The 2019 Employee Benefits Power Brokers

Timothy Ayala, First Vice President, Alliant Insurance Services

Timothy Ayala
First Vice President
Alliant Insurance Services, Newport Beach, Calif.

Three tribal governments represented by Timothy Ayala of Alliant Insurance Services faced soaring premiums, so he proposed shifting from fully insured to self-funded health care programs to supplement the nominal health insurance the federal government is required to provide.

This proposal promised big risks, big rewards and big hurdles, said Dan Taylor, director of finance, Pechanga Tribal Government. Native Americans are not the easiest groups to insure, he said, because as a group, they face a number of chronic health risks, and unlike conventional employee groups, members never retire and often live well into their 90s.

“Most brokers couldn’t bring in a single carrier, let alone alternatives,” Taylor said, but Ayala’s “knowledge and experience and connections brought competitive bids in many types of plans,” including solutions available only to tribes that a less-immersed broker wouldn’t know about.

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In 2018, Ayala helped advance high-dollar CHEF (Catastrophic Health Emergency Fund) cases that the federal government tried to deny in the hopes another insurer would pay, said Randy Bachman, tribal finance, Redding Rancheria.

“That takes knowing how the system works and willingness to do battle and stick up for [the] rights of clients,” he said. “Bringing the tribal council to a consensus was challenging,” said a human resources director.

John Baines, Partner, Aon

John Baines, FIA, FFA
Partner
Aon, Birmingham, UK

When PA Consulting considered a buyout on its billion-pound UK pension scheme in late 2017, a consultant told the company it was £150 million and a decade away from securing an insurance deal. “The numbers looked bleak,” said Dan Baker, pensions manager.

John Baines disagreed. “He looked at the insurance industry’s pipeline and saw a lot of appetite for our deal,” Baker said. Baines ran a few exercises to persuade the skeptics, including Baker, and concluded that £850 million was realistic and achievable in the short term.

The scheme’s 2,000 members now enjoy more secure pension benefits, and the company saves more than £100 million in premiums. “He looked at the problem a different and creative way,” said Baker.

In 2015, the Kingfisher PLC Pension Scheme was pleased with Baines’s team’s handling of a medical underwriting buy-in — a risk transfer insurance mechanism — and when market conditions were again competitive for another buy-in, the trustees reengaged him for a £230 transfer, completed in January 2018.

“Baines and his team delivered again,” said Dermot Courtier, head of group pensions.He said Baines read the market timing accurately, negotiated pricing and completed the transaction in a remarkable four to five weeks. But what distinguished him were his extraordinary communications skills.

“Insurance isn’t the trustees’ day job,” Courtier said.

Paul Fetterolf, Senior Consultant, Mid-Atlantic Region, Gallagher

Paul Fetterolf, RHU
Senior Consultant, Mid-Atlantic Region
Gallagher, Mount Laurel, N.J.

It would be an understatement to say that a large manufacturing company was “dissatisfied” with the way its medical claims vendor processed claims on an ASO basis. The company noticed massive fees charged back to the plan for out-of-network claims the vendor paid incorrectly the first time.

Seeking greater integrity, accountability and transparency, Paul Fetterolf “tactfully but persistently moved us out of our comfort zone” by scrapping the company’s preference for large network providers and shifting to an independent TPA, said the company’s benefits leader.

The shift generated immediate savings, said the leader, such as $100 thousand-plus savings on out-of-network back surgeries.

One of Fetterolf’s N.Y. clients was withdrawing from a Professional Employer Organization.

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That in itself is challenging, but coming out of a PEO, then setting up a new benefits structure and building new vendor relationships was “a huge undertaking,” involving complex interactions and conversations, said a company executive.

“Paul did it with tact, diplomacy and thoughtfulness. He’s a rare bird.”

When Fetterolf proposed a new voluntary retiree medical plan with structured copays for a large, self-insured, mostly unionized nonprofit, the benefits manager was interested in the front-end savings, the 40 percent reduction in premiums for those who chose it and the $6 to $8 million reduction in future liabilities for the plan.

