14 Questions for Crum & Forster’s Tom Bredahl
In mid-December, Dan Reynolds, the editor-in-chief of Risk & Insurance®, caught up with Tom Bredahl, CPCU, ARe, and the president and chief underwriting officer of Surplus & Specialty Lines for Crum & Forster, which is coming up on its 200th anniversary. What follows is a transcript of that conversation, edited for length and clarity.
Risk & Insurance: For starters, if you wouldn’t mind jumping in and describing your background with the company and your overall area of responsibility.
Tom Bredahl: My title is president and chief underwriting officer of C&F’s Surplus & Specialty Lines Division.
My responsibilities include setting policy guidelines, authorities, underwriting appetites and protocols. But we also have a full stack of support capabilities. The way we’re set up, it’s decentralized. We have a dedicated claims team, dedicated actuaries, our own HR division and our own digital capabilities – all within the Surplus & Specialty Lines Division.
All of those functional areas roll up to me and we run the division like a full-service insurance company. In fact, we’re targeting a billion dollars in writings for our Surplus & Specialty Group in 2022, virtually all specialty premium. It’s an exciting place to be.
R&I: We’re here on the back end of 2021, Tom, and thinking about 2022, are there growth or product areas that you’re pretty excited about or you find interesting?
TB: There are so many. It’s a great time to be a specialty insurer. There are a lot of fundamentals that are aligned, so many parts of the rising tide that are favorably affecting us all.
We keep four industry verticals. They are construction, environmental, security, and energy. The fundamentals in those, despite limits compression, despite competition from new upstarts, are just super robust.
We feel that with these groups, we’re in the right place at the right time. Having put in so much fundamental work over the past few years, we did a lot of our re-underwriting when times were leaner. And now that the light is shining on us, we feel we’re ready at the right moment.
Elsewhere, in our group, we have specialty divisions that service the gig economy. We have a big trucking group. We have all manner of specialty outlets for binding authority and small businesses. We have a large block of excess casualty business that is experiencing great gains.
We’re a big fan of pushing distribution concepts onto brokers and integrating with brokers. It’s the full stack that’s exciting. And that’s just on the underwriting side.
R&I: Could you tell us more about that security business?
TB: It serves the security guard industry, both armed and unarmed. We do all manner of venues, big and small. It’s a specialty that came to us from C&F’s acquisition of First Mercury Financial Corporation and its subsidiaries in 2011.
R&I: Just to dig into another industry a bit. With the trucking industry, we’ve heard a lot about removal of capacity, carriers getting away from that some. Can you give us your perspective on what’s going on there and your underwriting approach too, if you wouldn’t mind?
TB: Trucking is exciting to us because of the analytics we deploy in evaluating it. Everything that we do in terms of pushing the envelope, in terms of modeling and procuring information, understanding telematics, trying to develop correlations between risk traits and outcomes we want, or outcomes we don’t want; that really comes to bear first and foremost in trucking because there’s so much information available.
The DOT, the FTA, they all have tremendous amounts of information publicly available that we can pour into our models and utilize how we see fit. We started a data science team long before it was in vogue, and they’ve been wrestling with this kind of information for a long time now. And we think we’re getting pretty good at it.
That’s the upside. There are headwinds right now, just given supply chain difficulties, the shortage of drivers, and the amount of product that has to move during these lean times.
Nothing’s ever completely perfect, but we’re having good success with selection and pricing. And our distribution partners are feeding us a steady diet of meaningful and good risks.
Trends are good. I know that it’s a stigmatized line or a polarized line. It has its dissenters, but we’re pretty deep into it.
We’re mostly small-fleet oriented. I think that makes a difference. We don’t have a tremendously large segment in larger primary fleet business. We pick up a lot of one-unit and two-unit risks – and we can do because our operations team executes so well.
R&I: You mentioned distribution concepts or strategies. Would you mind saying more about that? Either going through brokers or around them; how you handle distribution.
TB: It depends on the product. We are a wholesale majority business and we want to be careful to stay true to those wholesale brokers in the markets that they serve best.
But there are emerging marketplaces that are well-suited to move through a direct-to-customer or through a retail channel. For instance, things like platform apps.
