2017 Power Broker

Education

Meeting Needs Far Beyond Insurance

Alex Burton
Area Vice President
Arthur J. Gallagher

Several of Alex Burton’s higher ed clients needed more flexibility than what they were getting within their risk retention group.

But transitioning out of a risk retention group can be a complex and exhausting process. The groups house such a diversity of risks, ranging from football programs to art collections, to protection for boards of trustees.

Fortunately, Burton was there to lead the way, building each university a new program to cover its unique coverage, pricing needs and risk appetite.

“Risk is not something that a college wants, ever,” said Brooks Seay, CFO and vice president of finance and operations at Young Harris College in Young Harris, Ga.

Clients also value how Burton enhances their risk management efforts, bringing to the table the right resources and capabilities to manage their exposures.

One college experienced a domestic issue that led to the presence of an armed individual on campus. Thankfully, the situation was neutralized without injury to staff or students, but it was a wake-up call, said Dawn Nash, vice president for administration and CFO at Wesleyan College in Macon, Ga. She was grateful that Burton sped into action immediately and “totally stepped up,” she said.

By the end of that same day, she said, Burton put in place a suite of services and programs that bolstered the college’s level of preparedness and enabled the risk management department to be proactive.

A Champion for Student Health Care

Teresa Koster
Division Chairman
Arthur J. Gallagher

Massachusetts’ adaptation of ACA Medicaid expansion in 2014 profoundly impacted the student health insurance plan (SHIP) marketplace. A wave of students became eligible for state coverage, and SHIP enrollment plunged at public colleges.

Institutions struggled to keep their SHIP programs viable with smaller, more volatile pools of students. Arthur J. Gallagher’s Teresa Koster saw the impact this trend was having on her clients, and saw an opportunity to help not just her own clients, but all public colleges in her state.

Koster reached out to the state’s Medicaid department and health care exchange, proposing a plan that would encourage students to enroll in their school’s SHIP by allowing the use of Medicaid funds to pay premiums. The initiative, which required the approval of regulatory changes, came to fruition in Fall 2016. The SHIP Premium Assistance initiative was launched at all 30 Massachusetts public institutions of higher education.

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“It’s an idea that existed but Teresa is the one that brought it to Massachusetts and championed it,” said Ashley Hague, executive director of MIT Medical. “And everybody’s better off for it. … It’s a win-win-win solution.”

“It’s an example that other schools around the country can turn to,” said an executive at a prominent Midwestern university. “She’s helping shape the student insurance industry.”

Since the launch, the per-campus increase in school-based enrollment ranges from 24 percent to 30 percent.

Supporting Educators in Lean Times

Laurie Miller
President
Miller Services

The Illinois budget crisis hit rural school districts hard. Health care costs were on an upward trajectory, while property values were on the decline, shrinking school tax assessments.

So when a key health carrier lowered the threshold for self-funding groups, Laurie Miller pounced on the opportunity to organize a rural school-based purchasing pool. The Illinois Scholastic Cooperative launched Sept. 1, 2016, with seven districts and 1,000 lives.

“It was a huge cultural shift,” said Scott Bloomquist, superintendent of Winnebago Community Unit School District 323 in Winnebago, Ill. He said it was no small feat getting all the districts on the same page, but that if anyone could have made it happen, it was Miller.

“Everybody trusts her,” he said. “When she makes a recommendation, we almost immediately get buy-in. … She knows her stuff.”

The entire group realized an immediate 5 percent savings overall, and one district avoided an 18 percent stand-alone renewal hit. ISC is now getting the attention of other cash-strapped districts that typically operate with just a superintendent and a bookkeeper handling the programs. All of Miller’s school district clients say they rely heavily on her expertise and her deep commitment to helping rural schools succeed.

“I don’t think there’s ever been a year where she hasn’t done something innovative for us,” said Tom Mahoney, superintendent of Oregon Community School District 220 in Oregon, Ill.