Wes Grigston, Area Vice President, Gallagher

Wes Grigston
Area Vice President
Gallagher, Charlotte, N.C.

Wake Forest, North Carolina wanted to save taxpayer dollars on its health care spend by self-insuring, but it didn’t have a reserve fund set aside.

“Wes offered a solution,” said HR director Virginia Jones. Gallagher had set up public entity health care risk pools in Illinois, and Wes Grigson’s team researched and presented information to government entities across North Carolina to pattern a similar risk pool.

“Our commissioners were enthusiastic, but other municipalities were more risk averse,” said Jones. “Wes sent some Illinois folks to our meetings to explain their programs and help us set up.”

The pool started up July 1, 2018, and it has delivered savings so far, Jones said.

Orange County wanted to protect against future health care cost increases of 15 to 20 percent, so Grigston explored joining the same North Carolina health insurance pool, said Brenda Bartholomew, human resources director.

Grigston wrangled multiple issues, said Bartholomew: “Legal and contractual, bringing in Blue Cross as administrator, the third party stop loss, the system compatibility and enrollment issues, voluntary benefits — it was heroic.”

The City of Rock Hill is also self-insured, and it had two goals: Achieving the healthiest workforce possible and saving taxpayer dollars, said Lori Thomas, performance manager. Grigston, she said, immersed himself with the city and vendors to transform its onsite clinic.

Ethan Hendrickx, Area Vice President, Gallagher

Ethan Hendrickx
Area Vice President
Gallagher, Cleveland

When the three-year guaranteed-cost health insurance pilot program for Koinonia Homes’ low-income employees ended in 2018, the nonprofit faced 100 percent premium increases, said Diane Beastrom, CEO.

To mitigate the increase while preserving the company’s goal of high-quality, low-cost insurance, Ethan Hendrickx worked hard with the carrier on four plan options, from “very affordable to richer,” that locked in rates for three years.

“Ethan personally walked this through. If he hadn’t been in the meetings, if he hadn’t brought his resources and relationships, we would have had a different result,” Beastrom said.

The Rock & Roll Hall of Fame & Museum takes a populist approach to its benefits consistent with the music it memorializes.

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Rather than eliminate its most expensive health care option, which would have made financial sense for the organization but run contrary to its culture, it hybridized its richest plan, cutting costs by eliminating a few less-used providers from the plan’s network.

“Some brokers don’t get so involved in the organization,” said Liz Peschges, VP, culture and strategy.

“They’re about spreadsheets and numbers.” Not Hendrickx.

“There’s a human here, and we trust him.”

Jamil Jaffer, Principal, Mercer

Jamil Jaffer
Principal
Mercer, Los Angeles

Northrop Grumman added 14,000 employees through an out-of-state acquisition in 2018. Its carrier’s limited geographical reach left out 3,000 of the new employees, frustrating attempts to offer uniform benefits without disruption.

Jamil Jaffer proposed one solution after another, said Leslie Melton, director of health and welfare plans. Working with the carrier, he finally created something original: a “narrow network plan” that expanded the current network to include a health care system accessible to the 3,000 employees.

“He did that during renewals and the integration of carriers. He’s a master juggler while we keep throwing balls into the mix.”

SouthWest Water Company’s insurance was complicated when Mercer won the account last year, said Mark Rodriguez, vice president, human resources. The company operated in multiple states with multiple carriers. It combined commercial and self-insurance. Its plans had multiple tiers of coverage combining employees and dependents.

Jaffer’s challenge: Bring the entire complicated plan into a single, fully-insured plan with four tiers for employee, spouse, children and family. He did it, Rodriguez said. For good measure, Jaffer also brought in the HSA the previous broker resisted.

Rodriguez expected 5 to 6 percent 2019 enrollment in that plan. Thanks to Jaffer’s communication plan, he got 13 percent. “That’s less cost for the company,” he said. “And the compensation committee is happy with me.”

