THE TASK FORCE

John Musgrove October 2, 2009 at 1:14 am Director of Risk Management Western & Southern Financial Group Cincinnati, Ohio Risk manager doubles builder's risk coverage limit at a 35 percent discount. It's one thing to make a key play in a backyard game of Wiffle ball or Frisbee, with only the family dog watching. But what about pulling off a great play when your company, indeed an entire city, is watching? That's the situation in which John Musgrove, a director of risk management with Western & Southern Financial Group, found himself when his company embarked on the construction of a 41-story office tower at the corners of East Third and Sycamore streets near Cincinnati's riverfront. The construction of big buildings like that might be common in Dubai, Shanghai or even Mumbai, but it's not an everyday occurrence in the Queen City, or the Midwest, for that matter. "Maybe for New York City this is not an out-of-the-ordinary risk but for what we do here in risk management at Western & Southern and for the city of Cincinnati this is an extraordinary project, just the scale and scope of it," Musgrove said. When completed in the spring of 2011, the 41-story office tower, which has as its crowning feature a 40-ton steel replica of Princess Diana of Wales' tiara, will be Cincinnati's tallest building. For a building that big with that much visibility and with a price tag of more than $400 million, Musgrove needed to produce coverage to match. "I guess that was the main challenge--that we were getting as broad a coverage as we needed and at a fair price also," Musgrove added. In working with Turner Construction, one of the nation's largest contractors, most risk managers might have been content with using Turner's builder's risk policy, which offered limits of $100 million for what will be known as the Great American Tower at Queen City Square. Musgrove and his band of colleagues at Western & Southern weren't exactly satisfied with that. For one, they had an anchor tenant, the Great American Insurance Group, which in addition to agreeing to rent 530,000 square feet of office space in the new tower, just happened--coincidentally or not--to offer a specialty in builder's risk insurance. Musgrove and his colleagues thought they might be better served by having not $100 million in builder's risk limits, but $200 million. After all, the $400-million project is across from the Great American Ballpark, the diamond where the Cincinnati Reds ply their craft and where thousands of tourists and others would be walking around in summertime, easy targets for a wayward construction crane, should it get any nasty ideas and decide to plummet to earth: You get the picture. Responsibility Leader: Judie Tsanopoulos October 2, 2009 at 1:14 am If there is one thing that characterizes our Risk Innovators as Responsibility Leaders, it's persistence. Judie Tsanopoulos at St. Joseph Health System refused to give up on her efforts to match appropriate medical treatment to specific work restrictions to ensure that workers can return to work. To accomplish that task, she had to persist in changing the culture along with the treatment. Her program to change the culture of work at St. Joseph revolved around an effort to preserve the dignity of every injured worker or patient. It even meant changing the medical language to avoid negative repercussions. And in the process, the changes improved employee morale and helped workers lose fears of reinjury during recovery and return-to-work. The result, besides employees returning to work more quickly, is fewer lawsuits and lower workers' compensation costs. And healthy employees too. Nick Suminski October 2, 2009 at 1:14 am President Paul Davis Restoration of Central Nebraska Grand Island, Neb. A Nebraska insurance restoration company goes to great lengths to restore a rural landmark. It's more than four miles from Junior Bartels' cattle and grain farm to the Zion Lutheran church which dots the countryside a few miles outside of the little town of Tobias, Neb. And over the decades, even when the corn was at its highest, Bartels could always see the white cross that topped the steeple of the church where he has been a congregant for more than 80 years. That was until last July, when a windstorm blew the church's steeple and bell tower to the ground, destroying them. The church elders carried more than adequate insurance. But what do you do when what you are trying to replace is more than 100 years old, you have no blueprints and you're working with a structural foundation that is paltry by today's standards? Enter Nick Suminski, president of the Paul Davis Restoration Co. of Central Nebraska. Suminski and a team of architects and engineers have come together to painstakingly research and find a way, innovate, if you will, to rebuild the steeple tower and get that cross up to where Junior Bartels can see it again. "It is, well I guess you could call it a landmark," Bartels said. And Bartels and many others agreed that they wanted to see the church restored completely. He said he's seen what happens when other churches in his region lose their steeples and don't replace them. "We know of another church where they didn't replace the steeple. And it spoiled the looks of the church," Bartels said. To reconstruct the steeple and bell tower, Suminski and his crew hauled the broken architecture more than 90 miles to their shop in Grand Island. There, using the broken pieces as a pattern, the company is reconstructing the tower and steeple in two separate pieces. The last time the steeple was erected, back in 1907, horses and pulleys were used to lift it into place. This time, the builders have fastened cables to the church's interior and will use those to lift the steeple back into place, an event now scheduled for mid-September of 2009. Rebuilding the steeple to exactly the way Junior Bartels remembers it is one thing, but the foundation of the old church isn't much. "Only one course of block approximately eight inches by eight inches by 16 inches was used as a foundation on this project," said Randy Dye, an associate with Paul Davis Restoration. What's worse, the drainage under the old church was poor. There was no solid ground under the foundation to a depth of six to eight feet when it was probed, Dye relates. Dye said part of the restoration will now involve the pouring of a three-foot thick concrete