R&I: What was your first job?
I was hired at a local bank in Chicago as the first person to go through their new management-training program. I worked in all of the major areas of the bank and ended up in the controller’s office.
R&I: How did you come to work in risk management?
Over time, I have held all of the major financial positions — I was controller at North Park College, treasurer at Bank Western, and CFO at Adwest Minerals International — a gold mining company.
In each of those positions I managed various elements of risk management. My focus became full time when Mary Gardner hired me into risk management, finance, insurance and claims, at MediaOne during the 1990s and I have enjoyed the job ever since.
When the community started to see itself as an asset to their companies rather than just a cost center, the real value of risk management started to come into focus. Today’s risk managers are pulling together various elements of risk and creating profit centers for their corporations.
R&I: What could the risk management community be doing a better job of?
For me, I need to continue to focus on our partnership with the safety team — project executives that have the most influence on their job site — and to look for trending data to support the various business units.
R&I: What was the best location and year for the RIMS conference and why?
Most people will say San Diego and I would not disagree.
R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?
Rather than a “fire and forget” [i.e., buy your corporate policy once a year and never look back] tool, risk management is an active partner around the CEO’s table.
R&I: Is the contingent commission controversy overblown?
R&I: How much business do you do direct versus going through a broker?
Some of our London placements are direct — otherwise we use our broker to our fullest advantage.
R&I: What emerging commercial risk most concerns you?
The risks of cyber security and the rise of tribalism, which is unsettling communities and country borders. A return to a Cold War is also a very real risk. We pulled most of our operations out of several Middle Eastern countries for these reasons.
R&I: Are you optimistic about the U.S. economy or pessimistic and why?
Optimistic. We have a growing economy, relatively secure borders, and we are close to having an immigration policy.
R&I: Who is your mentor and why?
I mentioned Mary Gardner, director of risk management, finance insurance and claims with the former Media One in an earlier answer. She took the time to teach me the important aspects of what we were doing and also gave me an opportunity to learn and grow. That’s the definition of a mentor.
R&I: What have you accomplished that you are proudest of?
Personally: my marriage and our three daughters. In my professional life, it is those that I was able to support and mentor in the various roles I have been entrusted with.
R&I: How many emails do you get in a day?
Plus or minus 100.
R&I: How many do you answer?
Probably 20 or 30. I have several risk managers that work for me around the country and they frequently copy me on emails to keep me apprised as to what is going on at the firm.
R&I: What is your favorite book or movie?
The last movie I watched was “Fury.” A guy movie to be sure, but the sub-story to the tank battles was “what does it take to build a team?”
In this case, in a tank in the middle of World War II, it was the statement that “I promise to get each of my men home safely,” even though the reality of death was all around them.
I have often told people I was recruiting that I would take the first bullet for them. People have a need and a desire to know that managers and co-workers will stand with them in both good and hard times.
R&I: What’s the best restaurant you’ve ever eaten at?
I like pizza — so most pizza places are on this list.
R&I: What is your favorite drink?
I live in Sonoma — so I need to say wine!
R&I: What is the most unusual/interesting place you have ever visited?
Cambodia, about 10 years ago. The border had just opened up with Thailand and we were on a guided tour and visited Angkor Wat, which had been a large thriving city containing many religious and ceremonial buildings.
R&I: What is the riskiest activity you ever engaged in?
A high ropes course in Ecuador.
R&I: If the world has a modern hero, who is it and why?
The world has many heroes. We just need to look around us — they are everywhere.
R&I: What about this work do you find the most fulfilling or rewarding?
When all of the construction crews go home at night to their families.
R&I: What do your friends and family think you do?
I’ve had a few careers and right now they would say I buy insurance and handle claims.
Safety Initiative Saves Millions
Not long ago some of Safeway’s divisions had frequency rates ranging between 9.0 and 11.0 per 200,000 hours worked. Last year, the company’s stores averaged just over 4.0 with some in the 3s and even the 2s.
“We are not just outperforming our industry sector, but we outperformed OSHA expectations for our business,” said Ward Ching, vice president of risk management operations for Albertsons/Safeway, a newly combined organization purchased by Cerberus in January 2015. The question that everyone is asking is: “How did Safeway do this?”
The answer lies in the Safeway Culture of Safety initiative. Hired as an outside consultant, Ching introduced a framework that integrates behavioral safety into the Safeway business/retail execution model.
“The program lives in the space of enterprise risk management,” Ching explained. “It is, for all intents and purposes, a combination of behavior economics — the study of how price and incentives influence behaviors — and behavior safety, which focuses on identifying and quantifying the drivers of loss.”
