Top 6 Risks of U.S. Companies Working Globally
A Man of Principle
Constantine “Dinos” Iordanou could be forgiven if he wasn’t in the best of moods when we talked to him. It was the day after his beloved Arsenal Soccer Club lost 2-1 to Swansea City.
Even more painful was the loss by the Virginia Cavaliers women’s soccer team to Florida State 1-0 in the ACC Championships that same day. Iordanou’s daughter Tina is on that team.
“It was not a very good weekend for me,” said the chairman and CEO of the Arch Capital Group, a former soccer player who friends describe as an intense competitor in his own right.
All fans know that they cannot control the outcome of sporting events. But in the areas of his life that he does control, Dinos Iordanou simply does not lose.
The Arch Capital Group is a rarity among those Bermuda-based companies formed in 2001 — in the hardened market after the terror attacks — in that it wrote primary and reinsurance from the beginning. It clearly outperforms its classmates and is one of the darlings of Wall Street investors in this space.
Those who know the business and know Iordanou say the success of Arch is due to his drive, intellect and discipline.
The Police Academy
Iordanou, in turn, is quick to point to the roots of that ambition and self-control. They begin on the island of Cyprus, where Iordanou was the eldest of six children.
Iordanou’s father Philippos was a police officer. The family struggled to make ends meet.
“You know how far a policeman’s salary can go,” Iordanou said.
The only great thing for me, I was the first born, the hand-me-downs went to my brothers.” — Dinos Iordanou
“We always had food to eat but we didn’t always have the best clothes. The only great thing for me, I was the first born, the hand-me-downs went to my brothers,” Iordanou said with a chuckle.
In the house of Philippos Iordanou, you were expected to work hard and make something of yourself. All the kids had jobs after school. The money they earned was theirs for pocket money but sometimes it was needed to help the family cover its grocery bills.
As Dinos matured, his father made it clear to him that it was in the United States that he was expected to make his fortune.
“My father was very disciplined, he ran the house like it was the police academy,” Iordanou said.
After his mandatory military service, Iordanou boarded the SS Queen Anna Maria to the United States — the family couldn’t afford a plane ticket — and journeyed by himself for 17 days.
If Iordanou was expecting helicopter parent behavior from his father, he wasn’t going to get it.
“When I got here, I called him and his first words were, ‘Did you get a job yet?’ and his second were ‘Did you register for school?’ He didn’t ask me if I had a good time or if I was OK,” Iordanou recalled.
Iordanou was clear on his marching orders. With an uncle in Astoria, Queens, providing the roof over his head, Iordanou’s first job was pumping gas at a Shell station. He also washed dishes in a nursing home, drove a cab and worked as a cook.
“You’ve got to earn your way through school and get on,” Iordanou said.
With his father’s voice in his head, Iordanou moved on and stayed on track. He graduated from New York University with a degree in aerospace engineering.
His first job out of school was with Pratt & Whitney, assessing the condition of wheels on New York City Transit subway cars. But as an immigrant, Iordanou soon realized that he would never get the clearances to do more involved public sector work.
“The career would have been over before it started,” he said.
A college counselor suggested that Iordanou turn to Wall Street and consider a career in finance or insurance. Iordanou’s next job was with AIG.
The School of Greenberg
At AIG, Iordanou, who started out assessing engineering risks for underwriters, found himself rubbing shoulders with an equally young, talented and ambitious group. Many of them, like him, would go on to important leadership positions in the industry.
“[AIG] would give you a lot of exposure, understanding all the facets of the business as long as you were willing and able to put in the time.” — Dinos Iordanou
Colleagues like Kevin Kelley, the future head of Lexington and later Ironshore; Brian Duperreault, the builder of ACE Ltd. and now CEO of the Hamilton Insurance Group; Evan Greenberg, ACE’s current CEO, president and chairman; and Joe Taranto, the retired chairman of Everest Re; were Iordanou’s classmates in what we will call the School of Greenberg — the company run by former AIG Chairman and CEO Hank Greenberg.
Iordanou put in 80 hours per week as part of AIG’s “fast track” program, which identified promising future executives and gave them a lot of exposure. In addition to their assigned jobs, they were rotated through different areas of the company, to learn as much about the business as possible.
Iordanou wasn’t working 80 hours per week because it was specifically asked of him. The young, hungry immigrant did it because he wanted to.
“They would give you a lot of exposure, understanding all the facets of the business as long as you were willing and able to put in the time,” Iordanou recalled.