foundation over crushed rock. With that in place, there should be a solid enough base for Suminski's team to erect the tower. THE TASK FORCE October 2, 2009 at 1:14 am Persyn assembled a task force of representatives from the other utility members of the consortium to identify what risks were not covered by their current general liability insurance program. Persyn then gathered his brokers at Marsh and other environmental insurance experts to discuss the alternative coverage needed to mitigate the specific risks associated with carbon capture and sequestration. Before approaching underwriters, Persyn sought out geologists to explain the scientific theory about rock formations holding the carbon, and he also engaged members of the oil and gas industry, which has for 60 years pumped carbon dioxide under ground to force oil out of wells. "It's not quite as scary once you get all those disciplines together," he said. "We talked to insurers and underwriters who understood the concept." Putting together a policy was complicated by the other utilities in the consortium, all of which had different appetites for risk and some of which preferred to sit on the sidelines completely. Jonathan Ball, managing director at Marsh, said Persyn ran the show. "He was the captain of the team, taking the lead in addressing these things," said Ball. "We weren't working for four or five risk managers, we were working for Will. There was no one else raising their hand saying they wanted to take this on, so Will stepped up to the plate. He took all the steps in designing something that would work for all of them." The end result was absolutely innovative, according to Ball. The program was the first of its kind, a complete environmental liability package, including bodily injury and damage to natural resources that could occur if the sequestration area were to leak into the ground or water. Ball said five different environmental insurance carriers were eventually narrowed down to one and Persyn refined the terms and conditions so that the policy had broader coverage over a longer time period and offered more protection and lower premium than his previous environmental coverage. --By Erin Gazica POP. 150 October 2, 2009 at 1:14 am Some people win awards for sky scrapers that jump tens of stories into the sky in the middle of cities with populations in the millions. But Suminksi is pulling down this award for a church the closest town to which is Tobias, with a population of about 150. "It's not every day that you get to work on a 100-year-old church out in the middle of Nebraska," Suminski said. "The biggest challenges in pulling this off were trying to understand how this thing was built 100 years ago, " Suminski said. "Just trying to figure out how they did it. Why they did what they did and how can we bring it back and make sure that it doesn't happen again." For his part, Bartels, who articulates like a born story teller, can relate that the deer moved in on his sweet corn pretty aggressively this past summer and that a beaver, or a group of them, decided to interrupt his phone service as well. He also confides that his own sons painted that cross once and he wouldn't mind seeing it punctuate the horizon again. "If I live long enough," he adds, chuckling. --By Dan Reynolds Mark Robinson October 2, 2009 at 1:14 am Vice President Trade Protection Service UPS Capital Atlanta Flexible Parcel Insurance goes where Declared Value coverage has never gone before. Getting packages to their final destination is important. But sometimes it's even more important that they arrive, not just at the right place, but also at the right time. Mark Robinson, vice president for trade protection services at UPS Capital, began to recognize this problem in the late 1990s, when he began to see problems with the late delivery of mortgage loan documents. Mortgage closing documents are carefully prepared, and the loan amounts and interest are calculated to the day. Late delivery means that all of those figures have to recalculated, and it means that the closing cannot be completed on time. This can result in losses and delays and potentially lead to the collapse of a deal. At that time, transportation carriers offered Declared Value coverages, but that coverage only protects a shipper for the value of the item, and only if the item is damaged or lost. The mortgage loan documents themselves are just paper and have very little value in and of themselves. Furthermore, documents were not lost or damaged from Robinson's observations; they simply showed up at their destination a day or two late from time to time. Mortgage closing documents that show up a day or two late might as well not arrive at all. While the paper the loans are written on may have little value, the consequences of the delay, any delay, is often significant. That got Robinson thinking about whether there were similar kinds of cases that are time-in-transit related and falling through the cracks with the Declared Value coverages. He found there were other items, such as concert tickets and event tickets that also are worthless if they were delivered late. Certain intravenous pharmaceuticals that are shipped on dry ice, meanwhile, have a limited shelf life and have to be delivered within 72 hours or they would be ruined. Perishable foods, such as seafood and steaks, also have to be delivered by a certain date or they are also worthless. "We heard from customers that this was an area that gave them some concern," Robinson said. "We followed it through to determine why aren't these coverages provided and talking to them about what their losses were." He then began exploring whether it was possible to determine how often there was such a delay, what the potential losses would be and whether it might be possible to build an insurance coverage around that risk that might make sense. The result was the Flexible Parcel Insurance program, which protects against the costs associated with delayed shipments and protects against items that are ineligible for standard carrier liability programs such as Declared Value. The Flexible Parcel program reimburses shippers for specific losses associated with a late delivery. With standard carrier liability offerings such as Declared Value, there is no coverage because the goods are ultimately delivered and undamaged. Flexible Parcel Insurance covers this gap. Mary Ellen Moriarty