Why More Employees Are Going the 1099 Route and Other Insights from a Veteran Risk Manager

An industry veteran discusses talent, infrastructure, and climate risks — and what insurers should do about them.
By: | April 15, 2019 • 6 min read

Risk Insider Les Williams, partner and chief revenue officer of Risk Cooperative, recently shared his insights on some of the top challenges facing the insurance industry today, from talent recruitment and retention to resiliency against emerging threats posed by climate change, weakening infrastructure and IoT vulnerabilities.


R&I: You’ve written about the risks facing employers regarding talent recruitment and retention. Given the burgeoning “gig economy” and increasing reliance on automation, what does the workforce of the future look like?

Les Williams: A lot of our clients have trouble holding on to technology workers, especially millennials, because in the gig economy people have more options. They want to be able to work virtually as needed. We are seeing more transient folks who will switch jobs more frequently because there’s so much opportunity out there.

More employees are going the 1099 route, especially tech workers. They don’t want to be a W-2 employee; they want to be more in control of their own time, so they’re forming their own LLCs and working as freelancers full time.

That can be a gift for employers. You don’t have to pay for their health insurance, for one thing, and you can more easily fill positions that have high turnover. But you may also have to increase policy limits for some things. Crime, for example. You’re sharing more information and access with outside workers, and you run a higher risk because you don’t really know these folks and can’t vet them as well as you might an internal employee.

R&I: So what are some strategies for employers who want to hold on to their talent?

LW: One of the interesting things we’ve seen in our research at Risk Cooperative is how much health is becoming a fashion statement for younger workers. Having a new, reusable water bottle is as much a fashion accessory as having the latest iPhone. Health is the new wealth.

Health is the new wealth.

As a result, more companies are putting employee wellness programs in place. So workers can accrue points for things like taking yoga classes or drinking a certain amount of water every day and redeem their points for rewards like gift cards. There’s an element of gamification to it.

There’s one company called SoHookd that bills itself as a “wellness-based loyalty platform.” They built an online marketplace where users can redeem points for things like fitness classes, organic groceries, massages. Younger workers would rather receive these experiential rewards in the form of a health-conscious object rather than a monetary reward.

R&I: What about insurance and risk management specifically? What would you tell a college graduate about the industry to get them interested?

LW: When I’m on a plane and I don’t want to talk anybody, I tell them I’m an insurance broker. But when I want to have a deep conversation, I tell them I’m a risk manager.

Risk management is about putting processes in place to solve a problem. Risk management is complex; is not surface level. There’s a lot of technology involved and a lot of engineering involved. That’s usually the piece that gets younger people interested.

When people hear I work in insurance, they think I’m going to talk to them about bundling their home and auto, but when I describe what really goes into risk management, they see how varied and interesting it can be, and how futuristic it can be.

Technology is becoming the backbone of risk management.

R&I: You have a varied background yourself, with a degree in mechanical engineering, an MBA, and a host of roles in business development. What attracted you to risk management?

LW: Engineers, like risk managers, are problem solvers. I’ve always loved solving problems. At Ford Motor Co., my first job, one of my first responsibilities was trying to figure out why a vehicle was stalling. There’s a thousand of reasons why a vehicle could stall.

Risk management is putting processes in place so things don’t go wrong.

We found the answer was heavy key chains. The ignition switch was supporting all of the weight, so when the car drove over a bump, the heavy key chain would pull down the ignition and turn to the off position. So we had to find a way to remove the pressure and make ignition switches more robust so stalling wouldn’t happen. That’s risk management.

At IBM, I managed a team of 12 salespeople, and we were getting complaints from customers who were receiving multiple calls from different team members. We didn’t appear too organized. So I had to reorganize my 12-person team so they would do a better job of communicating with one another to prevent clients from getting upset and leaving. That’s risk management.

When I worked in commercial real estate at JLL, I had clients who needed help finding office space, and they always underestimate their future growth. So I would suggest looking at another building that wasn’t as well-leased so two years down the line we don’t have go through this process again.

Risk management is putting processes in place so things don’t go wrong. All the different jobs I’ve had were doing that, just in different ways.

R&I: What do you see as the most concerning emerging commercial risks?

LW: There are three that are connected: aging infrastructure, climate change and cyber risk in the Internet of Things.

Back in 2017, the American Society of Civil engineers gave America’s inland waters a D score. Much of the waterway infrastructure hasn’t been updated since the 1950s. We saw the impact of that recently in Nebraska, Iowa and Missouri, where rising flood waters left large areas completely submerged. Repairs take time; days or sometimes weeks. Delays at some of the locks in some of the rivers have doubled. That has impacts for the supply chain.

Climate change is intertwined in that. Currently, we’re 1 degree Celsius warmer than in pre-industrial times. Drier seasons are exacerbated. Rainy seasons are exacerbated. Weather is more severe and our infrastructure just can’t take it.

Weather is more severe and our infrastructure just can’t take it.

As far as cyber and the IoT — by 2020 there will be about 20.4 billion interconnected devices globally. As much as 37 percent of those will be used outside of consumer settings. Connected equipment will play a role in our infrastructure — monitoring dam openings, the electrical power supply, etc. What’s scary about that is that bad actors can hack into those systems and cause havoc.


We already have evidence that our electrical grid has been hacked.

Globally, cyber job demand is going to outpace supply by about 1.8 million jobs by 2022. So at the same time a lot of our critical infrastructure is exposed, we won’t have the workers to help protect it. All of these were detailed in the World Economic Forum’s recent global risks report.

R&I: What can the industry do to mitigate these risks?

LW: Insurers have a lot of influence. They have the power to say, ‘we’re not going to provide insurance for your building if it’s not resilient enough to withstand a flood.’ Or strong winds, or hail, or whatever the hazard may be in that region.

Insurers have to put their foot down and say, ‘if you want to have this entity, these are the risk management protocols that must be in place to get covered.’ I think we will see carriers starting to take a stronger stance.

Insurers can also lobby for more money being spent on sustainability projects.

The EPA invited almost 40 projects in 16 states to apply for loans under the Water Infrastructure Finance and Innovation Act. There’s an available $5 billion in funding to help finance water infrastructure projects. Insurers can encourage private companies to invest in infrastructure projects as well, bringing private sector capital off the sidelines.

Not only is this the right thing to do for society, it will also help to reduce catastrophic claims.

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

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.


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.


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?


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.


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.


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]