2017 Power Broker

Health Care

Long-Term Risk Management

Martha Acker, CIC, CRM, CHSP
Area Senior Vice President
Arthur J. Gallagher, Birmingham, Ala.

For 30 years, Arthur J. Gallagher’s Martha Acker mitigated risk and helped insure the long-term care market.

Last year, Acker further fortified the industry when she established a risk purchasing group (RPG) program for the property and liability environmental exposures of long-term care.

Long-term care has an inherent risk for environmental claims such as mold, mildew and Legionella because of the compromised health of most residents.

The RPG program presented a simplified underwriting process, broader coverage and a lower price to the LTC clients.

The program also was designed around loss control resources to assist clients in identifying and reducing their exposure to loss in this area.

Acker also developed and managed two captive insurance programs for the PL/GL exposure. The first captive was established during the industry crisis of 2000 as a group captive. The second is a single parent captive established in 2013.

Her clients in this industry view her expertise and dedication as unmatched.

“I have never come across anyone that even comes close to what Martha does,” said Richard Brockman, an attorney who sits on the board of Associated Long Term Care Insurance Company.

“She’s there, soup to nuts, with her clients up and down the line,” Brockman said.

A ‘Visionary’ Broker

Chris Ainscough
Account Executive
Aon, Cleveland

A client of Aon’s Chris Ainscough faced a large property loss. The client shared concerns with Ainscough: How would the carrier’s policy respond to the loss? How could they quickly get whole again after the business interruption? Finally, how would this recent setback affect the upcoming property renewal?

Ainscough quickly got to work and confirmed coverage with the carrier, set meetings between the carrier and client, and assisted throughout the process to make sure the claim was adequately adjusted.

Next, he collected the data needed to make sure the client recovered fully from the business interruption. Ainscough worked to have the insurer allow Aon to act as a consultant, all the while having the policy cover the funds for the consulting services.

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Finally, the insurer agreed to a two-year term with a flat renewal rate in the first year, and a low single-digit rate increase the following year.

“I really enjoy working with Chris,” said one client, Chet Porembski, system vice president and deputy general counsel for OhioHealth Corp. “I can always rely on him.  When he tells me he’s going to do something, he does it. Chris is always trying to think ahead about our business to bring value to our organization.”

Ainscough’s preparation and foresight left an impression with other clients as well.

“He is a visionary,” said Kimberly Baughman, the director of risk & compliance at Wood County Hospital. “He always thinks five to 10 years out.”

The Unflappable Mr. DePriest

Tim DePriest, ARM
Managing Director
Arthur J. Gallagher, Glendale, Calif.

Clients value Tim DePriest for the significant amount of time he puts into education, planning and negotiating creative solutions with the carriers. They know he’ll pore over policies to find weaknesses and ways to reduce premiums.

When the CFO of a mental health services center invited DePriest to review its P&C program, DePriest found significant coverage gaps and issues throughout the program.

DePriest created a comprehensive marketing overview for carriers, working to educate them on the strength of the  management team, their risk management philosophy and their strategic operational plans.

Coverage for many areas such as earthquakes, board directors and cyber liability was expanded and improved. A claims management, loss control and safety education services plan was created to prevent workplace injuries and manage claims. All of these coverage enhancements as well as substantial improvements in client service, were achieved while reducing annual premiums by 25 percent.

DePriest will go the extra mile to get policies to work in his client’s favor, said Carl Coan, CEO of White Memorial Community Health Center. DePriest helped Coan sort through malpractice coverage issues for health care workers acquired through a recent merger.

“He was really helpful as we were trying to work through the malpractice issues,” Coan said. “He’s unflappable.”

Big in Telemedicine

Larry Hansard
Regional Managing Director
Arthur J. Gallagher, Dallas

This year, Larry Hansard designed a comprehensive telemedicine medical professional liability program. It offers global protection for U.S. health care providers who, in the past, had coverage that was limited by location.

The new liability responds in the jurisdiction where the patient resides around the globe and provides defense in nearly every venue, allowing the emerging telemedicine sector to provide health care internationally.

Matt Scalo, head of finance at Doctor on Demand, Inc., said Hansard was able to get his company a more than 50 percent discount on medical malpractice coverage. Doctor on Demand offers a mobile application that provides mental health care to patients in all 50 states. As a startup, it struggled to find affordable insurance coverage.

