Chad Yonker, a former hedge fund manager, never intended to own an insurance agency. In fact, his first exposure to GoodWorks Insurance — the Glastonbury-based agency whose business model is designed to donate 50 percent of its annual profits to charity — was as an equity investor when the company launched in 2006.
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Chad Yonker, a former hedge fund manager, never intended to own an insurance agency. In fact, his first exposure to GoodWorks Insurance — the Glastonbury-based agency whose business model is designed to donate 50 percent of its annual profits to charity — was as an equity investor when the company launched in 2006.
But when a series of business decisions under its previous ownership put the firm in financial turmoil by 2011, Yonker, seeing the social enterprise business model as a competitive differentiator in the insurance sector, bought the agency.
Since then, Yonker and his team — which span four Connecticut offices and two in Massachusetts — have grown revenue by more than 200 percent while investing, Yonker says, hundreds of thousands collectively in nonprofit organizations focused on three main areas: education, health and public safety.
Over the past decade, social enterprises — businesses that build community support as a core principal of the company's purpose — have emerged as a growing sector in the U.S. economy. In 2014, a survey of social enterprises found that among survey respondents, social entrepreneurs accounted for more than $300 million in revenue and employed more than 14,000 people in 28 states.
That's been a positive — if still emerging — trend for nonprofits, said Gian-Carl Casa, president and CEO of the CT Community Nonprofit Alliance.
“It's been eight years since the Great Recession and the economy has been slow to rebound, and that's put incredible pressures on nonprofits to find new sources of revenue,” Casa said. “It's heartening to be at the beginning of a trend where businesses — especially younger entrepreneurs — want to give back [through their business model] to their community.”
And while the 50 percent threshold for charitable causes hasn't changed since GoodWorks' new ownership took over in 2011, the way the money is distributed has, according to Paul Brian, the agency's chief operating officer.
“The agency used to give away a lot of smaller grants — in the $500 range — to a larger number of organizations,” Brian said. “But to have a great impact, we now provide larger grants to fewer nonprofits.”
The agency has also evolved how it distributes its profit-driven charitable contributions. While a pool of funds remains available for area nonprofits to apply for, for larger clients like member-based associations, GoodWorks will allow clients to designate a particular cause to receive a specified amount of funding.
That approach has helped the agency build a growing clientele and fueled a profit increase of nearly 25 percent in 2016. While GoodWorks is prohibited by law from having an insured client designate itself as the recipient of the agencies charitable funds — a process known as rebating, Brian explained — the charitable giving component has been a strong selling advantage with clients, including the CT Community Nonprofit Alliance and Connecticut Energy Marketers Association (CEMA), which promote GoodsWorks to its members.
In fact, Brian said, through its contract with GoodWorks, CEMA elected to designate Operation Fuel, a program that provides fuel assistance for struggling families, to benefit from insurance products sold through its association's membership.
“We ended up donating $10,000 to Operation Fuel and then matched another $5,000 CEMA members raised to support the program,” Brian said, noting the typical award from GoodWorks is between $5,000 to $10,000.
Running an agency that only keeps half of its profits for the business presents its challenges. “We need to run more efficiently and we do that, in part, through our [technology] systems and back-office operations,” Brian said. And Yonker, the agency's owner and CEO who does not take an annual salary, enables GoodWorks to split its profits evenly between ownership and community.
The company has also used acquisitions and organic growth to boost its size and scope over the past five years. Recent deals included the purchase of Avon-based Metayer Bonding Associates. With additional M&A planned for 2017, Yonker expects to more than double the agency's size in the next 12 months. That would make GoodWorks one of the top 100 largest independent agencies in the country, an accomplishment Yonker credits to the company's focus on sales, products, service and charitable structure.
“I think it's a unique value proposition,” Yonker said. Larger insurers may give away more money, he explained, but as a percentage of profits, it's significantly less than GoodWorks' 50 percent threshold.
“What we've been doing [charitably] for the communities we serve is valuable,” Yonker said. “And it's something we need to continually make sure our policyholders, clients and communities understand.”