Pepper Krach, Area Vice President, Marketing & Communications, Mid-Atlantic Region, Gallagher

Pepper Krach
Area Vice President, Marketing & Communications
Mid-Atlantic Region
Gallagher, Radnor, Pa.

Employee benefits are complex. Thankfully we have people like Pepper Krach to explain them in easy, simple and innovative ways.

Her communication skills were on full display with Genex Services — which surveyed 3,000 employees, finding that many lacked an appreciation for the consumerism behind high deductible health plans and health savings accounts.

So Krach developed a new way of explaining those concepts — a three-part video series featuring interviews with the company’s CEO, HR manager and senior vice president of HR.

Adding that human touch was far more impactful than sending a PDF or handing out a flyer. In the end, employees felt better educated about their benefit options.

“Her focus is communications and that’s an integral part of where we are with benefits today. There’s no such thing as putting out a booklet and expecting employees to read it,” said Debbi Bromley, senior vice president, human resources at Genex Services.

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When a hospital system on the East Coast rapidly made five acquisitions of hospitals and health care facilities, Krach needed a way to help unify the HR employee benefits leaders from each hospital.

So she created a board game called The Destination Employer Game based on managing risk, improving employee well-being, attracting and engaging top talent and controlling health care costs. The primary goal of the game is to establish a combined vision and a spirit of community and collaboration.

Matt Maloney, Partner, Connecticut Practice Leader, Aon

Matt Maloney, FSA, CERA, EA
Partner, Connecticut Practice Leader
Aon, Norwalk, Conn.

Matt Maloney is a problem solver. When a large chemical company faced massive premiums resulting from having multiple pension programs — the result of a complex ownership structure that evolved over the years — he sprung into action.

Many participants had benefits under several plans, and the company was forced to pay premiums two, three, or even four times for the same employee.

In 2017, that amounted to approximately $150,000 of duplicate premiums. Over the decade, that amounted to around $3 million in excess premiums.

Maloney designed a strategy to move benefits for hundreds of former employees among the various pension plans and eliminate duplicate premiums. The result was a costs savings of $400,000 in 2018 and millions more over the coming decade.

The president and CEO of the company called Maloney the “ultimate professional,” “extremely knowledgeable” and someone with “the ability to speak about complicated subjects in layperson terms.”

Maloney was also integral in the Dow/Dupont merger. It brought together two of the world’s largest multinational companies and resulted in three different businesses: one for agriculture, one for materials science and another for specialty products.

“The merger of equals with Dow and preparation for the subsequent split into three companies have been a very complex process, yet Matt has continued to provide helpful and straightforward consultation on employee retirement programs,” said Patty Yang, chief actuary at Dupont.

Laurie Miller, President, 2HB Human Resources & Benefits Solutions

Laurie Miller
President
2HB Human Resources & Benefits Solutions, Rockford, Ill.

When Kaney Aerospace acquired a company twice its size, the benefits challenges were substantial. The organization needed to find a less expensive benefits program that didn’t sacrifice benefit levels or providers; bring a paper enrollment process online; and communicate the program to and assimilate newly acquired employees.

It was quite a task, but Laurie Miller was more than capable.

Miller got Kaney a free online enrollment system, assisted HR with assimilation and negotiated an employee benefits package that retained all benefit levels plus added additional coverages. Kaney Aerospace saved more than $200,000 on its medical plan and got a two-year rate guarantee on the benefits and network.

“The customer service is phenomenal,” said Dawn Johnson, HR manager at Kaney. “She has a great team in place that is there to answer all our questions. She is not afraid to work on our behalf with our vendors.”

When Miller began working with Arachnid 360, a manufacturer of electronic dart games, she noticed quickly that the company did not have stop/loss coverage in place.

“The policy triggers if an employee has $25,000 in expenses. It doesn’t take a whole lot to go over that threshold with major surgeries or something else major that occurs within the year,” said Deb Baggs, controller at Arachnid.

“It made us sleep a lot better once we knew the coverage was in place,” she said.

Megan Nichols, Associate Partner, Aon

Megan Nichols, FSA, EA
Associate Partner
Aon, Independence, Ohio

Megan Nichols has a knack for saving clients money. Take Giant Eagle for example.