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Hansard educated carriers on the business model, making them far more comfortable insuring the business.

“Part of our challenge with our original broker is they didn’t understand our business,” Scalo said. “Larry … spent the time to understand what we do and how we do it.”

Hansard frequently reconnects with Scalo to learn about any new products the company is developing and suggest ways to incorporate risk and insurance issues early on, before they go too far down any path.

“What Larry and his team have done is really build a partnership,” Scalo said. “I don’t worry about insurance, he really owns the insurance process.”

Exclusive Treatment

Coleen Kelly
Vice President, Program Management
Aon, Hatboro, Pa.

Aon’s Coleen Kelly was contacted by a colleague seeking her help: Could Kelly help provide a solution for a specific exposure faced by a client with multiple franchise operations?

Kelly thought she could. She quickly realized that many of the coverages being sold were not aligned with the franchise requirements, nor did they address the client’s exposures.

Kelly helped to secure the commitment of the carrier with a product offering that would meet and actually exceed the clients’ need as well as offer a streamlined process to ensure compliance with the franchise requirements. Additionally, the client indicated early on that the franchisees needed a health insurance solution.

Kelly worked with a group from Aon Risk Solutions to offer ideas, gain the endorsement and launch a new product offering to the client franchisees. Kelly is now helping take to market products for all the franchisees.

Kelly also helped set up the nonemergency medical program used by R.E. Chaix & Associates. “It’s really taken off, it’s been great for us,” said Kristi Mulford, a broker at R.E. Chaix. “It allows me to not turn away as many accounts. I almost feel like I’m an exclusive, like she would do anything to help me and if I have questions, she is always available.”

“She gets things done, and gets things done quickly,” said Richard Walthall, a commercial insurance producer at Walthall Sachse & Pipes Inc. ”She is responsive, she’s accessible, she understands specifically what I want, and she’s able to negotiate what I want.”

A Great Client Asset

Charles Krauth, CIC, CRM
Vice President
Aon, Atlanta

Texas-based HNI Healthcare is a rapidly growing physician group with operations nationwide. It recently expanded to provide emergency department and anesthesia services as well as IT and management services.

Medical malpractice insurance is its largest risk and insurance cost and it is critically important for the practice to remain competitive when pursuing new contracts and recruiting new physicians.

HNI’s 2016 renewal needed to account for the company having doubled in size, entering into several new states, expanding into new specialty areas and rolling out proprietary practice management software.

Based on expiring rates, the 2016 renewal premium would have doubled.

Aon’s Charles Krauth reached out to insurers and highlighted the experience of HNI’s leadership team and new risk management strategies. He also emphasized the company’s positive five-year loss history.

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Four top medical malpractice insurance carriers offered rate cuts of between 30 percent to 50 percent. Additionally, Krauth negotiated an auditable policy provision that allowed for additional growth and an 18-month policy period, further locking in the very low rates.

“He wants to make sure he fully understands what our risks are and educates us on that,” said Skip Courtney, the chief operating officer at HNI. “We ultimately have to make the decision, but he’s brought us some things that we didn’t even think of.”

Medical Buying Power

Lee Newmark
Senior Vice President
Arthur J. Gallagher, Itasca, Ill.

This year, Arthur J. Gallagher’s Lee Newmark was asked to help integrate the insurance/risk management programs for several local gastroenterology practices into one single program.

Physicians seeking coverage face tough challenges in today’s health care market. The individual doctors know that they have to collaborate to survive. Newmark worked with the various groups and encouraged them to come together on their own terms while remaining as independent practices continuing to serve their local communities.

He helped construct a program that took advantage of the collective size of the combined gastroenterology group by offering preferred pricing. He also put together a coordinated risk management plan that would allow the group to become more efficient in its day-to-day work while offering the best patient care.

Ultimately, Newmark put together a single integrated platform that saved the doctors a significant amount in annual premiums and allowed them to establish a robust risk management plan that is already making great strides in improving patient care.

Gallagher continues to work with this group of physicians and introduced them to its employee benefits team. Now the medical group is considering a proposal that’s designed to achieve similar results in the benefits area.

