Latest / Profiles in Risk / E103 - How To Create Successful MGAs/Programs With John Willemsen of Arch Re/ Watford

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E103 - How To Create Successful MGAs/Programs With John Willemsen of Arch Re/ Watford · Profiles in Risk

• 0:00
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• 1:19
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• 1:31
  Speaker 2: Now onto the show.
• 1:38
  Speaker 2: Hello everyone and welcome to profiles and risk.
• 1:42
  Speaker 2: I am your host, Nick Barrelli on this stuff.
• 1:45
  Speaker 1: So it.
• 1:46
  Speaker 1: I am very pleased to introduce John Williamson, John as the managing director, head of insurance programs at Watford Insurance, Wofford specialty insurance and archery, and he is based in Morristown, New Jersey.
• 2:01
  Speaker 1: John, welcome to profiles and risk.
• 2:03
  Speaker 3: Nick, thanks so much for having me on.
• 2:05
  Speaker 3: This is a great privilege.
• 2:07
  Speaker 3: Thank you so much.
• 2:08
  Speaker 1: I appreciate that.
• 2:10
  Speaker 1: I, I kinda wish that we recorded everything we talked about before we went into the intro, but I have a feeling we're going to tap into a lot of that.
• 2:19
  Speaker 1: What you do overlaps with what I do and I get so many questions on the insurance there.
• 2:25
  Speaker 1: Slack channels about mgas and programs and how they get them up and running.
• 2:30
  Speaker 1: It's such a hot topic that I'm excited to have you on to describe what it is you do.
• 2:34
  Speaker 1: So first question I'm going to ask, I'm going to kick it over to you.
• 2:38
  Speaker 1: How would you, John, how would you describe what you do?
• 2:41
  Speaker 3: You know, nick, that's actually kind of a funny question.
• 2:44
  Speaker 3: I'm, I'm really involved in everything you know, as, as your listeners can imagine, especially in the early stages of our formation a few years ago, I've been involved in every aspect of the program management from underwriting, marketing, operations, compliance, accounting, carrier formation, to even fielding calls from insurance, looking for help.
• 3:07
  Speaker 3: You know, luckily for me these days we have an incredibly talented team to take our business to the next level.
• 3:13
  Speaker 3: It's truly exciting to watch everything come together.
• 3:17
  Speaker 1: Could you explain for members of the audience that don't fully understand what a program is, how would you define an insurance program?
• 3:26
  Speaker 3: Program?
• 3:27
  Speaker 3: Business is really business that is underwritten for a carrier on behalf of the carrier.
• 3:32
  Speaker 3: We delegate underwriting authority to a program administrator.
• 3:37
  Speaker 3: They typically have a, a broad ability and a great skillset, underwrite specific classes of business, and to produce that business as well.
• 3:46
  Speaker 3: And the program marketplace is truly a dynamic one where all of this talent just comes together.
• 3:54
  Speaker 1: Before I ask my second question, my first one, did you.
• 3:57
  Speaker 1: Did you ever think there would be a period in time where MBA's program business would be this attractive?
• 4:05
  Speaker 1: It's always, I wouldn't call the backwater, but you know, it hasn't been.
• 4:10
  Speaker 1: It hasn't really been in prime time.
• 4:12
  Speaker 1: Did you ever think there would be a time where a program business would get this much attention?
• 4:17
  Speaker 3: No.
• 4:17
  Speaker 3: I've always enjoyed program business had been part of my lengthy career in insurance.
• 4:22
  Speaker 3: At one time program business was, you know, a four letter word.
• 4:26
  Speaker 3: It was, it was not attractive business and part of the reason for that was really that we didn't have the systems as insurance carriers and reinsurers and program administrators didn't have systems as well.
• 4:39
  Speaker 3: And it really came down to monitoring.
• 4:40
  Speaker 3: And at some point in the future everybody realized like, oh my gosh, we're actually not doing a very good job at this, but today it's a much different world.
• 4:51
  Speaker 3: And those program administrators and Mgas that have actually embraced technology and those carriers that are able to monitor a program business, have been able to keep track, monitor and ensure profitability as best as possible of these programs.
• 5:09
  Speaker 1: It's a lot of listeners think like me, they may say, well, why can't the insurance companies just do this themselves?
• 5:16
  Speaker 1: Why does there need to be programmed business?
• 5:19
  Speaker 1: Why can't you know the large carriers just create a skunk works in their company and just whatever these programs are doing it replicated internally.
• 5:29
  Speaker 3: Yeah, it's a very good question.
• 5:31
  Speaker 3: You know, in the game of things that they probably could, but it really comes down to expenses.
• 5:36
  Speaker 3: Right?
• 5:36
  Speaker 3: What would I find in the program world is that there is a lot of focus on programs that are specific niches.
• 5:47
  Speaker 3: It may be anything from lawyers, professional liability, nightclubs, contractors, whatever it might be, but the underwriters in each one of those program administrators have a decade, two decades, three decades of experience in just underwriting those classes of business.
• 6:03
  Speaker 3: They have truly become experts in each one of those fields.
• 6:08
  Speaker 3: Whereas on the carrier side, while very talented underwriters as well, they are working with a multitude of classes, everything from a dry cleaner to a retail store up to a, perhaps a light manufacturer, but that true specialization is really what we look for on the program side.
• 6:27
  Speaker 3: Something that I would call outside the box that is not in the traditional marketplace.
• 6:33
  Speaker 1: Let's get to brass tacks.
• 6:35
  Speaker 1: John, how do you specifically go about evaluating a potential program?
• 6:41
  Speaker 1: What criteria are you using to evaluate something that comes across your desk as a potential program?
• 6:48
  Speaker 3: Well, the easy answer is everything.
• 6:51
  Speaker 3: Program administration, whether you're a carrier or a program administrator, is a complicated and heavily regulated business.
• 7:00
  Speaker 3: I really, when I talk to people about this, it's really like starting a new insurance carrier every time we launch a program yet without the need to raise additional capital.