The supermarket chain in Western Pennsylvania froze its $200 million defined benefit plan at the end of 2016 — but still faced high annual administration costs and premiums to insure the plan.

Nichols realized that a lot of those fees stemmed from participants with relatively small benefit values — so she separated those with $5,000 or less and offered them a lump sum payment or enrollment into a 401(k).

That move alone saved the company $4 million. Soon the plan went from 75 percent funded to nearly 100 percent funded and achieved a reduction in estimated future cash contributions by $6 million to $8 million over the next 10 years.

“She’s always very responsive and knowledgeable with a high level of professionalism,” said Janice Talerico, vice president, Total Rewards and Chief Diversity Officer at Giant Eagle. “If I wanted someone on my team, I’d pick Megan.”

For another client, she led the effort to terminate their $1 billion pension plan, meaning that 16,000 active and terminated participants were offered a lump sum payout in 2018 — giving the company access to roughly $275 million of surplus assets.

Nichols helped ease the process with her impressive communication skills and knowledge of the business.

“She’s really relatable to folks, whether it’s a financial person, benefits person or a layman,” said the company’s director of retirement and savings plans.

Mark Patrick, First Vice President, Alliant Insurance Services

Mark Patrick
First Vice President
Alliant Insurance Services, Spokane, Wash.

It’s no secret that saving money is crucial in the education sector. The Washington Education Association (WEA) certainly got cost-savings help through a creative offering led by Mark Patrick. He helped launch the Premera Education Pool in 2017-18 to great success, with 25,000 enrolled employees in its first year.

The new alternative saved the member school districts approximately $20 million in combined premiums while enhancing benefits for all pool participants. It’s now on its way to becoming the largest individually purchased educational pool in the state.

For another client, the Kalispel Tribal Economic Authority, Patrick has kept health care costs in check for its growing employee base that now numbers more than 2,000. In fact, benefits manager Deana Studnicka said they’ve only seen a 2.8 percent increase over the last 11 years.

“Mark is constantly saving us money,” said Studnicka. “He knows everybody in this town.”

Another client, Kim Maupin of Mortenson Dental Partners, said that once she started working with Patrick years ago, she never stopped — even when she changed jobs or he changed brokerages.

“Every time I’ve gotten a new position, I’ve hired him,” said Maupin. “If I changed positions again, I’d find a way to work with him. He’s upfront, honest and never steers me in a direction just because it’s better for him. He wants what’s best for our business, no matter what.”

Michael Rankin, Area Vice President, Gallagher

Michael Rankin
Area Vice President
Gallagher, Newport Beach, Calif.

Fighting rising health care costs is no easy task. That’s especially true in Southern California, a predominately HMO market which is less able to capitalize on the consumer-driven plan designs being popularized in much of the rest of the country.

LPA Inc., an integrated design firm, found itself caught in the middle. “I am a financial guy, and I could see the future becoming unsustainable,” said Charles Pruitt, CFO of LPA.

Michael Rankin had a plan: increase deductibles on the HMO programs and offset costs to consumers with a Health Reimbursement Arrangement. That consumerism put the employees in the driver’s seat of their own health care costs.

“He brings new ideas to the table. He’s not shy about pushing back, explaining what’s happening in the rest of the industry and benchmarking us against competitors,” said Pruitt. “We appreciate that pushback.”

For a fast-growing construction management company fighting for talent in a tight labor market, Rankin helped secure a competitive benefits package.

With Rankin leading the way, the organization maintained single-digit price increases over the past two years.

The company now boasts one of the richest benefit programs in the construction management segment.

“Year after year we take little steps forward,” said the organization’s CEO. “After a while, you’re a mile ahead of the competition.”

Jeff Ries, Area Vice President, Gallagher

Jeff Ries
Area Vice President
Gallagher, Charlotte, N.C.

When two health systems in the southeast merged, Gallagher’s Jeff Ries helped them integrate both sets of 15,000 employees on to one platform. His expert negotiating skills with vendors led to $10 million in savings.