October 2, 2009 at 1:14 am Vice President, Property/Casualty Educational & Instructional Insurance Administrators Chicago BRING OUT THE BEST October 2, 2009 at 1:14 am He is also adept at bringing together the best. Within the corporation, he has broken down walls in the legal department, as well coordinated with human resources, risk management and every other area that workers' comp touches. Sure, it's part of the McDonald's culture, the "three-legged stool" concept started by founder Ray Kroc. But Johnson is particular adept at making the theory a reality. "I really see him as someone who works very hard and takes pride in creating that kind of coordination," said Whitehurst. It's his grasp of McDonald's corporate culture that also explains his success with comp. In fast-food, there isn't much work considered "light duty." Injured workers can be considered "in the way." So instead of pushing an injured work on a manager, Johnson realized he needed to provide the right incentives. So he devised a way to give managers credits directly on their profit-and-loss statements for taking an injured worker back, based on the medical cost of the claim. "Instead of a push, we created a pull," he said. A major Johnson innovation in the past year has been a push to communicate workers' comp to Hispanic employees, who make up as much as half of his workforce. Johnson, with the help of Gallagher Bassett, is reproducing all information and training materials in Spanish that "conveys the right tenor and tone," said Johnson, reinforcing that the company is there to take care of them, that they are part of the "McFamily." --By Matthew Brodsky Robert Murphy October 2, 2009 at 1:14 am Managing Director Marsh Philadelphia Robert Murphy is not just a broker. He's the leader in the professional sports and arena world. One might ask: Haven't you given this guy enough awards already? Bob Murphy, managing director at Marsh's Philadelphia office, is a two-time Power BrokerTM winner. And with these brokers, you don't want to inflate their heads anymore than they already are, right? Well, with Murphy at least, you get the sense that he values the recognition for the right reasons. "No matter the award ... they're yearly awards. My opinion is, you have to re-earn them, so to speak," he said. "The way that you earn it is based on your achievements for your clients and their perception of your work for them." His clients' perception is quite high indeed. "Bob is way, way, way more than just a broker," said Paul Vogelgesang, vice president of risk management for H&S Ventures LLC, the company that operates the Honda Center and the Anaheim Ducks NHL franchise and a Murphy client. "He's a broker's broker." What does that mean? That he shows others how the job should be done. But it also means, in effect, that he's a client's broker. "It's so basic but most people really flunk this test. Bob listens, Bob understands, Bob puts the client first," said Vogelgesang. With Murphy, it's like "one risk manager talking to another." This approach is what earns Murphy praise with clients around the sports world, but it also has led him to become a true innovator among them. Murphy calls what he delivers "transactional and consultative excellence"--the ability to "take the guesswork out" of clients' cost drivers, to find gaps in programs, and how their total costs of risk compares with their peer group. Whatever you call it, his skills at this alone blows most clients away. As a past client, Jeff Goering, chief financial officer of the NFL's Baltimore Ravens, confided, his franchise is in a "much improved position" thanks to Murphy's benchmarking, which resulting in the exploration of new carriers; the challenging of exclusions, premium amounts, terms and conditions; and improved claims-handling. As Vogelgesang reported, his CEO wants to work with no one but Murphy. After all, it was sticking with Murphy for the gap-filling and benchmarking that led to a "legacy project" for client and broker, a first-of-its-kind captive for sports venues. Mario Marcel October 2, 2009 at 1:14 am Manager, Institutional Capacity and Finance Sector Inter-American Development Bank Washington, D.C. Banking head pushes for financing risk on a pre-event basis in developing countries to avoid more debt and higher taxes. Natural disasters are a serious concern for people in Latin America and the Caribbean. Every year, natural disasters affect about 4 million people in the region, causing some 5,000 deaths and $3.2 billion in physical losses. On top of that, the exposure to natural hazards such as earthquakes, hurricanes, drought and flood has steadily increased over the last decade, with annual losses rising at a rate of more than four times the gross domestic product growth. Mario Marcel, in his role as head of the capital and financial markets team at the Inter-American Development Bank, has developed policies and financial instruments to help the sovereign governments better manage and finance their risk from natural disasters. Marcel found, for example, that the resources needed to pay for natural disaster losses have been based almost exclusively on post-event financing, such as debt or higher taxes. That often proves inadequate because these countries typically face a serious liquidity gap in the immediate aftermath of these events, said Guillermo Collich, senior policy specialist at Inter-American Development Bank. Instead, it is crucial for these countries to financial this risk on a pre-event basis. "What we want is for them to start pre-emptive financing," Collich said. The pre-event financing, however, involves accessing insurance and the capital markets in ways that are unusual and innovative for sovereign governments, said Reto Schnarwiler, director in insurance and specialty at Swiss Re, which is working with the IDB. "The truly innovative piece here is the IDB combines the traditional banking instruments with the insurance and capital market instruments," said Schnarwiler. He noted banks tend to be conservative and are not often familiar with how to use insurance or capital markets to finance risks. One of the products Marcel and his team have designed and implemented in the last year includes a $600 million credit facility to help countries in Latin America and the Caribbean better cope with natural disasters contingent on their development of integrated risk management