One Call’s new owners just announced the hiring of Tom Warsop as the company’s new CEO, replacing Rone Baldwin.

Warsop, most recently CEO of TPA York Risk Services, will be the 4th CEO of OneCall since the company was formed by prior owner Apax. Unburdened of the crushing debt load that buried his two predecessors, Warsop was likely picked to revamp the troubled company. While no industry insider, he’s a very smart, insightful exec who learned a lot – and forced change – during his brief tenure at York. He also has deep experience in the tech side of things which will be quite useful in addressing Polaris.

(disclosure I did a brief consulting project with York some time ago; I was impressed with Warsop’s drive and engagement.)

So…what now?

Challenges abound – what to do about Polaris, the IT system always a few months from completion; the omni-present push to control costs; the hugely difficult ask of growing in a shrinking industry; well-entrenched and highly capable competitors. motivating and engaging a workforce worn down by a revolving C-suite, perpetual staff reductions, and increasing pressure to generate volume.

OneCall’s biggest “asset” is relief from the debt burden loaded on the company by former owner Apax. With about $150 million in annual debt service costs, it was darn near impossible for the business to make critical investments, upgrade technology, and incentivize staff AND keep bondholders happy.

I’d speculate there will be other management changes in the not too distant future as Warsop will almost certainly seek to bring in folks he knows from his past work at York and in the IT sector.

Note – I almost always ping One Call marketing prior to publishing stuff about the company. However, I’ve found the responses have been, well, not enlightening.

The LA Times’ Patrick McGreevy penned a piece on California’s State Fund – one that I contend is highly misleading.

McGreevy – and his editors – did their readers a disservice when “reporting” on executive compensation at the State Compensation Insurance Fund of California, focusing only on complaints about compensation and unsubstantiated claims of nepotism. Fact is, under CEO Vern Steiner, the State Fund has made a remarkable turnaround, one that has literally and figuratively paid dividends for businesses and taxpayers throughout the state.

McGreevy failed to mention anything about the Fund’s 2019 performance ($160 million in dividends paid to policyholders while significantly strengthening reserves) – performance he knew about before he wrote his piece.

Here’s an example of McGreevy’s reporting; an uniformed – at best – comment from one so-called “former industry executive”:

“It’s a very cushy gig…They don’t do much of anything and they get paid a ton.”

[Oh, and the guy who said that worked for a not-for-profit insurer – USAA – that paid it’s CEO 5 times what State Fund CEO Vern Steiner made. And the State Fund had a MUCH better year.]

But about that comment; specifically “they don’t do much of anything”.

I called Steiner to ask how the State Fund has delivered those results. Here’s what he said.

MCM – Talk about the Fund’s financial performance.
VS – ” [We] went into this year knowing that the Fund’s financial strength was exactly where California needed it to be to handle the market no matter what comes. Reserves are very strong; surplus is what we need to withstand any catastrophe; biggest risk is significant negative reserve development from unexpected system changes – we can handle this.”

“For 2019, we planned to break even, instead, investment performance was so strong that we realized $100mm in capital gains due to equity investment performance.”

MCM – What are the factors that drove this?
VS – There have been several transformative initiatives at the Fund, largely driven by claim performance and investment performance.

This could not have happened several years ago. A few years ago the State Legislature authorized additional executive positions at the Fund and allowed the Fund to invest in equity. We hired a Chief Investment Officer, and the equity investments have generated much more in unrealized cap gains. Our state insurance code only allows us to invest 20% of unrestricted surplus in equity; as our equity portfolio increased in value, it exceeded that 20%, so we had to sell off equity to get under 20%. This happened several times in 2019, creating a large capital gain. We didn’t need this money for surplus or reserves and we are not for profit, so we are giving them to our policyholders.

Since we were given the authority to invest in equities we have generated $433.8M in capital gains.

MCM – Has the Fund’s medical management of claims affected results?
VS – “The Chief Medical Officer position was also created by the Legislature. After Dinesh Govindarao came on board we created a comprehensive approach to the opioid epidemic; the work that was started in 2013 is impacting reserves for claims going back to 2008.  About $60 million dividend is from claims improvement…[there] may be as much as several hundred million more in dividends from our opioid initiatives alone.”