“I think he does a very good job,” said Dr. Neil Friedman of the Metro Chicago Surgical Oncology group. “He’s always well researched and he’s there if we need him.”

Preserving Relationships in Tough Times

John Orr
Managing Principal
Integro, San Francisco

Integro’s John Orr found a way to structure a comprehensive insurance program by securing aligned or joint policies for three different medical companies with interconnected businesses.

“They are two companies but most of our policies are joint policies for both entities because the covered risk is shared to both of them,” said the medical group’s director of corporate real estate. “They are really married.

“We’ve done a lot of work around structuring a comprehensive program where the coverages are aligned with insurers to close those gaps identified,” the director said.

Another client faced a dicey renewal with uneasy insurers. The client had several unrelated class action lawsuits over a three-year period, giving rise to challenging D&O renewals. On top of that, the client’s market cap tripled over the same period.

Orr managed the client’s carrier relationships while reworking the positions of some insurers on the tower. In the end, Orr delivered a 10 percent premium decrease, capping off four years of reductions in the wake of increased market caps and other challenges.

More importantly, Orr preserved relationships and negotiated coverage enhancements for the client.

“He’s incredibly available to clients. He is proactive in advising about litigation trends, insurance contract clauses and the nuance of what’s going on in relevant litigation,” said David Lehman,  general counsel at Intersect ENT. “That is incredibly helpful to me.”

A Health Care Partner

Larry Reback, ARM
Managing Principal
Integro, San Francisco

After Banner Health received a large and unexpected adverse jury verdict on a medical malpractice case, its insurer claimed it was not properly advised of key developments in the case and was not afforded the opportunity to settle prior to the jury verdict.

Integro’s Larry Reback contacted senior underwriters on behalf of his client and got up to speed with every detail of the case. He was able to bring both sides to the table  and negotiate a full reimbursement of the verdict by the carrier.

“I’ve been in the industry for over 35 years, it’s really hard to find a good broker that you can partner with,” said Ellen Rensklev, chief risk officer at Oregon Health & Science University.

“In Larry, we get somebody who gets the big picture, who listens to what our needs are and who’s able to execute on those needs,” Rensklev said. “Then we set our goals together.”

Reback, a former insurance defense attorney, works with clients on everything from cyber to general liability to professional liability to the domestic market to international markets.

“Every time I encounter Larry, he provides advice and guidance that is thoughtful and considerate and I always feel that I am his only client,” said Yvette Carrillo, a claims director at Banner Health who has worked with Reback for about 18 years.

A Model for Others

John Selgrath, ARM
Senior Vice President,
Integro, San Francisco

Oregon Health and Science University owned a mature captive with a significant number of coverage lines.

Over the years, coverage lines were bolted on as endorsements without fully integrating the coverage into the policy. As a result, the policy coverage was often hard to determine.

Integro’s John Selgrath noticed the patchwork quality of the policy and immediately volunteered to rewrite it.

“He actually took it on his own initiative to suggest we rewrite the policy,” said Cassandra Forbess, risk and insurance manager at the university.

Selgrath was able to recommend and implement significant coverage enhancements while streamlining and clarifying the policy.

“He’s been a great resource for us,” Forbess said.

Susan Plante, senior insurance analyst at UMass Memorial Health Care, Inc., recalled the time the hospital experienced an after-hours emergency and she reached out to him for help. Selgrath responded immediately, reviewed affected policies and offered her a preliminary action plan to bring back to senior leadership within just a few hours.

Jeff Winecoff, with corporate insurance & risk at John Muir Health, added that Selgrath’s background as an attorney further enhances his value.

“Having somebody who can break down the form and also share a legal perspective is really invaluable and perhaps something all brokers should strive for,” Winecoff said.

Interpersonal Skill

Mary Walkenhorst, CPCU, ARM
Senior Account Executive
Aon, St. Louis

This year, with considerable M&A activity in the health care industry, Aon’s Mary Walkenhorst found herself in the awkward position of representing two of her clients in an acquisition.

She impressed them both by pointing out risks that neither had contemplated in the arrangement. She advised them not to seek just the least costly option for combining insurance programs, but to choose the options that made the most sense from a risk management standpoint. The clients said Walkenhorst helped make the transition as smooth as possible.