plans that are acceptable to the bank. The loans, which are triggered based on the magnitude of the disaster, will provide member countries with liquid resources to cover urgent financing needs after a natural disaster of unusual proportions, until other sources of funding can be accessed. Another idea has been the development of a regional natural catastrophe insurance facility that will provide parametric insurance to Central America. As Schnarwiler described, the parametric insurance contracts are devised ahead of time based on a parametric payout formula--objective data that can be easily tracked, such as an earthquake magnitude or the wind speed of a hurricane. When an event happens, those figures will be plugged into the formula to determine the insurance payout. QUICK AND EASY October 2, 2009 at 1:14 am By using this approach, the insurance payout can be determined quickly and easily with little to no dispute. This is a benefit for the sovereign governments as they will receive a payout relatively quickly. It also spares the insurers on the contract from the potential for disputes with sovereign governments over the amount owed. Everything is objective and agreed upon in advance, Schnarwiler said. "It's very difficult to raise new funding quickly after an event, and many of these countries' budgets are already stretched and they cannot raise more debt," he said. "They need to think in different terms how to manage disasters." Marcel, who recently served as chairman of the Presidential Advisory Board on Pension Reform in Chile, also has provided substantial funding to assist the nations of Latin America and the Caribbean to examine, revise and update their existing regulatory structures to support a new range of insurance instruments catering to the complex risks these nations face, particulary with regard to property and agriculture insurance. Marcel and his team have already begun working with Honduras and the Dominican Republic preparing those countries for participation in the contingent loan financing program by the end of the year. The IDB is beginning the first phase of the process and developing integrated disaster risk management programs for four other countries in Central America: Panama, Costa Rica, Guatemal and El Salvador. Other countries are expected to begin working with the IDB on this program in the next year, Collich said. "We are very, very excited. It's a new line of work for us, and we really look forward to continuing under his (Marcel's) guidance," Collich said. --By Patricia Vowinkel Patrick Sterling October 2, 2009 at 1:14 am Director of Risk and Administration Texas Roadhouse Louisville, Ky. Patrick Sterling, a relative newcomer to risk management, has the right combo of patience and persistence to make big changes now. Patrick Sterling has been in the restaurant business for more than 22 years. He's managed restaurants, worked in HR and marketing, and recruited leaders, yet it wasn't until about four years ago that he tried his hand in risk management. In 2004, he joined Texas Roadhouse in an HR function and had risk dropped on him in addition. He did not dither or doubt. He took off. "Patrick is definitely the exception," said his broker John Logan, managing director at Marsh, referring to how quickly Sterling was able to pick up the profession. If you ask Sterling, who is now the director of risk and administration, he will thank all of the "best in the business" risk professionals with whom he consulted, his compatriots at the National Restaurant Association from whom he learned. He'll point to his "advantages": his great team within Texas Roadhouse, its supportive leadership, and his partners such as his brokers and his TPA. But it was Sterling who, a year after coming into the job, took a "hard look" at the company's risk management operations, changed his broker and came up with a three-year plan to become the "best in class in risk management." He put together a program designed to reduce accidents versus claims development, and he's scored some significant results. Since 2005, his team reduced the workers' comp loss rate by 30 percent, resulting in a three-year savings of $1.1 million. With general liability, their loss rate based on revenue dropped 56 percent since 2005, resulting in a three-year savings of $4.4 million. "It's really been a great story," said Scott Colosi, chief financial officer at Texas Roadhouse. A risk manager must be great at the basics, surely, to be named a Risk Innovator, but they must also deliver beyond just the everyday slicing and dicing. One of his truly creative solutions came about for a risk that all restaurant organizations are too well aware of: food safety. To mitigate the risk, he wanted a "gut check on food safety" across the operational side. He considered bringing in a third-party auditor. "It came across as a little Big Brother," he explained. Instead, he transformed a program already within the organization: product coaches who traveled from one store to another teaching food quality and preparation. About 20 of them were recruited and trained to attain Certified Professional Food Safety credentials. He also rolled out a remote food safety audit tool that allows the coaches to capture their audits and provides company executives with dashboard reporting and trend analysis about their progress. "You have to make sure the programs you have fit within your culture so they're not looked down upon, they're embraced," Sterling said. Joe Boures October 2, 2009 at 1:14 am President Specialty Risk Services Hartford, Conn. A TPA consolidates fees into one per-claim fee, even at the risk of a slightly higher price to manage a claim. Often innovation and difficulty overlap. Joseph Boures is the CEO of Specialty Risk Services, a major claims management company owned by The Hartford. Boures, an accountant by training with roots in Pennsylvania, came to SRS and confronted a business under increasing pressure to cut price to sell its services. Clients were under pressure to keep workers' compensation claim costs down. Claims management firms, which typically operate in a low margin business, are under pressure to keep prices down, especially when bidding for new business. One way to do that was to bid low, but not disclose arrangements between vendors and the third-party administrator (TPA) arrangements, which may not be apparent to the client. These