term employer, Arthur J Gallagher Risk Management Services Inc. (AJG), a global insurance brokerage, risk management and consulting services firm.  In the insurance business since 1974 and setting up his own office in Monroe in 1983, Duke’s commitment to the industry, along with his willingness to look at new ways of doing business, has earned him respect and accord from his colleagues.

In fact, Duke’s leadership tenets and his philosophy, “all for one and one for all,” happens to mirror “The Gallagher Way,” a similar set of shared values held by AJG, his employer since 1991.

Reflections of Success-Building

Now at age 70, Duke reflects back on the successful risk management programs he created–the LAC Self-Insurance Fund, the Agricultural Association of Louisiana, the Agricultural Group Compensation Self-Insured Fund, the Louisiana Agricultural Corporation L.L.C., and the LAC Assurance Ltd. He also consulted and provided the brokerage to the Texas Cotton Ginners Trust and the Louisiana Loggers Association Self Insured Fund.

“When I first had the idea to create a self-insurance group (SIG), the only source of workers’ compensation coverage was an assigned risk pool, which saw rates go up every year by about 20% per year,” he says.

Duke says he saw a way to solve the problem, and starting reading about self-insurance. Knowing his company only wrote a third of the cotton gin business, he decided to collect loss data that could inform the potential to start a self-insured risk pool.  Looking back, he admits the vision to create a SIG was an uphill battle that would require seven years of dedicated effort.

“I didn’t know spreadsheets at the time; we worked on ledger sheets, viewed copies of loss runs, audit reports, etc.  I ended up collecting data over a 5-year period, which showed the average loss ratio was 50 percent,” he says. “I didn’t even know what an actuary was but I knew about the payout patterns of claims, so I put together a rough overhead projection. What if we could collect $1M per year in premium over five years, study the payout pattern of claims and show our overhead expenses… then stop the rates from going up, and at end of five years be sitting on potential profit?  I had all this data, but we were not a group, just a collection of accounts, and I could not get a reinsurer to sign off on it.”

Duke’s knowledge of the unique nature of the industry ultimately played a role in his ability to successfully execute on his vision. “For cotton to turn to a commodity, it has to be grown, harvested, ginned, then put in a bale and stored in the warehouse until mill buyer buys it,” he says. “So, when we started the fund, we had the support of three different trade associations:  Cotton producers, cotton ginners’ and cotton warehouse associations,” Duke says.

Duke adds that when he realized under Louisiana law that the fund must operate as an association, he took matters into his own hands and created the Louisiana Cotton Association, an umbrella arm over the other three entities, which are non-profit.

“So, by paying into the association they can be a member of the fund,” says Duke.  “We only charged $100 per member, and my mentor at that time (Jack Hamilton, a predominant leader in the local agriculture community) mentioned that we had enough money to get help with regulatory and lobbying efforts, so in 1994 we hired an association director.”

Another Growth Step

 What followed next would be another significant growth step. “We started out just with cotton, but some grew corn, soybeans and sweet potatoes,” Duke recalls.  “We had a member who dealt only with corn asking, ‘why do I have to pay dues to a cotton association?’  So, I asked to change the Cotton Association’s name to the Agricultural Association of Louisiana.”

That move would consolidate and solidify the path forward building the organization into a viable risk management program. “We passed our proposal around and told our prospective members “if you join, we can’t spread it out over the course of just one year, we need a long term commitment.’”

Duke’s deep understanding of the ginning business also played into the Fund’s favor:  the bulk of claims occur in the fall harvest season from September through December, leaving the rest of the year for repairs and down time for farmers.

“So, if we started February 1, there was good chance we could go for six or seven months without any claims,” notes Duke.  “Several accounts canceled their other insurance, and paid our annual premium up front.  From the beginning we told members, you are jointly and severally liable. We were crystal clear on the risk, and transparent – no secrets.”

Five years after the fund began, Duke addressed the members at the Fund’s annual meeting. “I reminded them that they wanted to save money, but were initially nervous about self-insurance, so they took extra safety measures in managing their operations.  That year, we returned 70 cents on the dollar, locked in those rates, and in the cotton gin business, have not changed the rates since.  The industry’s rate structure may have gone down at times, but members prefer to pay, get through the year, and get paid back in a distribution.”

Duke’s loss control efforts also played a role over the years in keeping the Fund healthy.  Dealing with intense seasonal labor during the 2- to 3-month harvest, he notes that a laborer in one gin would file a workers’ comp claim, then next year approach another mill saying they have experience, get a job with that mill and file a similar claim. To tackle the issue, Duke suggested the organization dismiss its third-party claims company and hire its own claims team.

“The thought was that our own dedicated claims people wouldn’t be under stress to make a profit, they would be tasked with responding to do the right thing for the injured employee, give that employee every benefit of the doubt until claim goes south, then still have a vested interest in resolving,” he says.

Duke says the claims team is dispatched immediately to the claimant/injury, informs the claimant which medical bills the Fund will pay, provides hands-on claims processing, and ultimately builds a relationship with the employee—cutting down on potential legal involvement in the process.  “When we started, we had 500 claims,” he says. “Last year there were less than 100.”

Staying on Track

And under Duke’s direction, the organization is staying on track with technology, evolving from ledgers to spreadsheets to more modern cloud-based technologies, such as recent addition of modular core systems applications from CHSI Technologies. “Once we implemented CHSI’s Connections®, we began to deliver a package of information to the members unlike anything they had received before,” he says. “On the back end, it helped us automate our back office more, not anything our individual members could see, but we could see we were operating more efficiently as a result.”

Duke is also cognizant of how technology can enable the Fund’s members to be better at their jobs. “Technology has changed on their end tremendously,” he says.  “I have farmers who can pull up their smart phone and tell me the RPMs of a tractor or engine status… it’s changed the way they do business.”

Today, Duke’s contributions are as important as ever, as he continues to serve as a model for others in the industry, exemplifying many of “The Gallagher Way” shared values that have proven to engender success within the organization.

Celebrating semi-retirement this year, Duke has since given up his role as AJG’s branch manager, as well as his role as administrator for the LAC Self-Insurance Fund program and the Ag Comp program, but still contributes, serving as chief financial officer for both organizations.

This gives him more time to contribute to his other passion, ARCO, a social services organization that serves 100 people with disabilities who might otherwise not have the support they need. “We have a 31-year-old special needs son, and I’m blessed to be able to take care of him, including placing him in a special school when he was younger,” says Duke, who serves as ARCO’s President of its Board of Directors.  “For people who don’t have the support that my son has, ARCO is their only support, and I’m pleased to be able to serve the organization.”

The agricultural community is grateful for Terry Duke’s contributions to the industry, too.