“Jeff delivers on his promises. If he tells you he’s going to do something, he follows through,” said the organization’s manager of employee benefits. “When we get frustrated or anxious he is quick to provide support and reassurance. I cannot imagine ever working with another broker.”

Andrew Halsey, chief human resources officer at HAECO, an independent aircraft engineering and maintenance group, said Ries is constantly delivering innovative ideas to HAECO. He’s also been integral in helping the company comply with strict government regulations for companies that deal with the military. “He’s the best broker I ever worked with,” said Halsey.

Yet another client, in charge of benefits at a large university, said Ries “saved us millions” over the years. She said Ries has the unique ability to talk in great analytical detail with benefits experts and also explain things simply to laymen. If that weren’t enough, Ries is one of the most hard-working professionals she’s come across in her career.

“We send late-night emails. He does a great job of making sure that the questions we have are answered and our deliverables and deadlines are met,” the client said.

“I don’t know when he sleeps,” she added.

Joshua Rubich, Area Senior Vice President, Gallagher

Joshua Rubich
Area Senior Vice President
Gallagher, Orlando, Fla.

Consumerism may be popular in health care these days, but getting employees to agree to high deductible plans is no easy task.

The benefits team at a multi-state construction staffing firm with 1,600 employees has first-hand experience with that challenge.

In fact, the organization saw a mere 5 percent of its employees enrolled in its high deductible health plan — plus it faced a $1 million budget increase.

Gallagher’s Joshua Rubich employed a complex but effective plan: lower the deductible to the high-deductible health plan (HDHP), find a new pharmacy benefits management (PBM) vendor, and use engaging videos and other support tools to help people make better benefits decisions.

The results were incredible: Employee participation in the HDHP jumped to 40 percent, the organization saved approximately $1 million, and the new PBM vendor is on track to deliver approximately $400,000 in savings vs. projected claims.

“Josh is truly consultative. I’m confident he’s looking out for the best interests of our company and employees,” said the company’s chief human resource officer.

“He’s knowledgeable, smart and always there when you need him.”

Rubich’s considerable skills were also on full display in his work for Blackstone, a multinational private equity company with a wide-ranging portfolio of companies.

Matt Sears, Executive Vice President, EPIC Brokers and Consultants

Matt Sears, CEBS, CMS, WELCOA Faculty
Executive Vice President
EPIC, San Mateo, Calif.

For a home builder that acquired another, Matt Sears helped integrate hundreds of new employees to the benefits program.

He analyzed plan comparisons, costs and employee satisfaction, then created a targeted communication strategy, including web portal, mobile app, paper collateral, webinars, in-person seminars and telephone assistance.

The result? New employees seamlessly integrated into the new plan. Perhaps more importantly, those new employees got their first taste of the home builder’s strong, welcoming company culture.

“Whenever we have an employee or dependent in need of guidance or support, Sears and his team immediately drop what they’re doing and spring into action,” said the firm’s VP of human resources.

“I’ve always been so impressed and relieved that we have Sears and his team during crisis moments. Nobody is a number. Every single person is a real person.”

Sears was also instrumental for the Supercuts Franchisee Association, a collection of people who franchise the popular salon chain. In fact, Sears helped create a health plan that could work for all franchisee owners — both big and small.

Cheryl Robinson, co-owner of 48 Supercuts locations in the Southwest, said that Sears offers a personal touch in his work.

“At renewal, he shows us dollars and cents. But it’s not just about how much things cost.

Matt always asks: ‘How does this impact the hair stylist with two kids and bills to pay? What is the difference for her?’ ”

Melanie Stangl, Principal, Mercer

Melanie Stangl
Principal
Mercer, Irvine, Calif.

Advantage Solutions, a 50,000-employee retail sales and marketing company, recently acquired a similarly sized business. Integrating everyone on the same benefits plan was no easy task. Doing it in just four months made the task that much harder.