costs, for example, can be attributed to managed care or pharmacy benefit services, one of many opportunities that a TPA may have to contract with specialized service providers. SRS has a policy of refusing to enter into any relationship with a vendor where the fee is shared between the TPA and a vendor, but not disclosed to the client, said Boures. "In effect the client thinks they are getting the 'retail' price when it's really kind of a wholesale price," he said. "I believed that clients would feel much more comfortable doing business with us, especially if other TPAs failed to disclose these issues." Sharon Van Sant, director of claims management for AmerisourceBergen Corp., said that "the innovation that Joe has lead within SRS was to create a true fiduciary environment." The issue, Van Sant said, emerged in a recent request for proposal process by AmerisourceBergen to hire a TPA. Fee sharing arrangements, she explained, makes it nearly impossible to compare bids because the arrangements among vendors and TPAs are all structured differently. The innovation, in a sense, that Boures adopted, was to forgo these relationships entirely. "Because SRS doesn't participate in these arrangements, their per-claim fees were a bit higher than most of their competitors." The result of these fee-sharing arrangements, besides giving a TPA the opportunity to lower its per-claim prices, allowed some TPAs to "collect some 'hidden' costs that clients were not counting as part of their programs." The effect of these fees could result in a "conflict of sending more volume to vendors, whether the claim needs these services or not." It meant, she said, that "the TPA and the vendor benefit at the cost of the client's results." Because of this policy to avoid any conflict of interest, or appearance of conflict of interest, SRS was often at a competitive disadvantage during the RFP process. Its claim rates often appeared to be higher than that of the competition. AmerisourceBergen quickly saw the problem and SRS was able to structure a new pricing format that clearly, and transparently, consolidated all fees, from SRS itself and from its vendors, into one per-claim fee. This process aligned the interests of the TPA and the client and removed the incentive to deliver volume-based services that were unnecessary. "We were determined to create an environment where the focus of our collective efforts was to improve the company's program," Van Sant said. The program at AmerisourceBergen now reflects the total cost of risk in its metrics. Robert E. Keller October 2, 2009 at 1:14 am Vice President, Compensation, Benefits and Safety Norwood Promotional Products Indianapolis Norwood Promotional Products had almost given up on its employee benefit and safety programs ... until Robert Keller stepped into the picture. When it comes to the resuscitation of a corporate employee benefit and safety program, Robert Keller of Indianapolis-based Norwood Promotional Products is without peer. "Compared to any other company that has tried to do a revenue and frequency of loss-reduction program in the workers' compensation and safety areas, I have never seen anything come even close to what Bob Keller has done at Norwood," said Brad Hart, senior vice president, risk services practice leader in the New York office of Lockton Cos., LLC and an adviser to Keller on a wide range of matters. "Bob is focused and driven," noted Hart, whose firm handles claims management for Keller and places all insurance for Norwood. (AIG is the company's carrier.) "Though he is willing to change his mind, he wants his timelines to be short." Added a former top executive at Norwood when Keller was hired in March, 2004: "He worked in some big companies (General Electric, General Dynamics, R.R. Donnelley. We recruited him. We kept expanding his job responsibilities. His persistence and personal organization were very noteworthy." Keller moved fast when he joined Norwood. He had to. By all accounts the company's employee benefits and safety arenas were in a shambles. The claims costs for workers' compensation were way out of control. THE NUMBERS October 2, 2009 at 1:14 am Consider some 2005 numbers that confronted Keller: "For a company of about 2,000 plant employees at six manufacturing sites," said one insider, "workers' comp losses were out of control--running at about $625 per employee ($1.22 million) per year for the 2005 calendar year and 838 days away from work due to plant injuries." By comparison, work-related injury days out of plant costs incurred in the years since were: --2006. Days out of plant, 651. Costs incurred in calendar year, $774,758; average cost per employee, $387. --2007. Work-related injury days out of the plant, 109. Costs incurred in calendar year, $432,104; average cost per employee, $242. --2008. Work-related injury days out of the plant, 51; Costs incurred in calendar year, $210,863; average cost per employee, $107. Those results were achieved by following a disciplined roadmap Keller set down immediately with the support of management. Keller, 59, came to a decidedly smaller-sized company because, he said, "I wanted the private company experience. I think smaller private companies are really the growth engine in the United States." Norwood has revenues of about $300 million a year, with 2,200 employees making more than 4,000 promotional products. Before Keller joined Norwood, the company had no risk services manager. The company's former insurance carrier was processing claims. There was no companywide workers' comp program, with no modified duty return-to-work program. Safety was a low priority. Human resources handled safety and workers' comp, with no ownership of safety by operations. Now, said Keller, "Safety is not done on a corporate level, but on a department-by-department level." Safety charts are circulated weekly throughout the company. There are monthly safety awards and postings for every plant. Machine guards are now mandated at all appropriate positions. That was one of the first steps Keller took upon joining Norwood. Other Keller improvements include: --Safety Power-Point presentation to all employees. --Biweekly statistical process analysis applied to work-accident days out of the plant by number of medical and indemnity claims and dollar costs. --Companywide policy/procedure forms to all treating medical practitioners. --Designated top-seven