For policy renewals, clients said, Walkenhorst treats every part of the program as new business, asking, How can we improve the risk financing program? Is it still relevant? Does it position the client to accept future anticipated risks?

Walkenhorst coaches clients on how to avoid risk and better negotiate contracts, rather than always transferring risk to an insurance company,

Clients said she’s a great resource on cyber liability, stop loss coverage and financing programs through the government. She’s able to pull in additional information from industry sources and her colleagues at Aon.

“She’s just one heck of a good collaborator,” said Bill Kauffman, general counsel at St. Louis University. “She asks insightful questions. The interpersonal skill Mary possesses is one of the things that separates her from others in the industry with whom I’ve dealt.

“I would give her an A-plus in terms of service,” Kauffman said.

Capping the Losses

Julie Wisener, AINS
Vice President
Marsh, Nashville, Tenn.

Julie Wisener’s health care client was recently named in a lawsuit for alleged negligence while providing labor and delivery services for the indigent back in 2012. Since the incident involved an infant, there was potential for long-term liability.

The legal entity named in the lawsuit was only supposed to be operating in a holding capacity in Louisiana. While the entity was covered under their professional liability program, it was not enrolled in the Louisiana Patient Compensation Fund (LA PCF). Without participation in the LA PCF, the client’s liability for the claim would not be capped, and economic damages could be unlimited.

Wisener discovered that the entity could have coverage because the law considers independent contractors as employees. As long as that independent contractor was enrolled into the LA PCF, there was hope.

Wisener’s next challenge was negotiating with the LA PCF back to the year of the loss. She successful enrolled the legal entity back to 2012, allowing the known loss to be capped under the program, thus potentially saving the client a large, long-term financial payout.

Wisener helped another client properly insure a health care property while it was still under construction and the client was uncertain when it could begin seeing patients.

When construction dragged on, Wisener went back to the carrier and got a discount.

“That is something that wouldn’t normally happen with other companies,” said John Edmunds, CFO with Generations Behavioral Health.

Finalists:

Theresa Edwards
Senior Vice President, National Practice Leader Healthcare Industry Practice
Wells Fargo Insurance, Charlotte, N.C.

Nicole Francis
Senior Vice President
Marsh, Danville,Calif.

Timothy Hoover
Area Executive Vice President
Arthur J. Gallagher, Whippany, N.J.

Ruth Kochenderfer
Senior Vice President
Marsh, Washington, DC

Peter Lavery
Principal
Integro, Boston

 

More from Risk & Insurance

More from Risk & Insurance

Alternative Energy

A Shift in the Wind

As warranties run out on wind turbines, underwriters gain insight into their long-term costs.
By: | September 12, 2017 • 6 min read

Wind energy is all grown up. It is no longer an alternative, but in some wholesale markets has set the incremental cost of generation.

As the industry has grown, turbine towers have as well. And as the older ones roll out of their warranty periods, there are more claims.

This is a bit of a pinch in a soft market, but it gives underwriters new insight into performance over time — insight not available while manufacturers were repairing or replacing components.

Charles Long, area SVP, renewable energy, Arthur J. Gallagher

“There is a lot of capacity in the wind market,” said Charles Long, area senior vice president for renewable energy at broker Arthur J. Gallagher.

“The segment is still very soft. What we are not seeing is any major change in forms from the major underwriters. They still have 280-page forms. The specialty underwriters have a 48-page form. The larger carriers need to get away from a standard form with multiple endorsements and move to a form designed for wind, or solar, or storage. It is starting to become apparent to the clients that the firms have not kept up with construction or operations,” at renewable energy facilities, he said.

Third-party liability also remains competitive, Long noted.

“The traditional markets are doing liability very well. There are opportunities for us to market to multiple carriers. There is a lot of generation out there, but the bulk of the writing is by a handful of insurers.”

Broadly the market is “still softish,” said Jatin Sharma, head of business development for specialty underwriter G-Cube.

“There has been an increase in some distressed areas, but there has also been some regional firming. Our focus is very much on the technical underwriting. We are also emphasizing standardization, clean contracts. That extends to business interruption, marine transit, and other covers.”

