Louisiana was a crook's paradise in the 1970s and 1980s for anyone selling car insurance to customers who could only afford the bare minimum.

Customers would find deals for coverage at $200 less than the cheapest advertised price then, after a wreck, find out their agent had pocketed the cash and left them without coverage.

Such swindlers, who operated under the protection of a series of crooked insurance commissioners, killed off virtually all legitimate competition. When the state insurance department finally stepped in and seized two dozen questionable operators in the early 1990s, it left a huge void in the non-standard auto insurance market.

Greg Tramontin, who for a decade struggled in Lafayette as an insurance agent, came up with a plan for selling non-standard auto policies. He would sell directly to the public, cutting out crooked or expensive agents, and would automate the operation to make it more efficient.

But it was next to impossible to convince investors to put up the capital he needed to start.

"I'm telling groups there is a tremendous opportunity here that may never happen again, that the timing was perfect," Tramontin recalls.

Time after time, potential investors walked away from the table, unsettled by the steady news of insurance company failures and corruption.

It wasn't until Tramontin made his pitch to Terrell Brown that the seeds were sown for what is today USAgencies. But even then, it took the persuasive Brown--whose United Companies Financial Cos. would become the darling of Wall Street before crashing--five years to convince his own board of directors to invest.

Once Brown did, though, the other investors fell into place "like dominoes."

"I have to give Terrell Brown a lot of credit--he got it the first time," Tramontin says.

[GRAPHIC OMITTED]

Under Tramontin's direction, USAgencies emerged from those shaky beginnings to become one of the most profitable companies of its kind. "We are a company that serves the under-served," Tramontin says.

Its success is largely due to a structure that has three distinct profit centers: insurance underwriting, high-interest lending and a management service that efficiently manages its risk. Each is independently profitable. As Brown puts it, the company is a "three-legged milking stool."

The plan

Tramontin learned the insurance business from the ground up, selling policies to customers as an agent. During the lean oil bust years in Lafayette in the early 1980s, he learned a lot about selling auto coverage to people down on their luck who could only afford to buy bare minimum coverage.

Before long it became clear that his customers felt mistreated by major insurance companies that didn't want or need the business. Many said insurers made them feel like the coverage was a favor.

Tramontin saw an opportunity to offer better service to that "non-standard" market. An idea began forming that would become a radical departure from the way the insurance industry operated at the time.

In the meantime, he continued learning the fundamentals of the insurance business. What he found was an industry with little or no computer automation that was riddled with inefficient procedures.

"I'd ask, 'Why do it this way?' and they'd say, 'We've been doing it that way for 50 years,'" Tramontin recalls.

In 1983, he started selling insurance in Lafayette as AAA Insurance, then as USAgencies. He specialized in non-standard policies underwritten by larger companies. No matter how hard he worked or how many new clients he signed up, his business never seemed to become more profitable.

But he stuck with his company until 1988, when a pair of New Orleans investors bought him out and, Tramontin says, eventually ran the company into the ground.

Tramontin remained convinced that profiting in the non-standard segment--where customers buy bare minimum coverage and often can't afford the up-front cash down payment--would require a radical new corporate structure.

In 1989, he began working on his business plan, honing his model. The structure called for three distinct units, each producing revenue for the holding company and, ultimately, profits for the investors (See graphic below).

The company Tramontin envisioned would sell policies directly to the public, spending heavily on advertising to drum up new business.

Because most of its customers would be financially strapped, a separate financing division would lend new customers cash to pay premiums for their insurance. The finance company would charge "usury rates"--the highest interest rates allowable under the law--because the customers simply would have no other choice.

Finally, a management company would manage the risk. It would employ all the workers and generate another revenue stream by managing risk for a key outside client--the company that insured the insurance company.

That company is General Motors Acceptance Corp. Re-insurance. Today USAgencies is its largest single customer, says Karen Schmitt, executive vice president and chief actuary at GMAC. GMAC gets 70% of the premium income, and in return pays 70% of the claims.

"They're a very efficient operation, and they've attacked every discipline within insurance," Schmitt says. "This has been a very close and productive relationship for both sides."

What's in a name?

Tramontin's structure was a new approach to an old business, but first he needed a name.

USAgencies was the name he had picked for his mom-and-pop agency in Lafayette in the 1980s. He got the rights to the name back in an agreement with the state Department of Insurance, which had seized the company from its subsequent owners when there was no cash left.

Now he needed cash, and lots of it. In the insurance business you can't sell coverage unless you have the capital reserves to pay potential losses. Tramontin needed investors.

He shopped his business idea from 1989 to 1994, both here and in other states--he even made his pitch to H. Ross Perot's Perot Systems.

USAgencies went nowhere until Terrell Brown got onboard.

Brown's Baton Rouge-based United Companies was pulling in hundreds of millions of dollars by refinancing mobile home loans for borrowers with poor credit, so he knew a thing or two about servicing the non-standard market.

Tramontin's business proposed to lend its customers money and sell them auto insurance. But what really caught Brown's eye was the structure.

"I was looking at this not so much as an insurance business, but the overall three-legged milking stool," Brown says. Tramontin's plan called for three distinct profit centers: underwriting, finance and management.

"They were mutually inclusive of each other," Brown says. "It was just a very interesting company. It all gets down to bringing a fairly priced service to the marketplace."

Before Tramontin came along, the non-standard insurance industry was all carved up. Independent agents, underwriters and finance companies all fought over a small pie, each extracting profits at every step. That drove up the cost of coverage.

By bringing the lending, insurance underwriting and managing functions under one roof, it lowered the cost to customers while providing a profitable platform for the insurance company. Doing that required another key factor: automation.

His plan was based on software that automated much of the business, far ahead of the curve in the industry--most competitors at the time still shuffled paper.

"From the very beginning, he was a paperless operation," Brown recalls.

So after getting Brown's ear, Tramontin got a desk at United Companies' headquarters and worked feverishly to flesh out his model from January to April of 1994. He figured his new company would need $5 million in startup capital.

Brown took the concept to the board. The board declined. "Thank God," Tramontin says now--USAgencies would have become a wholly owned subsidiary of a company in bankruptcy.

Brown knew he could get the board of directors to pony up $500,000, or 10% of the capital. "I think he eventually twisted their arm and told them they were going to invest," Tramontin says.

Brown himself would later put together a group of individual investors who put up a separate half-million dollar share. Eventually United Companies went into bankruptcy, so its shares were bought by the other USAgencies investors.

United Companies' original $500,000 pledge was just what USAgencies needed. First, Lamar Advertising agreed to invest. Quickly, eight other investors or groups stepped up as well.

Through a wall

With $5.1 million in capital, USAgencies opened up shop in Baton Rouge in 1995. It grew steadily, and in 1997 the original investors ponied up another $7 million in capital so it could continue to grow.

But in 1998, the company hit a wall.