safety categories with action programs directed at every plant. --Dedicated safety bulletin boards in every plant. Savings were used to fund 50 percent of a renewed 401(k) company match plan and medical plan premiums were held to no increase in 2007. The company had to suspend 401(k) contributions in previous years due to high workers' compensation costs. "People throughout the company have learned they can rely on Bob," said a former Norwood executive. --By Steve Yahn Dustin Ng October 2, 2009 at 1:14 am Actuarial Analyst Integro Insurance Brokers New York Integro creates custom cost allocation models using behavioral factors such as slip and fall claims and indemnity actions. Financial executives might want to believe that most cost-allocation models should be straightforward, and in many ways, they are. Many models are basically off-the-shelf programs. But, speak with any manager and you will typically hear complaints, especially if they are candid, about the unfairness of a model imposed by the head office. "The idea to custom-build allocation models came from the recognition that risk managers of large corporations are often met with substantial resistance regarding the validity of appropriated financial responsibility," said Dustin Ng, a broker and actuary with Integro Insurance Brokers. That most often happens around the issue of risk transfer costs, said Ng. Who will pay for what part of an insurance premium? Who will pay for the loss? Most allocation models were rather generic and often failed to take into account factors like having a large exposure, but with an excellent loss control record. By contrast, a much smaller risk and smaller exposure could enable a manager to be careless, provide less attention to loss control policies, often because the amounts of loss would fly under the corporate radar screen. "Existing allocations avoided getting into unconventional methods because they are difficult to implement and justify," Ng said. "Just because something is difficult doesn't mean it can't be done." Margot Roth, risk manager at Whole Foods, started using a model developed by Ng last year with excellent results. "It's been absolutely great and we adjust the model every quarter," she said. Building on existing allocation practices, custom allocation models have been developed that weave influences sometimes overlooked in a standard off-the-shelf analysis, according to Ng. For example, some of these influences could be "loss, behavioral components, peril exposures and others." Roth explained that the model that Whole Foods uses incorporates behavioral factors such as slip-and-fall claims, and indemnity actions into the analysis. To develop these kinds of models, the broker and analyst must be unusually familiar with the client's operations. If we do our job right, Ng said, "the resulting allocations yield justifiable blueprints for financial planning while stopping the 'blame game' and turning the focus on accountability." This somewhat unanticipated benefit of the new allocation models has helped to provoke individual risk managers to become more innovative themselves. In addition to the cost allocation model, Ng calculated the annual loss pick ratios this year, said Roth, and they came in at $100,000 less than that proposed by the carrier, Roth said. The model works with the risk management focus on data and analysis at Whole Foods. "We're always looking at metrics and this new model helps us even more," Roth said, who marveled at the speed with which the model can be implemented. "Maybe he's so fast because he's a speed skater. I wouldn't be surprised to see him in the Olympics one day." --By Jack Roberts The Nike Analysts October 2, 2009 at 1:14 am A pair of Nike analysts centralize exposure data and give their sportswear company a leg up on comparing risk coverage from different carriers. Nike risk analysts Nick Troxel and Marny Maahs had a simple goal when it came time to overhaul their company's risk management system: bring it all under one roof. "The only way to become the innovative, lean and efficient company that Nike has become is to have control, visibility and understanding of what their risk is," said Chad Levine, an account executive with Aon eSolutions, who worked with Maahs and Troxel to bring the system to fruition. "Marny and Nick are taking control of that risk and making the company a stronger organization." Risk management, risk finance and employee relations were among the teams brought into the new system with the new ability to share data with few hurdles. "I picture Nick and Marny running around the Nike campus bringing internal clients into the system in order to break down barriers where data never used to be shared," Levine said. The pair, based at the company's Beaverton, Ore. headquarters, were always thinking on a long-term basis about how users, particularly outside the risk management department, could benefit from the system. "Nick and Marny are doing different things at Nike," said Levine. "They have the ability to step back and think big picture about ways to push the RMIS envelope outside standard claims and reporting." They started from the ground up to help these groups design processes and solutions that solve business problems, "while they are always looking ahead about how this data can interact to provide a bigger picture to manage risk," he added. Troxel said that Global Risk Management had the challenge of looking at risk issues for a diverse organization that integrated a large portfolio of companies and products. "Internal risk management processes were manual with data integrity and validation issues," he said. He noted his unit had mastered the fundamentals of data management to support the core risk control and finance needs such as policy renewal and claims. "However, opportunities existed to integrate that information with that being derived from our risk prevention and loss control initiatives," he said. The vast quantity of data, which needed to be collected, vetted, analyzed and assessed, did not make things easy. As a result, time was wasted on data collection and data management issues. "In order to support the business going forward, Global Risk Management needed the ability to shift our focus to data analysis and critical risk decision-making," Maahs said. Like most challenges today, the main impediments were limited resources. "The philosophy