• 7:09
  Speaker 3: Every time we do that and what we look for in program administrators is probably first and foremost is the reputation of that program administrator, the quality of their data, their underwriting acumen, their ability to actually prove they've been profitable, premium size and then the potential there have to be able to grow that business and expand it beyond where they are sitting today and the one thing that are truly hinge on and probably the most important to me is culture.
• 7:39
  Speaker 3: I want to feel confident that we and the program administrator can work together as a team by jointly finding those weaknesses within the program as well as capitalizing on strengths of it.
• 7:53
  Speaker 1: As you're rattling those off.
• 7:54
  Speaker 1: My heart is sinking into my chest because as all the listener, as listeners know, I have my own Mga and we're.
• 8:01
  Speaker 1: We're creating a program and we're new so we don't have a lot of.
• 8:06
  Speaker 1: We can't check off all the boxes that you rattled off.
• 8:10
  Speaker 1: So what kind of.
• 8:12
  Speaker 1: What would you say to someone like me or a lot of the insure techs that are listening, maybe considering doing an Mga, how.
• 8:21
  Speaker 1: How does someone that doesn't have the reputation, that's just a maybe has some kind of underwriting edge that they've developed via their technology but doesn't have the book or the premium size and is struggling, is still at that perhaps minimum viable products thinking, I think we could make some some hay here, but you know, we need someone to take a chance on us.
• 8:47
  Speaker 1: How would a startup mga think about preparing themselves, getting themselves ready to approach someone like you for evaluation?
• 8:58
  Speaker 3: Well, traditionally, you know with within our marketplace here in the program space, startups are difficult at best to try to do because there's no book of business model and as you pointed out, you may not even have a reputation.
• 9:12
  Speaker 3: Let a lone a book of business to really talk about.
• 9:15
  Speaker 3: They truly need a solid business plan, scalable product from finances to back the program administrator and expertise of running an insurance agency.
• 9:26
  Speaker 3: What I find with a lot of startups is conceptually they have a great idea.
• 9:31
  Speaker 3: There are things that are popping in their minds that I really want to try to do and achieve, but I will tell you that some of the pitfalls that some of the folks have on the startup side, particularly on the insure tech side, is that they've never run an insurance agency before and they truly don't understand the regulatory and compliance side of this, let alone perhaps, you know, even billing other, a lot of nuances.
• 9:53
  Speaker 3: As you know, Nick, within the insurance world that require another level of expertise.
• 9:59
  Speaker 3: We're not just manufacturing widgets here, we're putting on an insurance product that, you know, it was heavily regulated and the world wants to make sure that the consumer is safe.
• 10:09
  Speaker 1: I almost think it's an afterthought for a lot of these companies in that, hey, we just built this fabulous technology that's the hard part.
• 10:18
  Speaker 1: So starting an agency, you know, that must be pretty easy.
• 10:22
  Speaker 1: We can, you know, get, get a consultant or high get TPA is.
• 10:27
  Speaker 1: And as you mentioned, it's a, it's a lot more difficult today.
• 10:31
  Speaker 1: I think, you know, even even us with a lot of insurance expertise, we're, we're spending in excess of six figures every year just to handle licensing and back office related stuff and I feel like we're still getting snagged so I almost perhaps it's an afterthought for a lot of them.
• 10:50
  Speaker 1: What do you think?
• 10:52
  Speaker 3: Absolutely.
• 10:53
  Speaker 3: The Abi was obviously the conceptual idea that an insuretech has or, or even an established program administrator has may have some groundwork to it, but it's all of that back room stuff that people just don't appreciate for you and you have an idea.
• 11:09
  Speaker 3: You're halfway there.
• 11:11
  Speaker 3: There's another whole part of the process here that really needs to unfold before somebody's going to grant you the pen.
• 11:18
  Speaker 3: And what I have found with a number of startups is that pretends to.
• 11:23
  Speaker 3: There tends to be things that fall short, you know, whether it's the financing that's required to get an insuretech off the ground.
• 11:31
  Speaker 3: Or is it really a scalable product?
• 11:33
  Speaker 3: We want to truly issued thousands and thousands of policies and have, you know, a million dollars a premium.
• 11:40
  Speaker 3: It's just not worth it to a carrier to really kind of go through that process, so everything has to be able to Jive and then folks certainly like myself and others within our industry, I have looked at, you know, I don't know how many it is, but certainly over a thousand program submissions I can sniff through these things pretty quickly and ascertain where the weaknesses are.
• 12:04
  Speaker 3: Lying.
• 12:04
  Speaker 3: It's kind of like a shark tank, you know, pardon the borrowing of the name, but it really is similar to that where we have seen so many opportunities in our past that we recognized pretty quickly are where the weaknesses are and it's up to that program administrator presenting that idea to be able to overcome those.
• 12:24
  Speaker 3: And we often will have folks come in, talk to us about concept and idea and it sounds really great and we identify a couple of areas that need some more work and they come back and are able to get through that or or they don't.
• 12:37
  Speaker 3: And I think a lot of insuretech opportunities will probably not make it through the process.
• 12:43
  Speaker 3: But.
• 12:43
  Speaker 3: And that's even true for program administrators is that are already established.
• 12:48
  Speaker 3: It come through and they want to start a new line of business, but they don't have the expertise, they don't have anything.
• 12:54
  Speaker 3: The real test here, right, is being able to prove your concept to folks that have looked at so many submissions in our lifetime and be able to sell that, not just present a concept and think everybody's gonna.
• 13:11
  Speaker 3: Be Happy about it.
• 13:12
  Speaker 3: You really have to know your stuff.
• 13:14
  Speaker 3: You really have to know it.
• 13:16
  Speaker 1: Another issue that a lot of newbies coming in to the space don't appreciate is the timeline.
• 13:23
  Speaker 1: So you had mentioned going forth, back and forth, back and forth.
• 13:26
  Speaker 1: Could you verbally describe what, what the timeline for getting an mga off the ground, getting capacity going live.
• 13:37
  Speaker 1: What's that timeline look like?
• 13:40
  Speaker 3: So I, I look at the program administration marketplace as truly relationship driven.
• 13:46
  Speaker 3: These are relationships that I've had over the years that eventually, you know, come to something.
