Larry Wilson, managing director of Pequot Ventures likes to soar. Piloting his two-engine Cessna that whisks him from Columbia, S.C., to New York City in three hours, Wilson spends hours staring at blue skies and the blazing sun.
Next year, he'll be flying his private jet that will let him soar even higher and cut his commuting time to just 90 minutes. But that's just half the story. The other, more interesting half is that he likes to watch other people and companies take flight.
"The vision is what excites him," says Michael Gantt, a former group president for insurance at Fiserv who worked with Wilson from 1995 to 2000 at PMSC and before that from 1972 to 1978 at Seibels Bruce, the managing general agent that first hired Wilson.
In the cloistered cabin of the insurance technology world, Wilson's given flight to many a vision, in the form of viable companies, and to dozens of careers as well. Senior managers working for carriers or for the industry's leading technology vendors either know Larry Wilson or know of him.
Dozens of senior managers working today in the insurance-technology field admit that as founder and CEO of the former Policy Management Systems Corp., they owe Wilson an enormous debt of gratitude, if not one of capital.
It was PMSC that pushed the property/casualty industry to move beyond the siloed structures of claims, ratings and underwriting, and to develop what today is known as policy management systems. More than 30 years ago, such an integrated vision of insurance technology was considered progressive and modern.
Today, no carrier would dare enter the market without a policy management system, or a strategy to buy or build one.
When PMSC was eventually sold to Computer Sciences Corp. in 2000, after a management buyout bid with Welsh Carson came up short, many of the alumni who left went on to create their own companies. Those firms now serve as key technology partners for property/casualty insurance carriers and dozens of today's stars were mentored, tutored or inspired by Wilson.
Wilson, too, left after the merger. But ever the hard-charger, casting his fishing rod in the streams and rivers of South Carolina wasn't enough for him. With hardly a pause, Wilson, described by one person as a "serial innovator" launched his own venture fund, Trelys Ventures, in 2001.
But Wilson's worth knowing not because he was the founder of the former Policy Management Systems Corp., not because he's a key player in a venture capital fund, not because he's a big man stalking the insurance-technology campus, not because he owns a car collection, not because he likes to race cars, and not because he has the luxury of slashing his commuting time from Columbia, to New York City from three hours to 90 minutes courtesy of his private jet.
He's worth knowing because he flies between the insurance and technology worlds like none other. Sure, there are plenty of younger people out there who can talk a bigger game about insurance, and there are those who can outtalk Wilson about technology. But there are very few who can talk about insurance and technology.
"He's always been focused on the nexus of insurance and technology," says Doug Roller, CEO of Duck Creek Technologies, which is funded by Pequot Ventures. "He can talk insurance to insurance people and technology to technology people. Very, very few people can do that, and fewer still who can talk about it well."
The 61-year-old Wilson, according to colleagues and family, has mellowed from his younger days when he was traveling around the world tending to PMSC's hundreds of customers, and leading the 6,000-employee firm for what turned out to be 100 quarters.
The grueling pace, mediocre food and long hours eventually caught up with him. In November 1998, Wilson discovered he had four blocked arteries and underwent quadruple heart bypass. That's when life shifted into a lower gear.
"I think he started to evaluate everything after the surgery and what was important," says Wilson's son, Christopher. "He pulled back on the hours and bad food and the travel and he did mellow out." Now, Wilson's far less likely to get upset about life's details.
Wilson's daughter, Elizabeth, says her father's quite capable of shifting gears, "or tries his best."
Standing in his office on the 35th floor of the Citicorp building, helping manage the $2 billion private equity arm of Pequot Capital Management Inc., Wilson says he's finally having fun. "I love building companies," he says. "I love to watch these companies grow and the people in them."
SMALL SAVINGS IN FIVE AREAS
With a schedule that allows Wilson to pursue the extracurricular interests that really matter to him--waxing and washing his garage full of cars, and organizing his dozens of fishing rods and reels--Wilson's had more time to assess how technology can make the industry more efficient.
Wilson believes there's as much as $200 billion to be saved in the property/casualty sector alone by pricing risk more accurately, distributing and processing commercial insurance contracts more efficiently, developing better capital allocation models for excess and surplus coverage, quota share reinsurance and catastrophe loss financing, and settling claims more smoothly.
"We've identified 10 investment themes that we think can each reduce the cost of most insurance by 2 percent each," he says. "If all 10 were accomplished in the next five to eight years it would result in a 20 percent total cost reduction."
Among the companies he hopes will help the industry pare down its own costs there are the ones--surprise!--in which Pequot Ventures has a stake. These companies include Duck Creek Technologies, a developer of Web-based rating, underwriting and processing systems; Dovetail Insurance, a business process outsourcing company for insurance carriers; and Eagle Eye Analytics, a data analytics vendor.
In all, Pequot Ventures has investments in six insurance technology companies in the United States and one in Europe. The investments are diversified among technology companies serving carriers, the agents/broker channel, data analytics and consulting services.
Insurance technology has made important strides in the past decade as companies have found ways to cut costs with the help of the Internet and more powerful data analysis software. Still, Wilson believes buyers are paying too much for coverage.
Unlike other financial services sectors, the mutual fund industry or the securities brokerage industry, which quickly adopted Internet-based transactions and saw their margins drop because of them, the margins for commercial insurance brokers are still relatively high, too high in Wilson's opinion.
"Hedge funds spend an enormous amount of time and effort to pound out one one-hundredth of a basis point--very thin spreads," he says. "A stock broker 20 years ago was making 50 cents a share trading IBM. Now it's less than a penny but commissions on insurance haven't changed that dramatically in that time period."
So while Wilson may have mellowed some over the past decade, his mind hasn't lost any of its quantitative acumen. Wilson remains a numbers man. "It's like watching a calculator with 35 registers in his head," says Gantt.
His ease with numbers, says Christopher Wilson, is "enviable."
But Wilson isn't one to use numbers to slash and burn his way through companies and yet more wealth. Wilson, colleagues say, knows how those numbers fit in, and how to rework the quantities in the interest of serving the insurance-technology sector more efficiently.
Along with educational bona fides, Wilson has the upside--and downside--experience that few can boast about. Wilson says that his financial investment which drew the quickest return was the maker and marketer of agency software AMS back in 1980. Within a year an $800,000 investment yielded $25 million.
The largest return was the creation of PMSC which sprung from the rib of Seibels Bruce in the mid-1970s and went public in 1981. Nine years later PMSC began trading on the Big Board.
And then there were the mistakes too, the most costly of which was getting into healthcare systems just before Hillary Clinton's proposal in 1993 to reduce the participation of private insurance carriers in healthcare at the expense of a single-payer system.
"We also invested in data analytics too early," he says. But he believes analytics are now emerging into an "industry-changing" idea that will shed new light on frequency and severity patterns. "Frequency and severity of claims costs are correlated to far more data than is currently tracked and the relationships are nonlinear," he says. "Carriers are selling products without really understanding the true costs."
But that doesn't mean any of this is easy. Wilson admits the insurance-technology space is a "difficult business" which requires terabytes of patience and a deep well of perseverance. "Never give up on a great vision, focus on execution and surround yourself with people smarter than yourself are principles that have served me well," he says.
... and the insurance-technology industry too, he might add.
CYRIL TUOHY is managing editor of Risk & Insurance®.
December 1, 2007
Copyright 2007© LRP Publications