“After the Palm Medical case, we had not removed any physicians from our previous network, so we closed it down, rolled out a new network in 2016, and did not include physician offices in our pharmacy network.  That had a massive impact on lowering claim costs and reducing inappropriate compound medicine and opiate prescriptions.”

MCM – Any significant changes to claims handling?

VS – “When the Chief Claims Officer joined at the end of 2015 we redesigned the claim model to move the 1/3 of open claims that were from early 2000s to a dedicated group of adjusters specializing in resolution. We had (received) a million claims over a 5 year period [this happened back when the California work comp system was in crisis and the State Fund had over 50% market share]

In 2015 a third of our open claims inventory was from that period, managing these claims was taking a lot of attention away from focusing on the 20,000 new claims we get every year. We separated the old and new claims, have different people working those and as a result we are closing claims at faster rate than ever and this continues to improve.”

The result of all these people in “cushy jobs not doing much” is a State Fund that’s:

• never been stronger financially,
• returned $160 million to policyholders, and
• one of Forbes’ 500 best mid-sized employers to work for.
  [btw USAA – where that “former exec” worked, the one where the CEO makes five times what Steiner does – didn’t make Forbes’ list.]

What does this mean for you?

Kudos to the State Fund for delivering remarkable results for patients, policyholders, and taxpayers. 

Note – I emailed Mr McGreevy early today asking for an explanation as to his article didn’t include information re the improvements in financial and claim outcomes. If he responds I will keep you posted.

If the insurance industry – and your organization – is going to a) make real progress and b) survive the next hard market its/your leaders must reward those who take risks – not fire them. (this is a follow-up to my last post)

In order to do that, our “leaders” must understand the value of failing.

A C suite exec with decades of success in work comp claims and executive leadership sent me this:

the lack of innovation is as much about penalizing those with ideas as it is anything else.  Whether my own direct experience as an individual contributor or member of a team, or watching others, I’ve seen way too many ideas be dismissed out of hand, ignored, or simply not advanced because of a culture that is just too harsh when it comes to ‘failure’.  The industry has, generally speaking, failed to realize that great innovation often comes from failed innovation.  I can think of multiple executives I’ve worked for where I simply gave up on advancing ideas because of their reaction to suggestions from me and others.

An example.

One of our daughters works for a huge tech firm that does data storage, backup, and a lot of other stuff I don’t pretend to understand. Molly (daughter 2) and her team are responsible for some really big accounts, one a huge business application company. Long story short, the team is always looking for ways to provide increased value, deliver more services, and help the client grow. Her company was working on a new tech platform/capability/service, one which might help Molly’s client speed up its development cycle and improve service delivery.

This was new, not-tested, bleeding-edge stuff. The team debated if they should pitch it to their client, as there was a better than 50/50 chance it would not meet the objectives.

Throwing caution to the winds, they pitched the $15 million+ project to the buyer, telling the buyer that it would likely “fail”.

The client bought it.

She asked why, given it might well fail to deliver, which would mean her client blew $15 million, which might be pretty awkward for the decision maker.

Nope – the client said there was every reason to go forward.

First, it might actually work, which would dramatically improve a couple key metrics;

Second even if the project “failed”, it would be well worth it because the client would:

• gain really valuable experience and insight into new technology;
• improve the client’s ability to implement new and unique technology; and
• help Molly’s company get better faster, increasing her company’s value as a partner.

Yeah, I can hear all the reasons this is fine for tech but not for workers’ comp. But those aren’t reasons – they are excuses – and lame ones at that.

Tech can do this because they have a lot more money than we do.

BS.  The work comp industry is making more money now than it ever has – there’s never been more dollars available for innovation.

We are doing great now, so no need to do anything different (if it ain’t broke…)

BS. The time to prepare for the storm is when the sun is shining, because sure as hell you won’t be able to patch that roof during the inevitable hail storm.

We don’t have the ability/expertise/employees we need to innovate.

And…whose fault is that?

You need to build a culture that rewards smart failure, that values innovation – which by definition includes failure, that is excited about doing stuff better, faster, and more efficiently, that recognizes risk-taking as critically important to growth in revenues and margins.

That’s the single most important change we need to make – and those who do will win.