“I was very hungry to learn and very hungry to get ahead. So to me it was a blessing,” he said.
Ironshore’s Kevin Kelley recalls Dinos Iordanou as his kind of co-worker, someone who worked hard and was useful to his colleagues, but didn’t wear his ambitions on his sleeve.
“Dinos was a very, very bright guy, a very driven guy,” Kelley said.
“I think his colleagues respected him. He had the right perspective on how one should be ambitious,” Kelley said.
“He was charismatic, self-assured and personable and while he was certainly aggressive, with a desire to succeed, it was clear he had great leadership skills,” recalls Brian Duperreault, an AIG alumnus and the CEO of The Hamilton Insurance Group.
“He’s a born leader,” Duperreault said.
Iordanou’s big break came after the passage of the Resource Conservation and Recovery Act in 1976, which called for closer governance of hazardous waste disposal. Iordanou in 1979 was given the responsibility of creating an environmental liability group at AIG.
“It was new and it had quite a bit of risk in it,” Iordanou said. It was also closely watched by Hank Greenberg, by reputation a very detail-oriented business manager.
“After that, I started getting promoted with more responsibilities and more divisions,” he said.
“[Iordanou] was charismatic, self-assured and personable and while he was certainly aggressive, with a desire to succeed, it was clear he had great leadership skills.” — Brian Duperreault, CEO, The Hamilton Insurance Group.
When Iordanou was recruited away from AIG to Berkshire Hathaway in 1987, he was 37 years old and in charge of all casualty at AIG subsidiary American Home, overseeing a division with $1.7 billion in revenue.
That was an experience reflected by his equally ambitious teammates. At the age of 36, Kevin Kelley was running Lexington.
“All I know is that every day they seemed to be throwing more at you,” Kelley recalled of those days.
“I guess Greenberg saw how you responded and if you liked it he just gave you more.”
First Hank Greenberg, then Warren Buffett
At Berkshire Hathaway, Iordanou was eventually placed in charge of all casualty. The graduate of the School of Greenberg also had a new mentor — Warren Buffett.
“He provided lessons in understanding business every single day.” — Dinos Iordanou, on Warren Buffett, Berkshire Hathaway chairman, known worldwide as the “Sage of Omaha.”
“He provided lessons in understanding business every single day,” Iordanou said of the Berkshire Hathaway chairman, known worldwide as the “Sage of Omaha.”
“He is beyond brilliant. He has a style almost like a college professor. Every time he speaks, you are learning something from him,” Iordanou said.
The ambitious and now in-demand Iordanou had a handshake agreement with Buffett to stay for five years. He honored that agreement, then left to take on a variety of roles at Zurich North America.
During his tenure at Zurich, Iordanou needed to consolidate a number of troubled businesses. That meant he wasn’t engaged in building the business to the degree he would have liked.
“You’re putting such an emphasis on remodeling the house that you don’t have time to be adding any rooms to it,” he said.
Iordanou also chafed at not seeing the path that would take him to CEO.
“The CEO at the time did not want to give up the top job and I just didn’t want to be there to have a lot of responsibility and not have the ability to run the company,” he said.
The Founding of Arch
Then came the terror attacks of Sept. 11, 2001 and the drive to bring new capacity to the market in the form of the “Class of 2001.” Arch, Allied World, Axis, Endurance and Montpelier were all formed by the end of that year.
Paul Ingrey was brought out of retirement to run Arch’s reinsurance operations and Iordanou was tapped to head up the U.S. insurance operation.
In that respect, Arch was very different from its classmates, the rest of which were reinsurance companies.
“Our view was that when the market cycle was turning that there would be very good opportunities across the spectrum of insurance,” he said.
Arch’s board made the commitment to sacrifice short-term results in the effort to create a more diverse company.
It’s an effort that is now paying off by the bucket load.
“If you are a mono-line company in a cyclical business and the sector you have dominance in becomes highly competitive, what do you do?” — Dinos Iordanou
“Diversity allows you room to navigate,” Iordanou said.
“If you are a mono-line company in a cyclical business and the sector you have dominance in becomes highly competitive, what do you do?”
Arch’s financial reports show just how successful Iordanou’s approach is.
One area where Arch excels is the program business.
From 2011 to 2012, Arch saw net premiums written growth of 17 percent in programs. That was followed by 23 percent growth from 2012 to 2013.