Ching estimated that over the past four years the program has been credited with saving the company more than $100 million in direct costs.
Most of the company’s efforts to reduce its workers’ comp and general liability costs had been to manage claims after the fact. The idea for the Culture of Safety was that preventing losses from occurring could significantly reduce costs, as well as improve worker productivity and engagement and help drive better retail execution in the stores.
In 2008-09, Ching and an internal Safeway team used various quantitative analyses and set a specific target frequency rate of 4.5 per 200,000 hours worked for all divisions and store departments.
The first step was to study the general culture of Safeway. As Ching explained, the safety program would need to work within the company’s core culture in order for it to be successful.
Based on survey work done with other organizations, Ching identified a number of “essential behavioral hypotheses” and tested them across 5 percent of the entire Safeway organization. “For six months, a colleague and I were focused at the store level,” he said. “I spent half an hour with them asking questions, testing the hypotheses.” They were reworked and became the core tenets of the initiative.
Part of the initiative was to create data transparency within the organization, which allows all stakeholders to see their frequency reduction performance against all divisions at the same time.
“We also identified the key behaviors that contribute to loss — not tasks, but behaviors,” Ching said. “By identifying the behaviors, you can begin to develop tools and approaches to positively modify them. More importantly, behaviors can be observed readily and the economic consequences of poor behavioral management can be calculated.”
Financial incentives were created for store leadership such as premium credits and chargebacks to influence behaviors that contribute to loss.
“A tool we imported from insurance underwriting was to calculate an experience modifier for all store managers,” Ching said. “The ex mod is used as a predictive indicator of risk management and safety performance at the store manager level.”
Additionally, Ching worked with outside consulting groups to develop a weighted average approach to frequency showing which divisions, districts, and individual stores contributed to the frequency. “We honed in on those stores that had the highest contributing factors to frequency, highest or negative, so we could allocate our resources into areas where it mattered most.”
A key aspect of the initiative is what Ching refers to as the positive observation approach. The idea was to have supervisors and employees observe each other in their work environments to identify and comment on those behaviors that contributed to a safe workplace and fulfilling customer experience.
“There is a form, and if they observe something going well — that is done right — they would observe it, write it down, and go to the person and say, ‘Thank you; what you did was right,’” Ching said. “This increases our productivity. It connects safety and the operations of the store.”
The company found that the positive observations created an overall positive experience in the store that was reflected in productivity and sales. While supervisors are limited to five positive observations per week, employees can do as many as they want for other employees.
“When we voluntarily got 28-30 percent of people in the store doing [the positive observations], frequency for workers’ comp and general liability went to zero and stayed there,” Ching said. “That’s the key. If you do your observations well and create a culture in the store where employees are engaged and positive, the behaviors that contribute to loss go away.”
The positive observations are the main thrust of the initiative, as well as a knowledge of what contributes to loss at each store. “For example, if you are in the deli and doing your huddle [in the morning], you might say, ‘Let’s be careful about our gloves and avoid sharp things,’” Ching said. “You’re reminding people of the behaviors up front, then giving them positive observations through the day.”
To create a similar program, a company must be able to understand its own culture and determine how to take the basic aspects of the program and implement them. There needs to be a correlation between safety and productivity in the workplace.
“I refer to safety as a pivot; if things are going well from a safety standpoint, chances are everything else in your business is going well. It’s a leading indicator of future performance,” Ching said. “We know from our workers’ comp experience that when frequency starts to spike, usually that business will be in serious trouble in six months or out of business.”
Healthcare: The Hardest Job in Risk Management
Radically changing cost and reimbursement models.
Rapidly evolving service delivery approaches.
It is difficult to imagine an industry more complex and uncertain than healthcare. Providers are being forced to lower costs and improve efficiencies on a scale that is almost beyond imagination. At the same time, quality of care must remain high.
After all, this is more than just a business.
The pressure on risk managers, brokers and CFOs is intense. If navigating these challenges wasn’t stress inducing enough, these professionals also need to ensure continued profitability.
“Healthcare companies don’t hide the fact that they’re looking to reduce costs and improve efficiencies in practically every facet of their business. Insurance purchasing and financing are high on that list,” said Leo Carroll, who heads the healthcare professional liability underwriting unit for Berkshire Hathaway Specialty Insurance.
But it’s about a lot more than just price. The complexity of the healthcare system and unique footprint of each provider requires customized solutions that can reduce risk, minimize losses and improve efficiencies.
