2014 Power Broker

Health Care

Tailored Solutions That Drive Success

Brian Andrews Senior Vice President Aon, Pittsburgh

Brian Andrews
Senior Vice President
Aon, Pittsburgh

A large and heavily Cat-exposed nursing home and assisted living organization was facing steep premium increases after Superstorm Sandy. But Brian Andrews was able to secure a rate reduction despite its exposures. To make it happen, he secured construction and year-built data for each of the facilities, and performed natural catastrophe modeling for the facilities in order to calculate short-term and long-term loss estimates from the exposures. This enabled the company to negotiate a reduction in its necessary coverage limit. Andrews was able to delete the top layer of the program, which not only reduced excess premiums but increased carrier completion for the lower layers as well. 

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“We have 19 carriers in our layered program,” said Charles Gutshall, CEO of Work Comp Strategic Solutions, “and that’s where having a broker, an expert in that area, makes a huge difference, as to knowing how to put that puzzle together.”

Among other positive outcomes Andrews has been able to help clients realize this year, he was faced with a unique situation: a health care provider that transformed itself into an integrated health care delivery system in the space of 18 months. Stepping in to fill the shoes of a broker that had just retired, he helped the organization restructure its program dramatically on a tight timeline.

“He did an excellent job coordinating the whole effort,” said Tony Cosentino, director of risk management at Highmark. “He was able to save the hospital system significant money, while improving coverage terms, limits and deductibles across the board.”

New Challenges, New Solutions

Richard Chiocchi, CHC Managing Director Aon, Pittsburgh

Richard Chiocchi, CHC
Managing Director
Aon, Pittsburgh

While there are provisions of the new health care law designed to protect health plans that enter the marketplace, some regional plans may suffer financial hardship in spite of these risk mitigation efforts.

Aon’s Rick Chiocchi, national practice leader, Managed Care, sought to develop a secondary reinsurance program to fill in the gaps, but reinsurers backed away from the idea at first. Chiocchi persisted, eventually pairing up with Partner Re to develop a set of secondary reinsurance programs. These included a specific excess program to cap catastrophic losses that exceed the government’s limited $250,000 cover. The design of this second level of protection is to only address true catastrophic clinical expenses common to high cost medical events. 

The program also factors in unknowns about the government reinsurance program’s initial funding, including a “put” option for purchase at a low premium. The option pays if the government cannot, while a dividend is granted against the premium in the case the government upholds its end of the bargain.  

“Rick has been instrumental in helping me navigate through the crazy world of health care benefits and health care reinsurance,” said Christopher Bosser, director of corporate and captive insurance for the University of Pittsburgh Medical Center.

Bosser also lauds Chiocchi’s superior service. “At year one or two, everybody will give you that kind of customer service. The million-dollar question is, after three, four years, is it still there? It’s refreshing to have someone in the broker community you can count on day in, day out.”

Proving the Value of Risk Management

Ken Felton, CPHRM, DFASHRM Senior Risk Management Consultant Willis, Hartford, Conn.

Ken Felton, CPHRM, DFASHRM
Senior Risk Management Consultant
Willis, Hartford, Conn.

Ken Felton was repeatedly asked: “Do you have a way to determine the appropriate staffing levels for our risk management program?” He didn’t have a solid answer. So he set out to find one.

Felton drew upon his nursing director experience and developed a theoretical framework looking at specific risk management activities, collecting time data from hospital risk management staff in order to quantify the time required to support those activities. Felton beta tested his workload quantification model with one hospital to great success. There are now more than 20 hospitals in the database. This data provided a quantifiable model for hospital risk managers to make changes in department structure, improve efficiencies and justify requests for resources. Risk managers agree the tool is priceless.

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“From a risk management standpoint, it’s hard for us to get resources because we’re not revenue producing,” said Curt Caruso, system director of risk management for Via Christi Health Inc. “But using this tool, and with his support, we were able to get the full six FTEs that we requested approved. Within a year, we’re already up and running and full-staffed, supporting 4,000 or 5,000 employees, plus all of the patients and families, from a risk standpoint.”

Another risk manager, Trisha Farmer, director of risk management for Connecticut Children’s Medical Center, participated in Felton’s staffing survey and determined that her team was right on track. When her company brought in a productivity consultant soon after, Farmer’s team had no reason to sweat. “We were able to show them, ‘This is exactly what we’re doing,’ so it was really beneficial.”