“We have been in the program business from the beginning, but we have a very disciplined approach,” Iordanou said.
Iordanou’s view is that the managing general underwriters in the program business excel at marketing and distribution but need to be governed by a firm underwriting hand.
“Usually, we look for programs to be an extension of our system as long as our program administrators are willing to have that kind of partnership,” Iordanou said.
Program administrators working with Arch can underwrite business but they must do it within Arch’s pricing guidelines. By net premiums written, programs are the biggest piece of Arch’s primary insurance business. The company is trimming its exposure to property, marine, energy and aviation.
Another area where Arch is distinguishing itself is in the private mortgage insurance business. Arch launched Arch Mortgage Insurance in 2011 and is growing it through acquisitions.
In 2013, Arch bought the assets of the bankrupt Private Mortgage Insurance company, or PMI, for $300 million.
“I think the step into the mortgage business was smart, it was timely and it was quite unique,” said Kelley.
“They were entering at a time when the wind was at their back. As with most ventures, timing is extraordinarily important,” Kelley said.
To Iordanou, the mortgage business move gives him the diversity he craves as much as he craves an Arsenal goal.
“Us buying that asset from PMI creates over time a competitive advantage,” he said.
Don’t think, given Arch’s success, that Iordanou is done innovating.
“For some CEOs, once they’ve built a successful company, they don’t want to take any more chances,” the Hamilton Insurance Group’s Duperreault said.
“Ironically, they become risk averse, and in that process, they make mistakes in trying to avoid them. That’s not Dinos, and he‘s obviously not finished building Arch.”
Loyal to his Roots
Pat Ryan, founder and chairman of the Chicago-based Ryan Specialty Group, counts Iordanou as a dear friend. He also considers him an industry standout.
“Dinos is very strategic in his thinking and is very definite,” Ryan said.
“He is not unwilling to be a contrarian and in fact I think he kind of likes being a contrarian,” Ryan said.
Ryan, who also founded Aon, said Iordanou’s reverence for his roots and for his family is unshakable.
“Dinos is a very deeply loyal person,” Ryan said of the man who now commands a company with total assets of $22.6 billion.
“He is very proud of his heritage and very proud of his background and he keeps those front of mind.”
The Promise of Technology
The field of workers’ compensation claims management seems ideally suited as a proving place for the power of technology.
Predictive analytics in the hands of pharmacy and medical management experts can give claims managers the data they need to intervene in troublesome claims. Wearables and other mobile technologies have the potential to give healthcare providers “real-time” reports on the medical condition of injured workers.
Never before have the goals of quick turnaround and transparency in managing claims appeared so tantalizingly achievable.
In the effort to learn more about technology’s potential, in September, Risk & Insurance® partnered with Duluth, Ga.-based Healthcare Solutions to convene an information technology executive roundtable in Philadelphia.
The goal of the roundtable was to explore technology’s promise and to gauge how advancements are serving the industry’s ultimate purpose, getting injured workers safely back to work.
Big Data, Transparency and the Economies of Scale
Integration is a word often heard in connection with workers’ compensation claims management. On one hand, it refers to industry consolidation, as investors and larger service providers seek to combine a host of services through mergers and acquisitions.
In another way, integration applies to workers’ compensation data management. As companies merge, technology is allowing previously siloed stores of data to be combined. Access to these new supersets of data, which technology professionals like to call “Big Data,” present a host of opportunities for payers and service providers.
Through accessible exchange systems that give both providers and payers better access to the internal processes of vendors, a service provider can show the payer the status of the claim across a much broader spectrum of services.
“One of the things I see with all of this data starting to exchange is the ability to use analytics to predict outcomes, and to implement workflows to intervene.”
–Matthew Landon, Vice President of Analytics, Bunch CareSolutions.
“Any time that we can integrate with a payer across multiple products such as pharmacy, specialty and PPO services, what it does is gives us a better picture of the claim and that helps us to drive better outcomes,” said roundtable participant Chuck Cavaness, chief information officer for Healthcare Solutions.
Integration across multiple product lines also produces economies of scale for the payer, he said.
Big Data, according to the roundtable participants, also provides claims managers an unparalleled perspective on the cases they manage.
“One of the things that excites us as more data is exchanged is the ability to use analytics to predict outcomes, and to implement workflows to intervene,” said roundtable participant Matthew Landon, vice president of analytics with Lakeland, Fla.-based Bunch CareSolutions, A Xerox Company.