• 13:51
  Speaker 3: So that relationship part, maybe take a year, two, three, four, five years in just establishing a relationship with the carrier and be able to talk to them frankly and having good conversations.
• 14:03
  Speaker 3: But let's just fast forward through that and assume you've gone through that relationship component.
• 14:09
  Speaker 3: The timeline on launching an insurance product is much slower than any of us would probably want.
• 14:16
  Speaker 3: Yeah.
• 14:16
  Speaker 3: We would love to be able to flip a switch and say, oh, you're up and running and everything is great.
• 14:21
  Speaker 3: But the reality is is that particularly an admitted business, it takes a much longer process.
• 14:29
  Speaker 3: Everything is ready to go.
• 14:30
  Speaker 3: All the nuts and bolts are there.
• 14:33
  Speaker 3: You've got everything done.
• 14:34
  Speaker 3: Data is good.
• 14:36
  Speaker 3: Everything is working.
• 14:37
  Speaker 3: It'll take at least probably three to nine months depending upon the states and the complexity of the filing process through or about the Goto non admitted paper is much faster.
• 14:49
  Speaker 3: Fastest one I think we've ever done is probably about 30 days.
• 14:54
  Speaker 3: That was one that was easy.
• 14:56
  Speaker 3: One Line of business, we had the data, everything was good.
• 14:59
  Speaker 3: And your launch or you're not necessarily concerned about you're, you're always concerned about regulatory issues and compliance issues, but it's a much easier process of filing.
• 15:09
  Speaker 3: There is no real filing process to undergo, but when you know, when you take a step back, when you look at our marketplace, the marketplace that I play in, if you will, 75 percent of the business that we do is admitted paper, 25 percent is non admitted paper and so that means that three quarters of the time I'm spending in, you know, working with the compliance folks and working through regulatory and departments of insurance filings.
• 15:33
  Speaker 3: It's a much longer, much more strenuous process to go through.
• 15:38
  Speaker 3: Departments of insurance at the end of the day are really there to protect the consumer and they want to make sure that that's going on and they don't want any bad practices going on.
• 15:47
  Speaker 3: So some states are more difficult to get through than others.
• 15:51
  Speaker 3: But really it's really a three to nine month process.
• 15:54
  Speaker 3: And if you have something that's completely outside the box that you're trying to get approved or something that's a little bit more radical, it could take a year and sometimes I've heard of even more to try to get a product to marketplace,
• 16:07
  Speaker 1: which gets back to what you described as a might've been one of the first bullet points, which is financing for a new, for a new company they need to survive.
• 16:17
  Speaker 1: They need to have enough cash on hand while they're twiddling their thumbs, waiting for regulatory approval of their rates are forms they need to survive.
• 16:27
  Speaker 1: And, and I just, I just don't.
• 16:29
  Speaker 1: A lot of the insurer texts that are coming in, I don't think have, have thought about that.
• 16:35
  Speaker 1: They're just thinking once they get to the start line, uh, the gun goes off and they just start sprinting when they're actually like a true marathon, they're actually like in the back of the pack.
• 16:45
  Speaker 1: So when the gun goes off, they have to bide their time to get to the starting line and they could run out of money.
• 16:52
  Speaker 1: So you, could you just briefly talk about financing and you know, your, your opinions about how, how well a program or an Mga should be capitalized for them to be able to handle these delays?
• 17:09
  Speaker 3: Yeah, I think that, you know, particularly I think we're going to focus here on probably insuretech business if you will.
• 17:15
  Speaker 3: The it is a long process.
• 17:18
  Speaker 3: So if you're just starting out from scratch, it's going to take you, my guess is you know, a minimum of six months to even conceptualize what it is that you're doing and then from there then you've got to do the rounds with the carriers and the reinsurers.
• 17:34
  Speaker 3: You can add another three to six months on top of that and then you've got to convince someone that it's going to work when you're really looking at probably a two year timeline from an insuretech startup to really get a product out to market, place and launch.
• 17:49
  Speaker 3: So whatever your expenses are, they, you really need to consider that this is a long process.
• 17:55
  Speaker 3: It's not going to go over easily and it's going to take probably a couple of years really to get the marketplace
• 18:01
  Speaker 1: and for a lot of lines, since it's tech oriented, it might be different, you know, the timeline could extend out, uh, what the expenses.
• 18:10
  Speaker 1: It could be an excess of seven figures, right?
• 18:14
  Speaker 3: Absolutely.
• 18:15
  Speaker 3: Absolutely.
• 18:16
  Speaker 3: And, and, you know, once you start throwing the technology and everything, we all recognize that technology is rarely under six digits.
• 18:23
  Speaker 3: Right?
• 18:24
  Speaker 3: So it becomes extremely expensive and you just start burning through that cash pretty quickly
• 18:30
  Speaker 1: for what, what I do with catastrophes.
• 18:33
  Speaker 1: It's a, I don't think you can get a catastrophe, a single catastrophe model license for less than six figures.
• 18:40
  Speaker 1: So, uh, as, as a firm, we're a company that's very tech oriented and we're very focused on, you know, providing a ensemble model view that's a, that's a very hefty expense.
• 18:55
  Speaker 1: And you know, as we're going into it, I, it, it just becomes clear, wow, this thing's going to get to seven figures pretty quickly.
• 19:02
  Speaker 1: So you have to, you know, you have to be financed.
• 19:04
  Speaker 1: So for anyone that's listening, John laid out the timeline, but the, you know that you have to be capitalized to be able to withstand that.
• 19:12
  Speaker 1: So John, the reason why I reached out to you is because you publish something on Linkedin.
• 19:19
  Speaker 1: There's a lot of.
• 19:20
  Speaker 1: There've been a lot of articles.
• 19:21
  Speaker 1: I've had podcasts on programs and you know the thought process to get one started, but you were, you published the first article to actually talk about, okay, the programs up and running.
• 19:34
  Speaker 1: How do you measure its success?
• 19:36
  Speaker 1: How do you follow through on it?
• 19:38
  Speaker 1: How do you know if the program is actually achieving what it's supposed to be achieving?