that problems are good wasn't well understood by all stakeholders," he said. Moreover, the ailing risk management insurance system (RMIS) did not make things any easier. "Internal stakeholders were skeptical," Maahs said. "They questioned the intentions of the Global Risk Management team supporting them, posing the question of 'Why are you doing this for us?' " Megan M. Marshall October 2, 2009 at 1:14 am Risk & Insurance Manager The Hershey Co. Hershey, Pa. Megan Marshall has a plan: Speak softly, carry a big stick and send redundant third-party administrators packing. Recently Megan Marshall, risk and insurance manager at The Hershey Co. in Hershey, Pa., ordered a lot of pizza. The pizza was for the kind of gathering that never occurred before she joined the company in February of 2006 at the age of 28. Ordering in pizza for meetings has become a Marshall trademark, but this meeting was special: 20-plus people would be in attendance, half from Hershey and half from the company's claims management vendor, Sedgwick Claims Management Services, Inc. Not only is the pizza a new Marshall trademark, but also the larger number of people attending the meetings--half of the group from Hershey and half from Sedgwick. "This emphasis on an atmosphere of communication and community has had a positive influence on the culture of the Hershey risk management team and enabled it to operate more effectively and contribute greater value to their organization," said Sheila Clark, area account executive at Sedgwick. At the time Marshall moved over to Hershey from Aon's Hershey office, the famous chocolate maker had three TPAs--two too many for Marshall. Hers was a vision of a more efficient, quantifiable and value-added claims management program. It was time for Marshall to consolidate the three TPAs, all of whom had a long history with the company. "The challenges Marshall faced were huge in light of the fact that it meant legacy practices and procedures had to be changed, updated or eliminated," noted Sheila Clark. Marshall's first move was to call for a RFP to nationally recognized claims managers. That proposal went out in early 2007 with the goal of having a new claims management firm in place by the summer of that year, and with implementation to start on October 15. Sedgwick was hired for the task but it was a challenging one. Marshall wanted all of Hershey's 10 facilities to be under the Sedgwick umbrella by Jan. 1, 2008 (half of the company's renewable cycle occurs on Jan. 1, the other half on June 30/July 1 to balance the workload). Claire Lee Reiss October 2, 2009 at 1:14 am Deputy Executive Director, General Counsel Public Entity Risk Institute Fairfax, Va. An online resource for a group of entities with very special needs. What makes creating a Web site so innovative? When the Web site is designed for small and medium nonprofit organizations that can't find insurance. That's the essence of the new Web site Claire Reiss has been developing for the past three years and which launched in May. As the deputy executive director and general counsel at the Public Entity Risk Institute (PERI), a nonprofit itself, Reiss knew there were several other insurance information Web sites but none devoted solely to educating and informing the small nonprofit world, which typically has a tough time finding carriers willing to insure them. PERI's mission is to develop risk management education and training resources for small and medium nonprofits, including local governments and school districts. So the Web site, www.insuranceformynonprofit.org, fits the bill. "Her vision to help small nonprofits from this kind of portal was very creative," said Sean Sweeney, chief marketing officer at Philadelphia Insurance Companies, one of PERI's co-sponsors and a participating insurer. The road to creating the Web site was littered with all sorts of bumps and starts-and-stops. "We went down a couple of different alleys and realized we could accomplish similar goals (educating nonprofits about insurance) by doing a Web site," said Reiss. Certainly there are some major insurance-related Web sites that appeal to nonprofit organizations and offer risk management advice, including the Nonprofit Risk Management Center in Leesburg, Va., that worked with PERI to develop the new Web site, and the site of the Public Risk Management Association (PRIMA), which primarily functions as a professional organization for public entities. "Melanie (Herman, the executive director of the Nonprofit Risk Management Center) had a lot of inquiries from nonprofits that nobody wanted to insure," said Reiss, particularly the small community nonprofits. So that became her all-embracing task--to discover a way to help nonprofits identify their risks and exposures and figure out and understand their insurance needs. "I'm not aware of anyone else doing what we're doing," said Reiss. "It (the Web site) actually gives advice or information to try to get insurance." As a primer for nonprofits, the Web site's key elements include: a free insurance needs self-assessment tool with basic guidance and suggestions based upon the nonprofit's responses; educational information about insurance, including material provided by the Nonprofit Risk Management Center; and a process for submitting requests for insurance quotes. Nick Troxel October 2, 2009 at 1:14 am Risk Analyst Nike Inc. Beaverton, Ore. WALK FIRST October 2, 2009 at 1:14 am Troxel also had to fight the urge to run before they could walk. "With the 'Just Do It' culture, Global Risk Management needed to slow down the pace to make sure the RMIS solution was built in the proper stages to support both the internal stakeholders and the larger organization," he said. Despite, or maybe because of the difficulties, the rewards of getting the new system in place were palpable. Troxel cited the enhanced risk awareness of the various stakeholders in the Nike universe in the top rank. "We were also able to shift our time allocation to analyzing data from gathering data," he said. Maahs listed the one-stop shopping now available for exposure data in its new centralized location as among the greatest benefits. In addition, the automated reporting capabilities proved far superior to merely consolidating spreadsheets or dealing with the various homegrown IT solutions. "RMIS is now becoming the data source of record for Global Risk Management," she