Right-Hand Man

Donald Martin Senior Vice President Alliant Insurance Services Inc., Dallas

Donald Martin
Senior Vice President
Alliant Insurance Services Inc., Dallas

After staying with the same broker for 37 years, a large specialty children’s hospital made a switch — tapping Don Martin and his team to take on the program. The contract administrator expected changes. But he didn’t expect dramatic savings in the first year.

Thanks to an exhaustive review of the program, Martin and his team uncovered numerous opportunities for improving coverage, as well as a few alarming gaps. First and foremost, the existing property policy didn’t include coverage for business interruption — an oversight that could have caused the organization significant harm.

Martin and his team recommended enhancements that would protect the organization’s assets in the event of a significant loss and interruption of business. They also recommended changes in deductibles on the organization’s general liability and workers’ comp policies. 

All told, the team reduced the client’s cost by almost 19 percent while significantly enhancing its coverage. “I’ve been extremely pleased with what they’ve brought to the table,” said the client. “It makes you say, ‘Why didn’t we do this sooner?’ ”

Longtime clients of Martin’s are even more effusive. “He is a right-hand to me,” said the vice president of risk management for a home health and hospice care client. “We have a pretty small risk management staff so I lean on them heavily. We speak almost every day.”

“Don Martin is just one of the best guys I’ve worked with, and I’ve been doing this a while — this is not my first rodeo,” said the CFO of another home health client. “He answers things like he’s in the next room; he jumps right on top of things and he never lets me down.”

Rising Star

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

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

In the rapidly changing health care landscape, increasing numbers of physicians are opting to join with large hospital systems in order to avoid being overwhelmed by the costs of maintaining their own practices — a huge piece of which is the cost of professional liability insurance. In Chicago, however, a large group of physicians sought ideas to help them remain independent.

One member thought of Lee Newmark, so he brought the broker in to help brainstorm. Newmark explained to the group that they could get more buying leverage by creating a purchasing group to allow them to buy medical professional liability insurance together, saving them a significant amount of money as well as securing better terms and conditions. As a group, Newmark could also offer them dedicated risk management services.

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Nearly all of the physicians agreed to explore the purchasing group option, and Newmark was able to reduce their collective premium dramatically. Not only have most of the group members been able to remain independent, they’re now looking to purchase other lines of insurance through the purchasing group. Newmark and his team also conduct numerous risk management seminars for the members to help them understand how to minimize their exposures.

“If anyone can give the insurance industry a different perspective, it’s Lee Newmark,” said a member of the purchasing group, echoing the sentiments of several of Newmark’s clients.

“He’s an outstanding professional, extraordinarily smart. He’s just our guy. I think he’s a rising star in our area. I would highly recommend him to anyone — including family.”

Taking the Pain Away

Judith Pearson, CPCU Senior Vice President Marsh, Irvine, Calif.

Judith Pearson, CPCU
Senior Vice President
Marsh, Irvine, Calif.

Judith Pearson’s dental client had a risk management challenge that was worthy of large doses of Novocaine.

The client was going through a workers’ compensation renewal as a corporation and had to get one policy for the parent company and 350 separate policies for the individual dental offices.

“It was a nightmare,” the client recalled.

“We had about a month to get it done. We got it completed at a great rate. That was a huge thing off my plate,” the client said.

“She’s my go-to person,” the client added. “Even if she’s not administering a line of coverage I have a question on, I can go to her with it and she’ll answer me.”

For a skilled nursing company, Pearson’s ability to save the company money on its professional liability program and get it better protection led to the company giving Marsh the rest of its business. Pearson provided the client with a host of primary and excess carriers to meet with the client and hear their story firsthand.

“Judy will do anything for us,” a client said. “Judy really understands our business and what we need.”

Pearson had a six-year relationship with a diagnostic imaging company that was being acquired. The acquiring company selected Pearson and her Marsh colleagues to put together a professional liability company with significantly higher limits coupled with lower premiums. After lengthy negotiations with carriers, Pearson delivered exactly what the customer wanted.

BlackBarFinalists:

Martha Jacobs Senior Vice President Aon

Martha Jacobs
Senior Vice President
Aon

Christopher Goodrich Senior Broker Aon

Christopher Goodrich
Senior Broker
Aon

Damon Bendesky Senior Vice President Aon

Damon Bendesky
Senior Vice President
Aon

Joanne Kowalczyk Senior Account Exec Aon

Joanne Kowalczyk
Senior Account Exec
Aon

Kevin Downs Managing Director Marsh

Kevin Downs
Managing Director
Marsh

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

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Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

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We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

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Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

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Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

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More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]