Philadelphia roundtable participant Mike Cwynar, vice president of Irvine, Calif.-based Mitchell International, agrees with Landon.
“We are utilizing technology to consolidate all of the data, to automate as many tasks as we can, and to provide exception-based processing to flag unusual activity where claims professionals can add value,” Cwynar said.
Technology is also enabling the claims management industry to have more productive interactions with medical providers, long considered one of the Holy Grails of better case management.
Philadelphia roundtable participant Jerry Poole, president and CEO of Malvern, Pa-based claims management company Acrometis, said more uniform and accessible information exchange systems are giving medical providers access to see how bills are moving through the claims manager’s process.
“The technology is enabling providers to call in or to visit a portal to figure out what’s happening in the process,” Poole said.
Another area where technology is moving the industry forward, according to the Philadelphia technology roundtable participants, is mobile technology, which is being used to support adjustors and case managers and is also contributing to quicker return to work and lower costs for payers.
The ability to take a digital tablet to a meeting with an injured worker or a health care provider is allowing case managers to enter data and give feedback on a patient’s condition in real time.
“Our field-based case managers have mobile connectivity to our claims systems that they use while they’re out of the office attending doctor’s appointments, and can enter the data right there into the system, so they’re not having to wait until they are back at the office to enter critical clinical documentation,” said Landon.
Injured workers that use social media, e-mail and the texting function on their mobile phones are staying in better touch with those that are charged with insuring that they are in compliance with their treatment plans.
Wearable devices that provide in-the-moment information about an injured workers’ condition have the potential to recreate what is known in aviation as the “black box,” a device that will record and store the precise physical state of an employee when they were injured. Such a device could also monitor their recovery process.
But as with many technologies, worker and patient privacy also needs to be observed.
“At the end of the day, we need to make sure that we approach technology enhancement that demonstrates value to the client, while ensuring patient advocacy,” Landon said.
As payers and claims managers set out to harness the power of computing in assessing an injured worker’s condition and response to treatment, the cycle of investment in companies that serve the workers’ compensation space is currently playing a significant role.
The trend of private equity investing in companies that can establish one-stop shopping for such services as medical case management, bill review, pharmacy benefit management and fraud forensics has huge potential.
“Any time that we can integrate with a payer across multiple products such as pharmacy, specialty and PPO services, what it does is gives us a better picture of the claim and that helps us to drive better outcomes.”
— Chuck Cavaness, Chief Information Officer, Healthcare Solutions.
The challenge now facing the industry, one the information technology roundtable participants are confident it can meet, is integrating those systems. But doing so won’t happen overnight.
“There’s a lot of specialization in the industry today,” said Jerry Poole of Acrometis.
Years ago there was a PT network. Now there’s a surgical implant guy, there’s specialized negotiations, there’s special investigations, said Poole.
The various data needs to be integrated into an overall data set to be used by the carriers to help lower the cost of risk.
Securing Sensitive Information
Long before hackers turned the cyber defenses of major national retailers inside out, claims management professionals have focused increased attention on the protection of data shared across multiple partners.
Information security safeguards are changing and apply to what technology pros refer to “data at rest,” data that is stored on a particular company’s servers, and “data in flight,” data that is transferred from one user to another.
Mitchell’s Cwynar said carriers want certification that every company their data is being sent to needs to have that information and that both data at rest and data in flight is encrypted.
The roundtable participants agreed that the industry is in a conundrum. Carriers want more help in predictive analytics but are less willing to share the data needed to make those predictions.
And as crucial as avoiding cyber exposures and the corresponding reputational damage is for large, multinational corporations, it is even more acute for smaller companies in the workers’ compensation industry.
Healthcare Solutions’ Cavaness said the millions in loss notification and credit monitoring costs that impact a Target or a Home Depot in the case of a large data theft would devastate many a workers’ compensation service vendor.
“They’d be done in a minute,” Cavaness said.
The barriers to entry in this space are higher now than ever before, continued Cavaness, and companies wishing to do business with large carriers have the burden of proving that its security standards are uncompromising.
Workers’ compensation risk management in the United States is by its very nature, complex and demanding. But keep in mind that those charged with managing that risk get better results year after year.
Technology has a proven capability to iron out the system’s inherent complications and take its more mundane tasks off of the shoulders of case adjustors.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthcare Solutions. The editorial staff of Risk & Insurance had no role in its preparation.