Next-Level Solutions

Scott Wightman, ARM-E
Area Executive Vice President
Arthur J. Gallagher

Ithaca College implemented a strong ERM program in 2009. But by 2016, the organization felt that its program was in a rut.

“It got to a point that we were really at a loss for how to continue managing our data and make our program more robust,” said Kristine Slaght, the college’s risk manager. “We were stalling and no longer had the right tools for where we’d grown to.”

So the ERM committee was intrigued when Scott Wightman approached them about becoming a beta tester for an ERM software solution he was developing.

Wightman, an active proponent of the importance of ERM and compliance in college and university governance, had long since seen the need for ERM and compliance management to move beyond spreadsheets. He sought out a viable software solution and discovered Risk Wizard, an Australian firm with a promising solution for corporations.

Wightman partnered with Ithaca College to help adapt and customize the program for higher education. Using the software, Wightman created about 10 or 12 different templates for the committee to use, said Slaght, including one that would produce a heat map — something that the committee longed for.

“He did miracle work with it actually,” said Slaght. “He’s really moved us in a positive governance direction.”

Slaght said she’s pleased with everything the college has been able to accomplish over the past year. “We’ve really taken it to the next level,” she said.

Taking on the Toughest Challenges

Elizabeth Marshall, ARM,
Assistant Vice President
Marsh

One of Elizabeth Marshall’s university clients experienced a troubling — and very public — array of legal woes. As expected, renewal time brought yet more pain, with incumbent markets proposing alarming premium increases and retention levels.

Marshall, an education placement specialist with Marsh, was concerned that the situation could get even thornier, with the potential for hybrid claims creating turmoil between the general liability and educators legal liability carriers. She designed an alternative GL and excess liability proposal. The outcome? Significant cost savings, a lower attachment point for hybrid claims, and a crisis management program independent of a liability occurrence or wrongful act.

“She was a pillar,” said a top risk officer for the university. Marshall was able to secure significant savings on the university’s excess casualty program, allowing it to purchase higher educator’s legal limits without impacting the overall insurance budget for the year.

Another university client needed to roll coverage for an acquired facility into its primary program despite it being a wholly different operation and class of business. It also needed to keep its automotive policy outside the primary program, even though only a limited number of insurers were willing to write automobile liability risk on a stand-alone basis. A tall order all around, but she got the organization exactly what it needed and then some.

“She found solutions and resources that I could not have found,” said the university’s risk manager, a veteran of the brokerage side as well.

Undaunted by the Impossible

Courtney Hensley, CRM, CISR
Account Executive
Aon

Almost immediately upon becoming the broker for a large university, Aon’s Courtney Hensley was presented with an unusual challenge: To secure a large federal contract, a division of the university needed coverage for providing prescribed burn services. But “intentional fire” was expressly excluded by the markets.

“These things, when they go bad, can go really, really bad,” said the university’s top risk management professional. Damages can run into the millions. Securing coverage was practically impossible, she said. “It was really nail-biting.”

But Hensley isn’t the type to be bested by a difficult exposure. “We can do better than this,” she told her client. An initial attempt to knit together several partial solutions came to naught because of exorbitant pricing and high retentions. As the clock ticked on the federal contract, Hensley kept working the problem and identified a viable Plan B.

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Her team was able to manuscript a program using a wholesaler to place general liability, professional liability and contractors’ pollution liability together, specific to the university’s operations, incurring only minimal deductibles and a cost-effective premium. The burn exposure was contained within a separate tower that would protect the university’s other exposures in the event of an unexpected loss related to activities under the federal contract.

“She created a whole separate insurance tower for that department,” said the risk professional. “I was so amazed.”

Finalists:

Kate Kenny
Vice President
Marsh
Chicago

Tyler LaMantia
Area Senior Vice President
Arthur J. Gallagher
Chicago

Robert DeVilbiss
Vice President
Aon,
Grand Rapids, Mich.

Shelley Levine
Area Executive Vice President
Arthur J. Gallagher
New York

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]