• 19:41
  Speaker 1: And if it's not, you know, what do you, what do you have to do?
• 19:45
  Speaker 1: I'd like to spend a little time talking about that and what you wrote about in that article, what we have, let's assume the programs up and running and the product is live and it's in the market.
• 19:59
  Speaker 1: Then what do you, how do you, how are you measuring the success of that particular program?
• 20:05
  Speaker 3: So there's a lot of different tools and techniques, I guess, that we use in our program world to make sure that the program remains profitable.
• 20:17
  Speaker 3: And I like to say that what some program administrators don't realize that this relationship that we have, carrier and program administrator is, you know, this is kind of the goose that lays the golden egg and if you can protect that, uh, you will have a long term sustainable program.
• 20:38
  Speaker 3: Look, I've heard of a lot of great stories and certainly a lot of bad stories about how those relationships go bad.
• 20:45
  Speaker 3: But if your listeners can kind take into account a few items that I would probably relate to them as far as maintaining a program on a day to day basis.
• 20:55
  Speaker 3: It's really kind of this, it's, it comes down to first and foremost is that somewhat daily interaction between the carrier and the program administrator.
• 21:06
  Speaker 3: And what I mean by that is that we at Wofford and our tree, we designed the underwriting box, if you will, the underwriting guidelines to kind of create about 10 percent of that book is a referral.
• 21:23
  Speaker 3: Meaning that we want to see referrals, we want to talk to you, we want to make sure that, first of all we are answering your needs, but you know, obviously we're all in this to make money as well, but that you're also answering ours.
• 21:36
  Speaker 3: It is a great way for us to keep a finger on the pulse of a program and it can be extremely demanding.
• 21:44
  Speaker 3: And I've heard stories about the referral process, you know, something kicks outside the guidelines and it comes into the carer and some carries me take a week, two weeks to get back.
• 21:54
  Speaker 3: I mean, we, I always stress a turn of 24 hour turnaround time and most of the time we're much less than that.
• 22:02
  Speaker 3: It's usually same day, you know, within the same business day.
• 22:05
  Speaker 3: And that is a huge help of course to any program administrator out there.
• 22:09
  Speaker 3: But recognizing that that's a way that we communicate without just going up each other and saying, hello, let's just talk about the business that you're actually doing.
• 22:18
  Speaker 3: And um, you know, a big thing that I'm always a big proponent of it is monitoring rate change.
• 22:25
  Speaker 3: Know without monitoring, rate change and let me back up.
• 22:28
  Speaker 3: So re change really is is a monitoring, you know, premium on exposure change so that we had last year as a rate, let's for instance let's say it was a dollar and we have actual were really gone into your book of business and we think that you need another five percent of rape change.
• 22:49
  Speaker 3: That rate will now be a dollar five for business going forward.
• 22:54
  Speaker 3: If you're not monitoring that component, which is a very basic but very essential piece of monitoring a program, you have no idea where you're steering the ship.
• 23:05
  Speaker 3: A lot of underwriters that are program straighter or let alone a carrier, I mean it's all the same across the book, right?
• 23:11
  Speaker 3: They are working on account one, account two accounts, three are working on a daily basis on accounts, but what we do from the carrier side reinsurer side is we take a step way back 40,000 feet and we look in and we're not necessarily.
• 23:29
  Speaker 3: I mean we're obviously concerned about that individual account, but what we are also doing is monitoring the book of business.
• 23:35
  Speaker 3: If you're not monitoring that bulk of business, you have no idea where you're steering your ship.
• 23:40
  Speaker 3: You can be driving it right in the ground.
• 23:43
  Speaker 3: You could be asking for too much.
• 23:45
  Speaker 3: Maybe you're hitting too much right and you're shedding off the book.
• 23:48
  Speaker 3: You're, you know, a lot of the good businesses going out, the back of war and the bad business if you will, is staying behind.
• 23:54
  Speaker 3: It's truly a critical component and it's a.
• 23:57
  Speaker 3: it's A.
• 23:58
  Speaker 3: I don't want to call it a science by any stretch of the imagination, but I think it's part of the art of managing a program.
• 24:06
  Speaker 3: I also think that doing underwriting and operational audit, we do those couple of times a year, especially when the program first launches.
• 24:16
  Speaker 3: We want to make sure we completely understand what that program administrators doing both operationally and underwriting, just to make sure that you know the deal that we all thought we signed onto and quite frankly, this comes back the other way to the program.
• 24:32
  Speaker 3: Mr Wants to make sure that that everything we've asked for we're doing and vice versa.
• 24:37
  Speaker 3: It's just that constant communication back and forth and then through that process we identify underwriting strengths and weaknesses, operational strengths and weaknesses, and then we try to fix those or capitalize on those and by doing all those kinds of things just on a day to day basis or a couple of times a year, it's really a a great way of monitoring how the health of the program will be and the better that communication, the better the program will probably be.
• 25:10
  Speaker 1: What gets programs into trouble?
• 25:14
  Speaker 3: Well, it could be a lot of things.
• 25:18
  Speaker 1: What?
• 25:19
  Speaker 1: What are the big ones?
• 25:20
  Speaker 1: What are the big reasons?
• 25:22
  Speaker 3: Yeah, no, the big ones are.
• 25:25
  Speaker 3: I think first I would say, you know, suddenly for whatever reason, and I'll probably get into maybe more of those kinds of details here, but the discipline and risk selection deteriorates.
• 25:38
  Speaker 3: You have a book all performing at x level and now for whatever reason, because of increased competition for whatever it might be, forcing you as a program administrator to take accounts on that maybe you wouldn't have taken on in the past, and it may seem, again, kind of going back to that 40,000 foot view.
• 26:01
  Speaker 3: Everybody's underwriting one account at a time and they don't see that deterioration of risk selection as it comes across a book of business as as they continue to go down the road.
• 26:12
  Speaker 3: Whereas right, it's a good program administrator.
• 26:14
  Speaker 3: A good carrier takes a step back and goes, oh, wait a minute.
• 26:17
  Speaker 3: We see a problem coming down the pipe path here.