We do a lot of wrestling with delivery services and other services arranged on the Internet – whether it’s dog walking or someone to clean your gutters or mowing your lawn. Car-sharing apps are another big one. These risks are arranged online and, as such, they’re very complex insurance risks.
These solutions have to be handcrafted, often with direct interaction with the insured. So in that space, we tend to use fewer intermediaries in the chain.
We also have a dual channel capability in our monoline excess casualty, and that’s really to capture some broader admitted types of risks. We do have several portal experiments where we can go direct to a customer.
One of those is active in trucking for owner operators to avail themselves of insurance for a single ride, for instance. We call that single trip excess. You can go online and get a quote for a single bill of lading certificate and an excess limit to match.
We’re game for any kind of distribution innovation that will serve the customer better. We’re not into creating a solution in search of a problem. Rather, we ask, “Okay, what’s the problem? How can we address it? Does this help?” If it doesn’t, we scrap it. And generally it winds up as a hybrid integrated solution with the intermediary that we’re dealing with.
R&I: On going direct, say like on a single trip in trucking, what kind of uptake are you seeing? It seems like you might get some good traction with that approach.
TB: I think it’s a brilliant idea. We are trying for the Holy Grail. And I think it would be integrating that with where these single trip operators get their business.
That’s either through a freight broker or a load board or some other aggregator that parcels out trips for broader shippers. And if we can get integrated using APIs to do these things in bundles, it’s going to be much more efficient for us.
We were actually granted a business patent for this approach, so we are excited to see where it goes. That patent itself is a great feather in the cap of our digital team. Now, we just have to monetize it.
R&I: Looking ahead at 2022 and looking at your business, what things do you feel like you really need to get right?
TB: I would say like most companies in our space and most companies operating during a pandemic across all industries, we’re concerned for our people. We’re concentrating on the engagement of our team, the continued education of our team and the career path management of all of our talent.
How do we draw new talent? How do we onboard folks? Those are top of mind, when we think about our challenge set for 2022.
We’ve got a number of programs that are designed to address just that. If there’s a company out there not thinking about that, I think they’re making a real mistake. We’re trying to address the issue from all sides.
We’re still recruiting right out of schools for our initial training programs, people with zero experience in our industry. We’re also trying to draw middle managers from the outside world, while tracking people internally to repurpose their skill sets or redesign their roles.
And the senior most marquee people, we want to keep our eyes out for them. As you know, there’s a lot of displacement everywhere with all the M&A throughout the industry. It’s an interesting time and challenging to keep up with.
R&I: There’s a lot of moving parts. Would you care to say, or can you tell us, Tom, about talent and the talent you want to recruit and retain? Using a sports’ analogy, how many come off the farm system and how many are coming through trades?
TB: We strike a balance. We had great luck getting tremendous colleagues right out of college. During the pandemic, we utilized our successful training program that we call Launchpad. This past year we recruited 15 college grads – 10 of whom are now full-time with us.
They’re now fully deployed in our underwriting, operations and claims areas. We’re going to do that again, probably doubling the scale of that, recruiting 20 to 25 right out of school.
When we think about drawing from competitors or even other industries, or maybe the tech sector, I would guess that that draw would be probably half that, half above replacement that is, and then the senior most people, that’s a one off deal. We don’t really plan to hire a division head unless it’s a very unusual circumstance.
R&I: When you get to talking to people that are in college and explaining the value of these careers and the great career you can have in this industry, what seems to be working? How are you getting that message across?
TB: That’s something that we work on. There always seems to be some explaining about the range of capabilities that is required. I don’t know what the presumption is in a senior college student’s mind, but it seems to be narrower than is the case in the industry.
Some may have the presumption that it’s just a math-oriented thing, or it’s just a sales-oriented thing, or some other outtake from the “Incredibles” movie with a claims adjuster who pounds on his desk or something.
Of course, we all know it’s a lot different than that, but when they see that there’s some high end machine learning that can be deployed, that there’s people with criminology degrees that we hire in our investigative unit for fraud, when we have actual doctors on the payroll, that we have environmental geologists underwriting in our environmental book; we have a lot of engineers, etc.
When they hear the caliber of people we have, I think they sit up straighter and they say, “Well, maybe this is an industry that I can consider.”
