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This Insurance Company Created Solutions That Can Handle Health Care’s Constant Change

Disruption of traditional health care delivery models is not slowing down. The industry needs flexible, comprehensive insurance solutions that adapt to changing needs.
By: | October 1, 2018 • 7 min read

Health care delivery today looks different than it did 10 years ago and will look different another 10 years from now.

Kickstarted by the Affordable Care Act, the evolution of health care delivery is premised on a shift from a fee-for-service model to value-based medicine. When reimbursement became tied to quality of outcomes over quantity of services, it forced providers to re-evaluate their business models.

“The shift drove the flurry of mergers and acquisitions among health systems and the alignment of services in health care,” said Cindy Oard, senior vice president, underwriting leader – healthcare for QBE North America. “By forming more integrated groups and systems, they strive to streamline services and increase efficiency.”

That M&A activity continues today, with larger health systems acquiring physician practices, hospitals outsourcing miscellaneous services to a network of provider entities, health plans purchasing health systems and pharmacy benefit managers (PBMs), and employers now getting into the mix as well. All of these mergers seek to bring health services to patients more efficiently while improving quality.

But the creation of new care delivery models and new structures impacts the allocation of risk. Two of the most novel developments — contract alignment for medical services in managing populations and increased payer and pharmacy alignment through ownership — present unique liability risk challenges from a coverage perspective.

Contracting Services Changes Risk Exposure

Accessing a wide range of services can be a tall order for many organizations. The choice is to provide a service within your group or contract the service out for more efficiency, quality and improved cost. Often, it’s more economical on all fronts to contract with a medical facility that specializes and efficiently manages the service versus building the service internally.

“You’re talking about medical facilities such as specialty practices, surgery centers, imaging, labs, pharmacies, hospices, etc.,” Oard said.

“Offering every service internally is expensive, and it becomes increasingly difficult to serve a geographically dispersed population. For some hospitals, it can be more economical to contract for these services than to create them.”

Contracting, however, changes oversight and influence. The health system no longer owns or controls the service.

“The alignment with medical facilities can include creating joint partnerships between the hospital and the vendor with controlling or limited equity. Sometimes the alignment is only on a contracted basis. Some are wholly owned by physicians who provide services in the community, and yet others are organizations that have private equity investor interest,” Oard said.

For all stakeholders, varied ownership structures raise the question: Who is accountable for what, and where are the lines of liability drawn? “The risk exposure changes for everyone involved,” Oard said.

“It’s about building a flexible platform that can adjust to the rapid pace of change in the health care sector.”
— Cindy Oard, Senior Vice President, Underwriting Leader – Healthcare, QBE North America

Employers and PBMs Shake Up Traditional Delivery Models

Cindy Oard, Senior Vice President, Underwriting Leader – Healthcare, QBE North America

Exposures are changing as health plans and PBMs draw closer alignments with providers and get more involved in the direction of care.

“Everyone wants to achieve the same end goal: accessible, high-quality care at lower costs. Given the traditional market’s challenges in meeting that objective, non-traditional players have stepped in to make their own attempt at it,” Oard said.

Those non-traditional players primarily include large employers and pharmacies that historically have limited roles in the direction of care but a large stake in outcomes nonetheless.

By partnering directly with health plans, they’ve made a play to gain more control over the care delivery process.

Take, for example, the independent health care company formed by Amazon, Berkshire Hathaway and JPMorgan Chase to serve their employees.

By building their own health plans, they can more directly influence the direction of care and control expenses.

CVS Health Corp.’s bid to buy Aetna, the U.S.’s third-largest health insurer, also gives greater control and leverage over cost and reimbursement of prescriptions at the consumer level.

In addition, retail pharmacies in big-box stores have led to a proliferation of in-store wellness clinics, enabling consumers to access care completely outside of the traditional model.

“Our concern from a carrier perspective is that as you change the scope of health care, how it’s provided, and who provides it, the business models of these entities change and the risk exposures shift, and that impacts insurance,” Oard said.

A Specialized Practice Meets Health Care’s Specialized Needs

Recognizing the need for more flexible and comprehensive solutions to address ever-changing exposures, QBE set out two years ago to build an integrated specialist health care practice. By integrating, the new practice provides a one-stop shop for medical facilities and health care service providers of all kinds.

After 30 years in the health care insurance business and two previous successful startups, Oard came on board to hunt for an expert staff.

Between July 2016 and February 2017, Oard hired eight underwriters, an in-house health care actuary and two claims professionals, all with an average of 17 years’ experience in health care.

The team’s second goal was to launch health care-specific proprietary products, which it did with remarkable speed. In 2017, the unit launched 11 new products focused on health care. They included:

• D&O, EPL, fiduciary and crime package products
• Primary managed care E&O products
• Medical malpractice product lines, including hospital professional liability, physician group liability and miscellaneous medical facility liability
• Facultative reinsurance of captives

“A large focus has been on the growing segment of miscellaneous medical facilities the organizations established outside of the health system, like clinics and surgical centers, labs and imaging, telemedicine, hospice and home health,” Oard said.

All this in 18 months. The team’s first product hit the market by April 2017.

Organization-Wide Integration Creates a Single Point of Contact for Insureds

This year, Oard’s third goal has been leveraging QBE’s property/casualty product offerings and the expertise of other teams to create a fully integrated team and experience for health care clients: “Everything from property, auto, workers’ comp and even aviation coverage apply to health care. We’ve spent this year bringing those capabilities into the health care practice,” she said.

“We have underwriters with expert knowledge of the products and exposures in one team, reporting to one leader, under one business unit.

“We approach the client holistically and manage that process together, enabling us to build product packages or dovetail policy language to take care of gaps or overlaps.”

The same integration applies to risk management and claims services. Clients have a single point of contact for all needs. As health care providers, payers and vendors become more integrated, they need an insurer that can adapt just as quickly to changing exposures and coverage needs. And they need coordinated solutions that can be customized to fit developing delivery models.

“It’s about building a flexible platform that can adjust to the rapid pace of change in the health care sector,” Oard said.

“Specialization allows us to dig into the nuts and bolts of a client’s risk exposure, so we understand the needs even as the industry evolves. And being integrated with all the products and resources allows us the ability to be responsive in applying our expertise and coverages to create the best solution possible.”

To learn more, visit https://www.qbe.com/us/about-qbe



This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with QBE North America. The editorial staff of Risk & Insurance had no role in its preparation.

QBE North America is a division of QBE Insurance Group Limited, one of the world's 20 largest insurance and reinsurance companies. We offer the unique integration of financial strength, a broad product set and sophisticated capabilities to deliver value for our partners and policyholders.

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]