• 26:20
  Speaker 3: Let's try to fix that, and so it's just constantly balanced with market share and profitability and making sure that you're not taking risks that you really would have never taken on before.
• 26:34
  Speaker 3: I also find that sometimes, particularly on perhaps newer programs or or folks that may not have been in this business a long time, they have a tendency to want big limits and they have no premium and I think it's pretty easy to understand that if I've got a million dollars a premium in a program or$5,000,000 of limits of 5 million, 10 million,$20,000,000, the second we have a pop up.
• 27:01
  Speaker 3: Everybody's sitting around the table looking at each other, wondering why we did the deal.
• 27:05
  Speaker 3: I would urge many program administrators, particularly in the common lines of business, if you will, the property, or not necessarily property, but gee, a professional liability.
• 27:15
  Speaker 3: They're really kind of take a step back and say, look, from this program carrier, you know, we want a million dollars.
• 27:21
  Speaker 3: Can we get excess insurance placed elsewhere?
• 27:24
  Speaker 3: Some carriers and reinsurers do that.
• 27:27
  Speaker 3: Well, we have the ability to reinsure things over a million dollars so we can help spread out that risk.
• 27:33
  Speaker 3: Share that risk.
• 27:34
  Speaker 3: Obviously we're making less money, but at the end of the day we're helping that program maintain some sense of balance between limit and premium.
• 27:43
  Speaker 3: Um, and then I think there were also other things that happen, you know, if, if a program administrator expands into a line of business that they don't have the expertise in what they think it's a necessary component of what they do, they can get into trouble when they treat it like a bolt on know.
• 28:03
  Speaker 3: So you know, a good example might be I've got a general liability based program and now I want to add worker's comp.
• 28:11
  Speaker 3: Not An unusual request and not an unfair request, but if you treat the workers comp like a bolt on product and it's just slap a premium on it and go, then I guarantee you you're probably heading for trouble there.
• 28:27
  Speaker 3: You need to have that same level of expertise in that core line of business that you started with as well as with those bolts on.
• 28:34
  Speaker 3: Some are less tenuous than others.
• 28:35
  Speaker 3: Right?
• 28:36
  Speaker 3: But when it comes to like workers comp, umbrella limits, whatever it might be, those are the kinds of things that I think truly get a, a program administrator in trouble and it goes the other way too, you know, you see carriers that may not even understand the, the line of business that they're getting into from the perspective of deploying the pen to a program administrator.
• 28:58
  Speaker 3: Uh, so it's a constant battle that everybody might have in that marketplace.
• 29:03
  Speaker 3: And then I think that, you know, on the identify changes in a marketplace that happened there could be shrinking or expanding marketplaces that are going on, you know, the, the market share is decreasing, it's increasing.
• 29:17
  Speaker 3: And that can dramatically increased competition if there's less to feed on, if you will.
• 29:23
  Speaker 3: People are going after even harder if there's more to feed on, that means there's probably more competition in the marketplace.
• 29:30
  Speaker 3: And again, everybody starts throwing a decrease premiums.
• 29:35
  Speaker 3: So it's really kind of like keeping that balance and making sure that everything is good for the long run.
• 29:41
  Speaker 3: And then I probably would add, expanding into states that they may not realize that there's a problem in certain lines of business, have certain problems in, in particular states, whether that might be, you know, auto liability for instance, or it could be some states are more prone to wind or hail the carrier and the program administrator really needs to understand what exposures are being added to that book of business as they go forward and expand.
• 30:12
  Speaker 3: And I think that those are probably some of the more basic things that can happen to a program
• 30:19
  Speaker 1: that explains a lot.
• 30:21
  Speaker 1: And as you were, as you were running down that list, I kept thinking that, um, these programs as they expand, should almost think of their expansion as like a new program in a way.
• 30:35
  Speaker 1: Even if it is a bolt on in that they should probably bring the same level of expertise to the bolt on that they did to the original program.
• 30:45
  Speaker 1: Which means that in your example of the Gel and that in worker's comp, they should probably create a worker's comp team.
• 30:52
  Speaker 1: That where there's an expertise and they can handle all of the specifics and they'll know like, oh, you know, California is a very expensive state and getting worse.
• 31:02
  Speaker 1: Um, but also all of all of the other stuff with pricing and everything else it would, would that make sense for program to, um, to, just to make it, is that part of it?
• 31:12
  Speaker 1: Just making sure that there's the appropriate level of uh, underwriting and technical expertise on the team regardless of what their underwriting.
• 31:23
  Speaker 3: Absolutely.
• 31:24
  Speaker 3: Again, going back to Kinda the golden goose theory, whether whether you're looking at yourself as the program illustrators, golden goose or you look at yourself in the carriers that Goldman goes, you need to protect both and that same effort that's been deployed on that core line of business that someone has been writing for 10 years or whatever.
• 31:41
  Speaker 3: It might be nice to be applied to that next line of business.
• 31:45
  Speaker 3: The tricks I'm going to get themselves into higher experienced underwriter and experienced team.
• 31:50
  Speaker 3: Whatever it might be.
• 31:51
  Speaker 3: Make sure that people that are about to embark on that through line of business truly understand not only that line but the risks that you're writing.
• 32:00
  Speaker 3: If you are in, you know, in the trucking business, whatever it might be, let's say if you're in a trucking business, you should have a worker's comp underwriter that understands trucking business.
• 32:09
  Speaker 3: If they were a gel underwriter or worker's comp on the writer for that matter, that handled retail business, then it's, it's, it's different, right?
• 32:17
  Speaker 3: It's apples and oranges and you will create issues down the road.
• 32:21
  Speaker 3: You may not see them right away, but at some point in time they will surface.
• 32:27
  Speaker 1: Have you, what's your experience with programs that have been performing poorly and reversing course?
• 32:36
  Speaker 1: Um, do, do you ever see that?
• 32:38
  Speaker 1: Or is it just pretty much the case where when programs begin performing poorly, they, they kind of keep going into that in that direction?
• 32:48
  Speaker 3: No, I, I, I've seen a number of really good success stories along the way in sometimes, like anything else in life, maybe you have to hit the bottom.
