Category Archives: The Inside SPOT

Military Service, Leadership & Claims: A Conversation With CNA’s George Fay, Executive Vice President, Worldwide P&C Claims

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Inside SPOT:  An Interview with George Fay, Executive Vice President, Worldwide P&C Claims, CNA

As part of our continued series, and in conjunction with Claims Advisor magazine, we add to our Inside SPOT interviews of leaders in the claims industry.  These articles have been previously printed in Claims Advisor as part of their Executive Concerns.

The Claims SPOT: George, thank you very much for spending time with our readers today and for telling us a little about yourself. Let’s start at the beginning. When you were child, what did you think you wanted to be when you grew up?

George Fay: My father was in the Navy in World War II and was a tugboat captain in New York Harbor, so I became enamored with the Navy. Early in my life, I thought I was going to grow up and join the Navy. Given my ultimate career in the Army, that’s probably a little ironic.

Did you spend time on the tugboat?

I did as a child. I was a very popular kid on the block because I used to occasionally bring one of my friends with me and we would spend a day on the tugboat in New York Harbor with my father. Those were great experiences.

How did you find your way to the claims management world?

It began with my military career. I was in ROTC in college, and I went directly from college into the Army. That was in 1970 during the Vietnam War. I was a counterintelligence officer, so I learned how to do investigations. Those investigations were on sabotage and espionage directed against the Army, so it was a pretty interesting four years of active duty. Ultimately, I decided I did not want to make the Army my full-time career, so I went into the Army Reserve.

After the Army, I applied to a few different insurance companies and got a good number of different offers, but I started with Chubb because they offered me a job investigating medical malpractice cases which, at the time, sounded more interesting than investigating auto cases.

How was the adjustment to the claims management world after serving in the military?

It was actually relatively easy. One of my jobs in the Army was as an instructor at the Army Intelligence School. I used to teach new counterintelligence agents going through intelligence school how to do investigations. One key thing that I learned is that, if you know how to investigate—how to conduct a thorough investigation—you can investigate basically anything. I think that is a valuable lesson for claims professionals today. Thorough, complete and professional investigations can take you in many directions. That background has helped me throughout my career, including when I served as the U.S. Army’s chief investigator during the Abu Ghraib prison investigation.

What do you think some of the challenges are for new professionals joining the industry?

Many years ago, companies had fairly rigid training programs, putting new employees through the basics and providing a solid foundation for a long career in insurance. Many of those programs were cut over the years in response to expense concerns, but they are coming back. We’re doing it. Some of our competitors are doing it. New professionals have to recognize that it is a challenging industry. They need to have a very broad perspective and learn about more than one line of business. If you do not, you are limiting yourself.

Do you think that it’s more difficult to find qualified junior-level, entry-level talent to feed the claims ranks?

We’ve had no problems finding people, identifying people and bringing them on board. We try to make it an exciting place to work, and we try to provide opportunities, training and development. We have far more applicants than we have the ability to hire.

What should today’s claims management professionals be focused on?

Training and development, and on getting the right bureaucracies in place so that they are helping their people develop. A company can make it hard or easy to learn and to grow. I would suggest that what they should be doing is developing systems and procedures that make it easy for people to be all they can be. The Army does a great job of what we call lifelong learning. You go to a school and then to an assignment. And then you go to a different school and then a new assignment. You get used to learning new things frequently. Today’s claims professionals should always be focused on figuring out how they are going to continue to learn.

How do you think your military career has influenced you the most?

It’s hard to say what would be the greatest influence, but certainly leadership is a big factor. Being a leader crosses all borders, and there is really not a significant amount of difference between being a leader in the military and being a leader in corporate life. A focus on leadership is all about your people—it’s not about you. You are there for them, they are not there for you. It’s a perspective, right? I learned that in the military, and I’m a product of my development. What the Army really drills into you when you are in training to be an officer is that it is all about taking care of your people. I know a lot about my leaders, those that work for me, just by having a very brief conversation with them when I first meet them. Those that involve me in a discussion about how great their team is and what I should know about their team—that is the right kind of leader.

When people bring you a problem that they perceive as a life-and-death situation, are you able to help them see it in a different light?