But Mercer’s Melanie Stangl was more than ready. She helped Advantage develop accurate financial projections, identify potential risks, work with carriers to prepare for a mid-year open enrollment, terminate the acquired company plans, advise on potential compliance issues and provide day-to-day support.

Most importantly, she negotiated the removal of termination fees and leveraged savings from the additional plan participants. The result? Savings of more than $2.5 million in 2018, a flat combined renewal for 2019 and a successfully integrated plan.

“We only had four people on the benefits team, no outside call center, and we received around 3,000 phone calls and 3,000 emails per month,” said the company’s former head of human resources.

“Melanie is like another team member. She genuinely understands the business. There aren’t words to describe the support we got from her. Now we can answer all those phone calls and emails, our claim renewals are flat and we’re being proactive vs. reactive with regard to communications.”

For the County of Orange, Stangl negotiated a low single-digit rate cap while also securing nearly $1 million in savings for 2019.

Tamra Walton, Area President, Philly Metro Branch, Gallagher

Tamra Walton
Area President, Philly Metro Branch
Gallagher, Radnor, Pa.

At a major art gallery on the East Coast, a high-level employee took their own life. Needless to say, the staff and leadership were shocked.

Tamra Walton sprung into action immediately, sending in a counselor to do group and individual sessions with employees — even though that fell outside the realm of the Employee Assistance Plan. She knew that the staff needed time to grieve, so she and her team stepped in to take over HR and benefit tasks.

“She just took care of it,” said the gallery’s chief human resource officer. “She knew that this person and I were really close. Tamra said to me: ‘Don’t think you’re going to file the death claim or handle other matters related to the death. Don’t worry about a thing.’

It’s indicative of how Walton deals with her clients — she’s not only proactive but incredibly caring as well.

“She’s a partner, not just a broker,” the CHRO continued. “She’s really there for you, understands your needs and provides solutions that are always innovative.”

That innovative thinking helped immensely for another client, a social services agency serving at-risk mothers and babies in Greater Philadelphia.

Finances were tight and the organization appeared to be facing a tough decision: pay for a double-digit health plan renewal or give employees much-needed pay raises. With Walton, they got both.

Lisa Wurster, Principal, Mercer

Lisa Wurster, CEBS, SPHR
Principal
Mercer, Indianapolis

Lisa Wurster can come up with a strategic solution for any complicated situation. Her work for a national sports marketing company is a great example.

Tasked with harmonizing benefit plan designs and establishing a common administration platform for the company’s six different business units, Wurster came through in fine style.

The task was incredibly complex: each business unit had different plan offerings, plan designs, employer cost-share structure and renewal dates.

Wurster’s solution brought all the business units onto the same program, improved the enrollment process and increased the value of the benefit plan designs — and she did it all while saving the client 9 percent.

Another client is a nonprofit health system in the Midwest, which really needed to be conscious of spending when shopping for its health plan.

“She saved us hundreds of thousands. For someone running on a shoestring budget like us, it’s super helpful,” said the health system’s vice president of compensation and benefits. “She’s also really fun. She’s someone we all really like working with.”

Yet another health system uses its benefit structure as a differentiator to attract and retain the best employees. “We’re in a war for talent,” the director of compensation and benefits said plainly.

Wurster gave them the plan option they asked for and an analysis of market options.

The complete list of 2019 Power Broker® winners can be found here.

 Finalists: 

Lenny Brucato
Area Vice President
Gallagher, Bingham Farms, Mich.

Mel Diaz
Area Executive Vice President
Gallagher, Rolling Meadows, Ill.

Shannon Gilbert
Area Vice President
Gallagher, Tampa, Fla.

 

 

 

 

 

 

 

 

Marcus Jackson
Executive Vice President
Alliant Insurance Services Inc., Spokane, Wash.

Lawrence Kirshner
Co-President
Frenkel Benefits / EPIC
San Mateo, Calif.

Sean Leary
Senior Vice President
Alliant Insurance Services, Inc., Sammamish, Wash.

Kim Lobato
Area Vice President
Gallagher, Omaha, Ne.

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 and 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]