• 33:00
  Speaker 3: You have to, you know, ride your book way down and then suddenly you realize that everything is just going out the back door and it's at that point in time when you know that decision is made as to whether as to what to do going forward, do you take a step and just maybe turn it into an insurance agent and place it with a bunch of carriers and go that direction and again, there's nothing wrong with that, but if you truly enjoy and love the space that we call program administration than what you need to do is have open and honest conversations with the carrier.
• 33:36
  Speaker 3: Make sure we all understand each other, right, and then get to the core of the problem trying to make sure you understand what's going on within your marketplace, what's going on within that pricing, and then set kind of a plan in action that will help deliver those results and you don't just get that today and then forget about it.
• 33:57
  Speaker 3: It's about doing that constantly.
• 34:00
  Speaker 3: Having that constant communication backing for back and forth and really trying to get to the science of all of that.
• 34:09
  Speaker 3: Really trying to finesse your products through the marketplace and growing it steadily.
• 34:15
  Speaker 3: You know, a lot of scary things happen with books of bins grow rapidly, but what you're really looking to do is to grow steadily and make sure you understand it.
• 34:25
  Speaker 3: You're not changing a lot of things going on within the program itself, but making sure you understand the original premise, that problem that you've identified and and trying to fix that and go forward.
• 34:36
  Speaker 3: A lot of folks may not recognize this, but one thing that I'm always looking for underwriting guidelines, so when you look at underwriting guidelines, and so I've seen again, you know way too many underwriting guidelines in my lifetime, but underwriting guidelines, if they're constantly changed, when you begin to realize is that what you're doing with your underwriting guidelines is messing with your loss pick as well.
• 35:03
  Speaker 3: Underwriting guidelines are really kind of the skeleton of what you do, right?
• 35:08
  Speaker 3: So every time I changed my underwriting guidelines, I'm changing a dial and if I don't know what those dials do as I moved through changes within my underwriting guidelines, I'm losing touch with the book of business.
• 35:21
  Speaker 3: I started with it, sometimes that's obviously a necessary evil to bring it back, but if you truly want to understand what's going on in your book, you should maintain a heavy discipline within those underwriting guidelines because that sets the box, that's the parameters of what your book is going to look like and as you begin to truly study and philosophize really about what your book of business is, you can start turning those dials to start changing things to increase production, decreased laws, but if you're constantly changing guidelines or you, you know, you think you're sitting at a 60 loss ratio right now, but you want to add, you know, a ton of coverage to it, you're ultimately changing your lost bag or you can go to a 70, you know, in a matter of months.
• 36:13
  Speaker 3: So it's really a matter of understanding everything that you're doing to that program as you progress.
• 36:18
  Speaker 1: Yeah, no, that makes a lot of sense.
• 36:21
  Speaker 1: I'm always, I'm always wary of a hearing of these companies that are growing incredibly rapidly and I think history has been very unkind and insurance to companies that have grown that rapidly.
• 36:38
  Speaker 1: Um, they just, they can't manage their expenses.
• 36:41
  Speaker 1: Um, it, it, it's usually, it's usually not a good sign.
• 36:46
  Speaker 1: Um, W, what would you say to a company that is growing rapidly that's, um, you know, they, they've, they've done everything they needed to do.
• 36:55
  Speaker 1: Um, there's a lot of demand.
• 36:57
  Speaker 1: Even if they're getting their price, what, what, why would you warn them about growing rapidly?
• 37:02
  Speaker 1: It seems, it seems counter counterintuitive.
• 37:07
  Speaker 3: Well, growing rapidly is great, right?
• 37:09
  Speaker 3: Everybody's making a lot of money certainly to start with, but if it's truly understanding what that book of business is about and it's about understanding the risk selection and the pricing of that book as it, as it moves forward.
• 37:22
  Speaker 3: If you're a growing so rapidly, you know, first of all, I would say that at first blush that maybe you're too cheap and that's why you're growing so rapidly or it could be that you have this great product in the marketplace.
• 37:37
  Speaker 3: It's priced fairly and maybe there is nothing wrong, but if you think that your product offering is, is similar, but let's say less expensive than everyone else, and then that's why you're growing so rapidly.
• 37:50
  Speaker 3: Then you better have another angle here as far as being able to manage that book as it continues to grow.
• 37:57
  Speaker 3: Otherwise this is going to be a, you know, a train wreck.
• 38:00
  Speaker 3: It's probably some point in time you're really not going to understand what you've done until it's too late.
• 38:05
  Speaker 3: Three years from now, you know, loss ratio is going to be over 100 and it's too late.
• 38:11
  Speaker 3: The program administrators scratching their head, the carrier scratching her head and there's no way back and that kind of goes back to some of those conversations with managing the program, like truly on a day to day basis, managing your rate change, managing your underwriting guidelines and making sure that you truly understand what's going on within that book.
• 38:32
  Speaker 3: One thing that I always urge program administrators to do is to hire their own independent actuary.
• 38:40
  Speaker 3: Whether they do it internally, they hire an actuary as part of the firm itself or they go out and secure the services of a, you know, an appropriate or well known vendor that can do those services for them.
• 38:53
  Speaker 3: This way you have, let's say, an unbiased person looking at your program and your book of business.
• 39:00
  Speaker 3: It can actually give you insight as to potentially what's going on.
• 39:04
  Speaker 3: They may not understand the true mechanics and the underwriting of it, but they can tell you that based upon the path that you're going, you're heading for trouble or you're doing an awesome job and what you're doing and then compare those notes along with the carrier telling you if we all agree within a couple of points as to what that loss pick might be, and I think we're all pretty good shape here, right?
• 39:27
  Speaker 3: But if we're telling you it's acts and your 10 points difference, that's a huge problem coming often in this program space as in probably a lot of insurance.
• 39:36
  Speaker 3: We are fighting for two points of profitability on, on a program.
• 39:41
  Speaker 3: So it's important to always make sure that that's well maintained and understood.
• 39:47
  Speaker 1: Which, what types of programs do you think will be hot in like the next five?