Insurance is a business. The military has an entirely different mission. When you’re talking about situations in the military, not to be dramatic, but the reality is you’re talking about life-and-death situations. In our business, you’re not dealing with those kinds of issues, so you have a different perspective on what a problem is, which frankly makes it easier to deal with.

Part of what I try to get people to recognize is that, no matter what the situation is, calmness always helps. A frightened captain means a frightened crew. As Colin Powell says, “Remain calm, be kind.” Organizations are always a reflection of the attitude and approaches of their leader. If you’re someone who is prone to panic and disorganization or whatever—so will your organization.

Obviously, the claims world has a lot more technology today. How do you think these new technologies have affected how claims are managed today?

Huge, huge changes have occurred in my span of insurance claims handling. I began at the same time we were just introducing computers into the claims world. Prior to that, everything was done by hand. When we made that transition, a lot of people suffered. They just couldn’t cope with the change from handwritten materials to having to use computers.

People have to be adaptive. They have to be ready for change. If you like the way our job is working today, well, don’t get too comfortable with it. It’s going to change tomorrow. The role of the leader is to make sure people are ready to do that—and ready to make those transitions.

If you project out five years, 10 years, what do you think the claims organization will look like?

I think it will look different and the tools will challenge people to do what we really want to pay people for, which is effect as opposed to process. So we, like a lot of other companies, have looked at our work processes and tried to determine how much time people are spending on what we call adjusting.

Is there any coverage? What’s the liability? What are the damages? All of adjusting should be answering those three questions. If you’re not working on answering one of those three questions, it’s not an adjusting function. Someone else or some system should be doing it for you. Ultimately, we want to remove as much of that process as possible so that adjusters are spending nearly all of their time—we’re talking 80% of their time—doing adjusting functions, answering one of those three questions. There are a lot of people in claims and in underwriting and insurance who are very capable and comfortable doing process stuff. There is going to be less and less of that going forward, which means that the real winners in the future are going to be the folks who are best at using the tools and thinking about how to use the tools to maximum advantage.

If the goal is to get people to use 80% of their time doing true adjusting, how big an industry gap do you believe there is now?

In terms of the industry as a whole, I think now people are at 50% effectiveness in terms of process versus true adjusting. This will change dramatically as new technologies are introduced to the industry. We are already doing things here that are changing our processes dramatically and enabling us to make great improvements. During my work at the National Security Agency and during the Abu Ghraib investigation, I saw the most advanced and sophisticated data mining and predictive modeling software and hardware available. The real winners in the future are going to be the folks that are best at utilizing tools like that and thinking about how to utilize these tools to maximum advantage. So people need to be ready to do and think differently, and the role of the industry leader is to make sure that people are ready to make those transitions.

George, thank you very much for your time today.

You’re very welcome.

Do The Hard Things First And Embrace The Challenges: A Conversation With Chartis (AIG) Chief Claims Officer Rick Woollams

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The Inside SPOT: An Interview with the Chief Claims Officer for Chartis U.S. (formerly AIG Commercial Insurance)

On July 28, 2010, The Claims SPOT had the pleasure to sit down with Rick Woollams for our “The Inside SPOT” series of industry leaders.  We hope to present more interviews where we explore how these leaders began their careers and how they see the industry today.

Rick Wollams is in charge of one of the largest claims organizations in the world. What was most interesting about our discussion was how he began his insurance career as a front line liability claims handler and worked his way up the ranks. At his heart he is a claims person through and through and clearly cares about the profession and the people that work for him.

The Claims SPOT: Tell us about your first claims job

Rick Woollams: My first claims job was as a claim rep, inside liability claim rep, at the Travelers in Cleveland, Ohio. It was a really good first job because it was all liability. Back in the day, when personal lines and commercial lines were blended, I could be doing personal auto, commercial auto, homeowners, products liability, commercial premises, or construction. It was all sizes and shapes so it was a great first job.

The Claims SPOT: How was the transition from practicing law to now being on the claims side?

Rick Woollams: Well, it took a little getting used to.  The nice thing about it, besides the fact that they paid benefits, was that I was the client. I went from being an executor of the orders of somebody else to the guy who gets to tell the lawyer what to do, and that’s a lot of fun.