The Blade Problem

“Gear-box maintenance has been a significant issue for a long time, and now with bigger and bigger blades, leading-edge erosion has become a big topic,” said Sharma. “Others include cracking and lightning and even catastrophic blade loss.”

Long, at Gallagher, noted that operationally, gear boxes have been getting significantly better. “Now it is blades that have become a concern,” he said. “Problems include cracking, fraying, splitting.

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“In response, operators are using more sophisticated inspection techniques, including flying drones. Those reduce the amount of climbing necessary, reducing risk to personnel as well.”

Underwriters certainly like that, and it is a huge cost saver to the owners, however, “we are not yet seeing that credited in the underwriting,” said Long.

He added that insurance is playing an important role in the development of renewable energy beyond the traditional property, casualty, and liability coverages.

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine. Weather risk coverage can be done in multiple ways, or there can be an actual put, up to a fixed portion of capacity, plus or minus 20 percent, like a collar; a straight over/under.”

As useful as those financial instruments are, the first priority is to get power into the grid. And for that, Long anticipates “aggressive forward moves around storage. Spikes into the system are not good. Grid storage is not just a way of providing power when the wind is not blowing; it also acts as a shock absorber for times when the wind blows too hard. There are ebbs and flows in wind and solar so we really need that surge capacity.”

Long noted that there are some companies that are storage only.

“That is really what the utilities are seeking. The storage company becomes, in effect, just another generator. It has its own [power purchase agreement] and its own interconnect.”

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine.”  —Charles Long, area senior vice president for renewable energy, Arthur J. Gallagher

Another trend is co-location, with wind and solar, as well as grid-storage or auxiliary generation, on the same site.

“Investors like it because it boosts internal rates of return on the equity side,” said Sharma. “But while it increases revenue, it also increases exposure. … You may have a $400 million wind farm, plus a $150 million solar array on the same substation.”

In the beginning, wind turbines did not generate much power, explained Rob Battenfield, senior vice president and head of downstream at JLT Specialty USA.

“As turbines developed, they got higher and higher, with bigger blades. They became more economically viable. There are still subsidies, and at present those subsidies drive the investment decisions.”

For example, some non-tax paying utilities are not eligible for the tax credits, so they don’t invest in new wind power. But once smaller companies or private investors have made use of the credits, the big utilities are likely to provide a ready secondary market for the builders to recoup their capital.

That structure also affects insurance. More PPAs mandate grid storage for intermittent generators such as wind and solar. State of the art for such storage is lithium-ion batteries, which have been prone to fires if damaged or if they malfunction.

“Grid storage is getting larger,” said Battenfield. “If you have variable generation you need to balance that. Most underwriters insure generation and storage together. Project leaders may need to have that because of non-recourse debt financing. On the other side, insurers may be syndicating the battery risk, but to the insured it is all together.”

“Grid storage is getting larger. If you have variable generation you need to balance that.” — Rob Battenfield, senior vice president, head of downstream, JLT Specialty USA

There has also been a mechanical and maintenance evolution along the way. “The early-generation short turbines were throwing gears all the time,” said Battenfield.

But now, he said, with fewer manufacturers in play, “the blades, gears, nacelles, and generators are much more mechanically sound and much more standardized. Carriers are more willing to write that risk.”

There is also more operational and maintenance data now as warranties roll off. Battenfield suggested that the door started to open on that data three or four years ago, but it won’t stay open forever.

“When the equipment was under warranty, it would just be repaired or replaced by the manufacturer,” he said.

“Now there’s more equipment out of warranty, there are more claims. However, if the big utilities start to aggregate wind farms, claims are likely to drop again. That is because the utilities have large retentions, often about $5 million. Claims and premiums are likely to go down for wind equipment.”

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Repair costs are also dropping, said Battenfield.

“An out-of-warranty blade set replacement can cost $300,000. But if it is repairable by a third party, it could cost as little as $30,000 to have a specialist in fiberglass do it in a few days.”

As that approach becomes more prevalent, business interruption (BI) coverage comes to the fore. Battenfield stressed that it is important for owners to understand their PPA obligations, as well as BI triggers and waiting periods.

“The BI challenge can be bigger than the property loss,” said Battenfield. “It is important that coverage dovetails into the operator’s contractual obligations.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]