“Each provider is faced with a different set of challenges. Therefore, our approach is to carefully listen to the needs of each client and respond with a creative proposal that often requires great flexibility on the part of our team,” explained Carroll.
Creativity? Flexibility? Those are not terms often used to describe an insurance carrier. But BHSI Healthcare is a new type of insurer.
The Foundation: Financial Strength
Berkshire Hathaway is synonymous with financial strength. Leveraging the company’s well-capitalized balance sheet provides BHSI with unmatched capabilities to take on substantial risks in a sustainable way.
For one, BHSI is the highest rated paper available to healthcare providers. Given the severity of risks faced by the industry, this is a very important attribute.
But BHSI operationalizes its balance sheet in many ways beyond just strong financial ratings.
For example, BHSI has never relied on reinsurance. Without the need to manage those relationships, BHSI is able to eliminate a significant amount of overhead. The result is an industry leading expense ratio and the ability to pass on savings to clients.
“The impact of operationalizing our balance sheet is remarkable. We don’t impose our business needs on our clients. Our financial strength provides us the freedom to genuinely listen to our clients and propose unique, creative solutions,” Carroll said.
Keeping Things Simple
Healthcare professional liability policy language is often bloated and difficult to decipher. Insurers are attempting to tackle complex, evolving issues and account for a broad range of scenarios and contingencies. The result often confuses and contradicts.
Carroll said BHSI strives to be as simple and straightforward as possible with policy language across all lines of business. It comes down to making it easy and transparent to do business with BHSI.
“Our goal is to be as straightforward as we can and at the same time provide coverage that’s meaningful and addresses the exposures our customers need addressed,” Carroll said.
Claims: More Than an After Thought
Complex litigation is an unfortunate fact of life for large healthcare customers. Carroll, who began his insurance career in medical claims management, understands how important complex claims management is to the BHSI value proposition.
In fact, “claims management is so critical to customers, that BHSI Claims contributes to all aspects of its operations – from product development through risk analysis, servicing and claims resolution,” said Robert Romeo, head of Healthcare and Casualty Claims.
And as part of the focus on building long-term relationships, BHSI has made it a priority to introduce customers to the claims team as early as possible and before a claim is made on a policy.
“Being so closely aligned automatically delivers efficiency and simplicity in the way we work,” explained Carroll. “We have a common understanding of our forms, endorsements and coverage, so there is less opportunity for disagreement or misunderstanding between what our underwriters wrote and how our claims professionals interpret it.”
Responding To Ebola: Creativity + Flexibility
The recent Ebola outbreak provided a prime example of BHSI Healthcare’s customer-centric approach in action.
Almost immediately, many healthcare systems recognized the need to improve their infectious disease management protocols. The urgency intensified after several nurses who treated Ebola patients were themselves infected.
BHSI Healthcare was uniquely positioned to rapidly respond. Carroll and his team approached several of their clients who were widely recognized as the leading infectious disease management institutions. With the help of these institutions, BHSI was able to compile tools, checklists, libraries and other materials.
These best practices were immediately made available to all BHSI Healthcare clients who leveraged the information to improve their operations.
At the same time, healthcare providers were at risk of multiple exposures associated with the evolving Ebola situation. Carroll and his Healthcare team worked with clients from a professional liability and general liability perspective. Concurrently, other BHSI groups worked with the same clients on offerings for business interruption, disinfection and cleaning costs.
Ever vigilant, the BHSI chief underwriting officer, David Fields, created a point of central command to monitor the situation, field client requests and execute the company’s response. The results were highly customized packages designed specifically for several clients. On some programs, net limits exceeded $100 million and covered many exposures underwritten by multiple BHSI groups.
“At the height of the outbreak, there was a lot of fear and panic in the healthcare industry. Our team responded not by pulling back but by leaning in. We demonstrated that we are risk seekers and as an organization we can deploy our substantial resources in times of crisis. The results were creative solutions and very substantial coverage options for our clients,” said Carroll.
It turns out that creativity and flexibly requires both significant financial resources and passionate professionals. That is why no other insurer can match Berkshire Hathaway Specialty Insurance.
To learn more about BHSI Healthcare, please visit www.bhspecialty.com.
Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, and homeowners insurance. It underwrites on the paper of Berkshire Hathaway’s National Indemnity group of insurance companies, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s. Based in Boston, Berkshire Hathaway Specialty Insurance has regional underwriting offices in Atlanta, Boston, Chicago, Los Angeles, New York, San Francisco, Toronto, Hong Kong, Singapore and New Zealand. For more information, contact firstname.lastname@example.org.
The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.