The Claims SPOT: What was the most unusual claim you ever worked on?

Rick Woollams: I had a homeowners claim once where two guys were trimming branches from a tree on one guy’s yard. This is the guy who comes over with the chainsaw and is climbing around up in the tree, cutting down limbs, and the actual owner is down on the ground watching. So the guy cutting down the limbs does it wrong, falls out of the tree and breaks his leg, and of course sues our homeowner. His theory of liability was that since the owner was on the ground he must have had a better view and therefore you could have prevented the fall.

“there’s something gratifying about being the first guy in a big and complicated claim to see what’s going to happen”

The Claims SPOT: What was the best result you remember achieving as a claims handler?

Rick Woollams: I don’t know if it’s necessarily the best outcome, but there’s something gratifying about being the first guy in a big and complicated claim to see what’s going to happen. To really understand the claim well enough to say – “here’s what’s going to happen in this claim.” Even though maybe you may be able to change how it’s going to happen, or maybe you can’t, to really understand it that well, and to be among all the lawyers and all the professionals associated with it, to know that is very gratifying.

I’m always pushing my people to understand that this is chess, and you don’t play chess a move at a time. You play it a bunch of moves ahead (if you’re doing it right) and that’s what we have to do.

The Claims SPOT: So when did you realize that you wanted to stay in claims and make it your profession?

Rick Woollams: It seemed to me pretty early on that it was an interesting and challenging job and that there was a lot of room for advancement within it so that if you devoted yourself to it hard, and you worked at it hard, you could do well. I also found it was truly intellectually fulfilling work.

The Claims SPOT: What do you think are the biggest roadblocks for people entering the profession now?

Rick Woollams: The first claim job, now, because we as an industry are so much more specialized, might cause some people to have a hard time breaking through into something that is more intellectually interesting. In that first job you might be getting an unending stream of the exact same thing, and that might be difficult.

The Claims SPOT: When you got your first management job, what was your biggest concern?

Rick Woollams: Well, I was managing a bunch of people that I had been working right next to the day before.  I was promoted to a supervisor in the same claim office and, while I know there are pluses and minuses to that, that sort of immediate change in status among your peers was a really uncomfortable thing.

The Claims SPOT: As you moved through management what do you see as the next biggest challenge or concern?

Rick Woollams: It’s trying to resist the temptation to spend my time doing the things I’m comfortable doing, and that I know I know how to do well.  Because as you progress, you need to understand that each new job has with it a set of responsibilities that are different than the ones before. You have to embrace those differences and get good at them.

The Claims SPOT: When you were younger, what did you want to be when you grow up?

Rick Woollams: I have to go back to when I was a kid and I guess I wanted to be the right fielder for the Cleveland Indians, Rocky Colavito because I was a Cleveland Indians fan and he was our great player at the time. So like every small town kid in the Midwest I wanted to be something like that.

The Claims SPOT:  What do you see as your primary charge in your current role?

Rick Woollams: Well, you have to start with the big number on the board, right?  So that’s payout.  I run an operation that spends, in really, really round numbers about $1.5 billion a month in claims, so job one is to make sure that we’re managing that claim inventory to its appropriate outcome every single time.

“It’s still going to be about the human being figuring out the right answers and figuring out how to interact with this person across the table or on the phone to get the right outcome.”

The Claims SPOT: If you could look into the future, what do you see that claims organization in the future looking like?

Rick Woollams: Technology will drive it to be more decentralized and at some point in our business it will hardly matter where, physically, you are. There will always be certain subsets of our activity where it does matter.  You have to attend a mediation or settlement conference, you have to climb on a roof, or do an inspection. Those tasks will still require the physicality to matter, but a lot of the other things that we do as claim people, physical location doesn’t matter. You don’t necessarily need to be in the office, you don’t necessarily need to be in the city or the county, and you can be in a lot of different places. I also think you’ll continue to see various kinds of technological tools to make claim people smarter and more productive.

The Claims SPOT: Do you think claim handlers are being asked use technology more so that they’re not necessarily going back to the art of claims?