It used to be, “I want to be tech this or tech that, or investment banking this, or venture capital that.” Now it’s, “If I’m at a dynamic insurance company that innovates continuously and is, in a broad number of fields and a lot of different verticals, that’s like a huge playground.”
That’s what I want them to understand. It’s a bit of convincing that has to be done to get through to them because a lot of them don’t have that exposure. Even if you’re in a risk management program, I sometimes think you don’t get the full understanding of the breadth of the industry.
R&I: Are there other uses of technology, Tom, that are getting some traction for you in particular, any of your verticals, or any of the areas that you’re underwriting that you’re interested in or excited about, besides that trucking innovation that you mentioned?
TB: I think a lot of the excitement is going to come through integration with some of the more well established tech operators. You might be aware that Amazon is firing up another pilot program to help insure the providers on their platform. When you want to sell as a private business, something on Amazon, there are certain levels of insurance requirements.
They’ve tried several times in the past and both here domestically, but also internationally, to get a panel of insurance providers in the most painless way possible to integrate with these providers on their platform so they don’t have to think about it.
They want to ensure the products they provide and the services they offer will all be insured properly. It’s got to be Amazon-easy. That’s a real challenge from a technology standpoint, from an integration standpoint, from a procurement of information standpoint, and a claims handling standpoint post event.
It’s just an interesting type of technology that we are trying to integrate with. I think all the distribution channels we read a lot about are asking the same questions: ”How do we make it easier, faster, better?
How can we ask you fewer questions? What’s publicly available? What can we purchase in terms of information for a reasonable price so that we don’t have to inconvenience this business in soliciting their information? Can we renew a risk without having to bother the actual insured?”
Those are the kinds of things that we’re experimenting with that all involve technology and information processing. And it’s interesting, it’s cutting edge. You could spend the entirety of your business day focused on only those issues, but they don’t immediately ring the cash register. You’ve got to do some other activities some of the time.
R&I: I was thinking about your background and your life and your professional life. What did you say formed you, Tom? What, either individuals or experiences, really moved you forward, would you say?
TB: I started at a reinsurer. I was a treaty reinsurer first in my career.
I don’t think I fully appreciated it at the time, but I had the fortune of having a ringside seat to view the goings on at specialty insurers all across the country. Part of the routine for any treaty reinsurance underwriters is going out to visit a company and meet with senior management, following the policies through that insurance company’s workflow and process, and understanding it all.
I did this. We would go out on audits for a good portion of the year and the education you get, even if you’re not the best note taker in the world, just being around and asking questions and absorbing it all. It’s been the most valuable thing to me, because I draw on that every day.
I remember things about how insurance company “A” did this or how company “B” does that. I don’t want to laundry list all my competitors, but I’ve been in their offices as a reinsurer in that capacity at the time. And so it was a unique experience for me.
R&I: If you think about the business, Tom, is there anything we didn’t ask you about or that we didn’t cover?
TB: I would just say that, part of our success and really part of anyone’s success at a Fairfax company is operating in the environment that’s a decentralized one. I think a lot of companies try to put forward the concept that they have a lot of delegated authority, that they trust their managers, or that they just buy it and let it run.
I’ve been associated with our parent company, Fairfax Financial Holdings, for more than 20 years. There’s a highly unusual amount of autonomy at every level of the operating entity.
Each of the companies has an amazing amount of autonomy with their respective CEOs, but in my case, Marc Adee, our CEO, allows that on a division basis in an incredible way. The decision making is accelerated. The sense of ownership is stronger. I think the engagement of the people is deeper. And to me, the biggest part of our success is operating in that environment.
R&I: We’ll soon see the 200th anniversary of Crum & Forster, right?
TB: Yes, the foundation of what would become Crum & Forster, The North River Insurance Company, was founded in 1822. We’re planning a series of events to celebrate the occasion.
R&I: Any forecast on what the next 200 years might look like?
TB: I don’t know if the planning dial goes out quite that far, but central to everything we do is the people. I think technologies will come and go, and working in the office, or working from home, the pendulum will swing back and forth, and all different types of management trends will come and go.
There’s a set of Fairfax values that are infused throughout the organization, many of them just centered around doing good by doing well, and focusing on the softer side of things.
It’s not a cutthroat kind of place where every equation or every transaction has a winner and loser. They believe in win-win types of arrangements and they live it. &