• 39:55
  Speaker 1: Let me, let me rephrase that.
• 39:56
  Speaker 1: That's the, that's the wrong way to ask that question.
• 39:59
  Speaker 1: Um, what's, what's the trend with programs?
• 40:02
  Speaker 1: Where were we going with this?
• 40:05
  Speaker 1: Um, and you know, where, where do you think will be like five or 10 years from now?
• 40:11
  Speaker 1: Do you think your job will be dramatically different?
• 40:16
  Speaker 3: No, I, I would tell you that it probably become perhaps a little bit easier.
• 40:22
  Speaker 3: I think certainly the program market continues to expand.
• 40:26
  Speaker 3: You know, there are numbers out there that kind of bury somewhat wildly, but let's just call it$37, billion dollars a program business out there, a couple of thousand dollars program administrators or I'm sorry, 2000 programs, thousand program administrators out there.
• 40:44
  Speaker 3: And as time goes by, we as an industry become more and more sophisticated.
• 40:50
  Speaker 3: As we become more and more sophisticated, we're able to price risk more appropriately.
• 40:56
  Speaker 3: So those programs and carriers for that matter that you know, can see that coming and adapt to the ability to truly monitor all of these programs.
• 41:08
  Speaker 3: As we go forward.
• 41:10
  Speaker 3: We'll probably be ahead of the pack and I think it becomes more specialized.
• 41:17
  Speaker 3: Carriers are gonna look to program administrators to handle.
• 41:20
  Speaker 3: The more specialized lines are gonna handle the things that truly require an underwriter's touch.
• 41:26
  Speaker 3: I think we can all see, obviously in the personal line space where we've somewhat commoditized marketplace, right?
• 41:34
  Speaker 3: It's all online.
• 41:35
  Speaker 3: It's easy to do.
• 41:36
  Speaker 3: I combine my homeowners insurance, my umbrella, whatever it might be.
• 41:40
  Speaker 3: I can do all of that online.
• 41:42
  Speaker 3: The commercial space is certainly getting there and it will get there and there will be obviously points in time where there'll be leaps made in that space.
• 41:51
  Speaker 3: Right now it's a bit more difficult to clean a multiline type of account, but those monoline accounts know if you're specializing in in a space that's let's say, under$5,000 premium, and if you truly look at that application, you can think that a computer can underwrite it.
• 42:11
  Speaker 3: Then you're in trouble already.
• 42:13
  Speaker 3: What you're really need to do is get away from that.
• 42:15
  Speaker 3: That doesn't mean runaway, but that means you need to transition from becoming that somewhat generalist, if you will, to becoming much more specialized.
• 42:25
  Speaker 3: Really understanding those kinds of exposures and risks that require a certain level of underwriting accurate that's not being handled by the traditional market.
• 42:37
  Speaker 3: If you go online and you find dozens of competitors against what you're doing, that means everybody else is watching it.
• 42:44
  Speaker 3: The insure techs are watching and they're saying, hey, we can come in and take a lot of market share and go and we can do that in theory a less expensive, but uh, those folks that truly looked towards that specialization, getting to know what, what the risks are about and it's not necessarily computerized.
• 43:06
  Speaker 3: They can probably do well for a number of years coming.
• 43:12
  Speaker 1: John, is there.
• 43:14
  Speaker 1: What would you recommend for listeners that want to learn more about program business?
• 43:18
  Speaker 1: So are there any reading materials or sites that you think could be valuable for them?
• 43:26
  Speaker 3: No.
• 43:26
  Speaker 3: I look at this as kind of a, a somewhat of a blessing in disguise, right?
• 43:32
  Speaker 3: This is part of the barrier to entry.
• 43:34
  Speaker 3: The program business.
• 43:35
  Speaker 3: There really aren't any books out there for say that specifically discuss this.
• 43:41
  Speaker 3: There were probably some association published type of publications that are out there, but really at the end of the day, there's no real manual on how to do this.
• 43:52
  Speaker 3: I would suggest that most people take a look at target markets, a program association.
• 43:59
  Speaker 3: They are probably the preeminent program association out there.
• 44:05
  Speaker 3: They catered a program administrators and then carriers like I go in and we taught the program administrators is straighter during conferences.
• 44:13
  Speaker 3: We provide educational sessions, whatever it might be, and that to me, seeing some of the best way to go about that.
• 44:20
  Speaker 3: I mean other than you know, someone like myself, I'm.
• 44:23
  Speaker 3: I really believe in trying to promote the health of the industry, so I always strive every day to try to help someone or guide someone.
• 44:31
  Speaker 3: So if any of your listeners just just want to chat, I'm not looking for a benefit out of it.
• 44:35
  Speaker 3: I learned something everyday anyway, so what I'm saying to you is that talk to people, call me Cole, anyone else in this role and get an opinion as to what to do next and.
• 44:47
  Speaker 3: And try it that way, but I probably can't point them to any single publication that would help them.
• 44:53
  Speaker 3: There are a lot of studies out there, but that's not gonna help you get into program administration.
• 44:58
  Speaker 1: Yeah, that's completely coincidental because they podcast that we released today was with David Wright who's a reinsurance broker at beach and associates.
• 45:07
  Speaker 1: And I asked him how does one become a reinsurance broker?
• 45:11
  Speaker 1: And he basically said there's really no way to become a reinsurance broker excepts, have just become a reinsurance broker.
• 45:18
  Speaker 1: Like, uh, getting through the minefield is the hurdle that you have to get through and just, if you can get through it and contact the right people, you can become a reinsurance broker.
• 45:32
  Speaker 1: But there's a, it sounds like, it sounds like it's very similar, uh, with, uh, with program administration.
• 45:38
  Speaker 1: You just got to pick up the phone and do your research and do your homework.
• 45:43
  Speaker 1: Hell, that's what we had to do.
• 45:44
  Speaker 1: So, uh, I didn't know if there was a, if there were any other shortcuts in and we did just become a member of target markets.
• 45:50
  Speaker 1: So I'm very much looking forward to participating, uh, in, in that's, uh, in that specialty group.
• 45:57
  Speaker 1: So that'll be fun.