Rick Woollams: I’ll always be a defender of the art, so I’ll always be skeptical about tools that say they’re going to do the thinking for us.  To me that’s the core of what we do is the thinking part.  I think it’s great that we’ve got a lot of tools to bring us more information and make us more efficient and be able to chop the claim up into little segments where some of it can be done by others.

But at the end of the day a claim person’s craft is thinking about what the right outcome is and strategizing about how to get there and then the personal interactions that get that outcome.

The Claims SPOT: If you were giving advice to claims executives, managing groups in the industry, what would you tell a claim executive now?

Rick Woollams: Well, if they’re working for other companies, I don’t want them to be better at what they do. So I’m not sure I would give them advice.  Or if I did, I might intentionally give them bad advice.

The Claims SPOT: Well, what would you tell your own executives, then?

Rick Woollams: Well if I’m talking to my own, then it’s embrace the hard parts of the job, embrace the parts that you are less comfortable with. I’ve got a lot of people that work for me who grew up in this business as technical claim people. Managing their transition from being purely technical, to mastering the financial and process and HR-related aspects of those jobs, is the main nudge I have to provide.

I’ve had to go through that as well. I find myself wanting to lapse into wanting to spend half the day doing something really technical because it’s fun.

The Claims SPOT: And for the individual to succeed at this business do you have any keys to their success?

Rick Woollams: There’s a couple of things.  First, you’ve got a whole bunch of different competing tasks awaiting you every day but do the hard thing first.  The human temptation is to let it go and knock off a couple of easy ones, but the hard thing never gets easier by letting it sit, so you’re better off just doing it and knocking it off and then moving through the day with greater dispatch.

That plus simply working harder never hurts you. My attitude was always give me a job to do and to do the job to the absolute best.

The Claims SPOT:  Do you have a sense that the younger generation in the business is always looking for the next opportunity and not as “nose to the grindstone” about their current role?

Rick Woollams: Yeah, they’re clearly a more interactive group so that’s a good point it could be a generational thing.  I do, intellectually think it’s just the right answer, just as one of the other bits of advice I give our claim people is that they shouldn’t look upon career as a purely vertical progression.

I’m always encouraging people to look to either side of where they are as well as looking up. If there’s one thing I’ve learned here, in a place where we have lots and lots of lines of business, are people with broad knowledge are really valuable. The idea that I’ve got someone who has maybe seen a little bit of the underwriting world, and seen two or three lines of claims, means a person that is intrinsically more valuable than someone who has just done one thing.

The Claims SPOT: What do you think is the most innovative technology that claims has embraced that has helped the industry?

Rick Woollams: I am going to speak to this from a very narrow perspective now – that’s just what’s going on here in my world.  For us, it’s the ability to have sort of the virtual workstation at home or at some remote place.

That technology is so powerful in terms of what it lets us do that that is the big thing.  We’ve got lots of other stuff going on, but for me that’s the headline and we’re just now starting to scratch the surface of what that can do for us in terms of how we deploy our people and what that does for the physical structure of the claim department and its cost structure. I’m expecting big things out of that.

INTERVIEW HAS BEEN CONDENSED AND EDITED

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Richard Woollams is the Chief Claims Officer of Chartis U.S. (formerly AIG Commercial Insurance), a position he assumed in April of 2008. In this capacity, he oversees the operation of Chartis U.S.’s Primary Claims, P & C Severity Claims, Financial Lines Claims, Claims Resources and Solutions, Commercial Property Claims, Lexington Claims, Aviation Claims, Canadian Claims, Structured Settlements and Claims Operations and Systems organizations. Prior to assuming this role, Rick was the President of P&C Severity Claims for AIG Domestic Claims Inc., where he was responsible for the operations of the Aviation, Canadian, Lexington, Excess, Environmental, Asbestos, Mass Tort, Healthcare, Excess Worker’s Compensation, Pollution Insurance Product (PIP), Risk Finance, AIG CAT Excess and Commercial Property claim departments. He held that position from 2002 to 2008. Previously, Rick served as Senior Vice President, leading the Excess Casualty Claims Department of AIG Technical Services, Inc. (AIGTS) – the predecessor to AIG Domestic Claims – a position he held for over four years.

Prior to joining AIGTS, Rick was the Second Vice President for Strategic Claims at Travelers Property Casualty. He began his career in the insurance industry in 1988 with Travelers, holding a variety of claims positions there before joining AIG Domestic Claims.

Before joining Travelers, Rick was an attorney in private practice in Ohio. He graduated from the Cleveland State University John Marshall School of Law in 1979 and was admitted to the Ohio Bar in November of the same year. Rick was the Chairman of the Claim Committee for the American Excess Insurance Association and is a current member of the Claim Committee for American Nuclear Insurers.

The Need For Claim Auditing In Catastrophe Loss Situations Such As The Gulf Tragedy

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Claim auditing is an essential tool to ensure best practices and timely claim payouts

Obviously the tragedy caused by the Deepwater Horizon accident will be felt for years, if not decades to come. I have previously commented on claims issues surrounding this loss that have yet to hit the industry in my Commentary: Expect Gulf Oil Slick Claims To be Extensive And Impact Multiple Lines of Business. Recently there have been numerous reports about the speed and adequacy of claim payments being made by BP, including a statement by President Obama, that White House will be watching the claims process closely (see White House Statement of June 7, 2010).  On June 9, 2010 it was reported that Admiral Thad Allen met with BP to ensure “every legitimate claim is honored and paid in an efficient manner” (see UPI – Allen, BP Meet on Claims Process). And even more recently, the administration is seeking BP to establish a compensation fund so the Federal Government can manage the claims process (see White House: Obama poised to take claims processing away from BP unless it changes system).

Managing this enormous claims undertaking won’t be easy and will be criticized for years to come. Regardless, claims auditing is a way to ensure ongoing claims practices are fair and expeditious.

The enormity of the claims process

While changing daily, there are some reports, BP has processed over 51,000 claims and paid over $62 million (see BP Oil Spill Claims Reach $1.6 Billion). With over 25 claims offices and some 600 claims professionals working to resolve matters, this is one of the largest claims organizaitons operating in this country focused on one event.

From a claims management perspective, handling this many claims is an enormous task that is fraught with potential problems and criticisms.  It is a massive undertaking rivaling claims organizations for some of the largest insurance companies for all lines of business. Keep in mind that it all had to be established in a matter of a few short weeks.

While there is no easy way to manage such an onslaught, there are a few things that can be done to make sure best practices and timely compliance is occurring: Internal reviews and audits.

Audit to ensure compliance and look for waste

There are a variety of Audits that should be explored when faced with a large catastrophe situation. A proper audit can look for weaknesses in the operation, provide valuable feedback to improve those weaknesses and further protect against waste and mismanagement. In a large CAT loss situations, such as in the Gulf tragedy, audits should be an essential element of the process.

3 Claim audits that should be done, preferably by a third party not associated with those managing the claims, can include:

  1. Best practices and procedural reviews to ensure there are no delays in payments, the claims staff is appropriately trained, and to identify inefficient processes.  When done correctly, and regularly, these reviews can save money and ensure appropriate payments are being processed timely and appropriately.
  2. Anti-fraud assessments are needed to ensure fraud is identified and prevented. The reality is in any catastrophe situation the unscrupulous will come out of the wood works to claim all sorts of false damages. Fraud diverts resources away from legitimate claims and will only create further delays in the claims process. Ensuring fraud is properly detected, and ensuring law enforcement aggressively prosecutes those involved, is essential.
  3. Vendor selection and compliance must be reviewed to ensure appropriate vendors are being hired and “kept honest” to help those who have been damaged. Many vendors will say they can handle certain types of losses or repairs when the reality is they are not staffed nor experienced in the areas they claim to be.  A proper vetting process and regular audits of those vendors, is the best way to ensure compliance and prevent waste (see How Do You Effectively Manage A TPA? Speak Up And Be Active!).

Audits performed periodically can ensure ongoing quality claims services, and help to see if claims are being handled consistently from office to office. Successes from one office can then be passed to others, and failures can be used as learning experiences to prevent future problems.

What other audits should be done in the Catastrophe loss situation?