• 45:59
  Speaker 3: That's great.
• 46:00
  Speaker 3: Good for you.
• 46:01
  Speaker 3: Yeah.
• 46:01
  Speaker 3: I've been on a board of directors of target markets is, and I'm currently on the carrier committee now.
• 46:05
  Speaker 3: I retired from the board, if you will, but it's a very active association.
• 46:12
  Speaker 3: It really, it really helps a lot of program administrators do the right thing and it helps carriers as well to do the right thing and make sure that we're all promoting the health of the industry.
• 46:22
  Speaker 1: Yeah.
• 46:22
  Speaker 1: Yeah.
• 46:23
  Speaker 1: John, this is part of the podcast where he transitioned to the personal side of things so that the audience can find out who is John and uh, so the question I asked all of my guests are, if you weren't working, what, what, what do you or when you aren't working, what do you enjoy doing?
• 46:43
  Speaker 3: It was.
• 46:43
  Speaker 3: So I'm pretty much a outdoorsy kind of guy, so I love being outdoors, whether it's backpacking or whatever it might be, you know, hanging with the family and friends.
• 46:56
  Speaker 3: And I'm also known to tip back a very nice IPA
• 47:03
  Speaker 1: that's the wrong with that
• 47:06
  Speaker 3: and not necessarily in that order.
• 47:09
  Speaker 1: Good.
• 47:09
  Speaker 1: Good for you.
• 47:11
  Speaker 1: Uh, John, uh, what tools or techniques do you use to stay productive and slash or organized?
• 47:18
  Speaker 3: I think that, you know, first and foremost, it's the team that I work with.
• 47:24
  Speaker 3: I know that may sound a little bit flashy or whatever you might want to call it, but it's really about having a good team that's behind you.
• 47:32
  Speaker 3: Do you help make everything go well and transition things, fix any issues that pop up.
• 47:38
  Speaker 3: But I would tell you that one of the, my main sources of sanity in this crazy little world that we live in is really just using a.
• 47:47
  Speaker 3: I have a mini kind of mini crm helps keep me focused on important tasks each day that I need to accomplish.
• 47:55
  Speaker 3: It's not necessarily a perfect science, but it, it really does work and it's, I tend to lean towards more computer than I do a piece of paper, so it's easier for me to work that way.
• 48:09
  Speaker 3: Um, but I would urge everyone to, you know, obviously, you know, what are the top five things we need to accomplish today and let's get those done and then focus on the other things and it's an ever shifting balance, right, of priorities.
• 48:20
  Speaker 3: But if you can at least try to remain as focused as possible, I will tell you that that's certainly a ticket to success.
• 48:28
  Speaker 1: Got It, got it.
• 48:30
  Speaker 1: John, what books have you found influential in your business and our personal lives?
• 48:36
  Speaker 1: Anything stick out?
• 48:39
  Speaker 3: A couple.
• 48:40
  Speaker 3: You know, I'm a big fan of Malcolm Gladwell, outliers tipping point.
• 48:48
  Speaker 3: Another interesting one I read not that long ago.
• 48:50
  Speaker 3: I can't even actually say the title, if you will, on the, on air, but it's a subtle art of not giving an f by Mark Manson, I believe it is.
• 49:00
  Speaker 3: It's a very interesting book and it's a way of kind of looking at things a little bit in reverse.
• 49:06
  Speaker 3: I would urge a lot of listener listener to take a look at that as well as perhaps the purple cow by Seth Godin and.
• 49:16
  Speaker 3: Yeah, and while I wouldn't recommend everybody heavily reading the art of war, I think it's also an interesting book to read.
• 49:24
  Speaker 3: It's somewhat simplistic and yet extremely complicated, but I think the art of war is an interesting read as well.
• 49:32
  Speaker 1: He might be the first person that's recommended that book or brought it up, but that's like, I, I hear that a lot on other podcasts.
• 49:41
  Speaker 1: You know, everyone, it's almost like a badge.
• 49:44
  Speaker 1: You have to say the art of war, you might, you might have been the first person to bring it up in profiles and risks.
• 49:50
  Speaker 1: So, uh, I have a quick.
• 49:52
  Speaker 1: I've honestly never read it.
• 49:56
  Speaker 3: I think there are different lessons to be learned.
• 49:59
  Speaker 3: I obviously reading a book of it easy and yet complicated, interesting read, but it was just kind of take some lessons from it is the way I would have listeners take a peek at that.
• 50:13
  Speaker 1: Got It.
• 50:13
  Speaker 1: I will put all of those on the show notes, John.
• 50:17
  Speaker 1: I was educated, um, that was, uh, that, that's always a pleasure when I can have a guest on and get a lot out of it.
• 50:25
  Speaker 1: And so, uh, it was fantastic having you on.
• 50:29
  Speaker 1: I learned a lot and I hope our listeners did too.
• 50:33
  Speaker 1: And uh, I will, uh, I will put your linkedin connection on the show notes as well so people can find you.
• 50:42
  Speaker 1: Um, so it was an honor having you on the show.
• 50:48
  Speaker 3: Nick, thanks so much for having me on.
• 50:49
  Speaker 3: Yeah, I'm actually a part of the reason why you found me to begin with.
• 50:53
  Speaker 3: I've just started a publishing, you know, tips for program administrators to really think about, you know, on my linkedin site.
• 51:03
  Speaker 3: So every couple of weeks I plan on putting something out.
• 51:05
  Speaker 3: I've got 20 subjects already that I'm pretty much ready to do, so it'll be awhile maybe before I run out of ideas, but I would urge anyone interested in a program space to just take a look at that.
• 51:18
  Speaker 3: There's any interest or anybody has any questions whatsoever, please always
• 51:22
  Speaker 4: feel free to call me.
• 51:24
  Speaker 4: I don't care if you're gonna Enroll your book to me are not just awesome.
• 51:28
  Speaker 4: Awesome.
• 51:28
  Speaker 4: I, I learned a ton, so John, thanks for coming on.
• 51:33
  Speaker 4: Profiles and risk.
• 51:36
  Speaker 4: Yeah, thanks nick.