said. "Other function teams and business units are looking to Global Risk Management for information." To sum up, Troxel said the ability to provide a more holistic view of risk across Nike was his greatest challenge; and its achievement his greatest satisfaction. "At Nike, it's our nature to innovate and our RMIS allows Global Risk Management to innovate in ways that we were never able to in the past," he said. --By Steve Tuckey Doug Pangburn October 2, 2009 at 1:14 am Director of Risk Control Macy's Paramus, N.J. Macy's and Bloomingdale's risk control officer consolidates retail giant's databases. If you are one of the millions of shoppers or employees in the more than 800 Macy's or Bloomingdale's stores throughout the nation you have Doug Pangburn to thank that your experience remains a safe one. As director of risk control for Macy's Inc., Pangburn directs a staff of 22 professionals who periodically inspect store locations to ensure all safety measures are enforced and figure out what new ones can be developed to meet changing conditions. About two years ago, Pangburn streamlined the entire reporting operation so that all data flowed into one source where it could be put to quicker and more efficient use. To reach that goal Pangburn saw the need to improve the database as it relates to safety and property surveys and the information that comes from them. In general, safety audits result in three data points including any recommendations that may be deemed appropriate, documenting safety procedures by the auditors, and finally any loss analysis. "Before we put in this system, those three data pieces were in all different places," he said. For the most part a soft-spoken self-effacing man, Pangburn had a hard time pinning down his greatest satisfaction in the job. "It is just not something you think about or talk about that often," he said with a chuckle. After some reflection he was able to put it in words. "My greatest satisfaction is being of the group that makes all of our stores safer for our customers and employees," Pangburn said. While it may seem that his entire job consists of coordinating data flows and implementing procedures, he realizes that at the end of the day, if it results in one less employee or customer suffering a serious injury, it can't get much more rewarding than that. SYSTEM DOES THE TRICK October 2, 2009 at 1:14 am Since he can't be in 840 locations at once ready to catch a customer who just slipped on a banana peel, Pangburn will just have to settle making sure the systems do the job. "The system allows us to analyze problem areas, get that information to our safety directors in our stores and continue to try and focus as much as we can on the right people on these areas," Pangburn said. Not all of Pangburn's superiors got aboard right from the start. "Sometimes the money issue became prohibitive," he said. Making it a priority took all of Pangburn's diplomatic skills and determination to see the system through to reality. "Lots of times it is just a time issue with everyone trying to multitask," he said. As for results, Pangburn has seen claims per millions of dollars of sales go down over the past year, in terms of numbers and in terms of dollars. As a self-insured company with policies only covering excess high-end losses, Pangburn savors the fact that the savings from his work go directly to the company's bottom line rather than merely reduced premiums that may or not happen over the years. "The dollars we save are basically our dollars," he said. Chad Levine of Aon eSolutions worked with Pangburn in developing the new procedures and saw a man determined to cut waste and inefficiency. "Doug could see that risk managers spent days copying and pasting documents to fit into a specific solution," Levine said. "This was not accurate, efficient or cost effective." All in all, Levine worked with a person with a clear vision and the ability to communicate it. "He is real easy to work with. He knows what he wants and can translate that to both me and his team and say, 'Here is where we want to go.' '' Seeing the big picture also means ensuring that the executives responsible for safety don't end up duplicating work. For example, such duplication could occur with the people responsible for employee as opposed to customer safety. In other words, silos are best avoided. His leadership style allows for general direction from the top. "From what I could see, he lets them become successful on their own," Levine said. Pangburn has been with Macy's (and its predecessor company Federated Inc.) for 17 years, and in the industry itself for more than two decades. With so much experience it is fairly easy to pinpoint his greatest challenge. "It is keeping the focus on safety with everything else that the business demands," he said. --By Steve Tuckey Ernie Machado October 2, 2009 at 1:14 am Risk Manager Foster Farms Livingston, Calif. Solving a decades-old problem in the poultry industry that often disabled workers with a unique testing program. Ernie Machado, risk manager at Livingston, Calif.-based Foster Farms, is revolutionizing safety standards and practices in the high-risk poultry-processing business. "I really believe that if Foster is successful in sustaining its post offer of employment testing (POET) program, it will change the poultry industry," said Gary Pohlmann, senior vice president, director of risk consulting in Marsh's Atlanta office. Foster Farms, Machado's employer for the last 29 years, processes about 1.2 million chickens and turkeys daily. The seemingly unattainable Holy Grail for Machado and others in the poultry industry is how to reduce upper extremity accidents, which Marsh's Pohlmann said had long been considered "almost a cost of doing business." It's very tough work, Pohlmann added. Machado's search for a solution gained traction when Marsh introduced him to Denver-based BTE Technologies Inc., which custom builds equipment and software that tests protocols and sets up clinics where applicants can be tested. Machado hired BTE and the POET program was kicked off in June of 2008 at the company's Livingston plant and it is now in place at all of the Foster Farm plants. Like other major poultry processors, Foster Farms had worked hard to install the best possible ergonomics-friendly machines and workplaces. But upper extremities repetitive motion injuries were highest on the injury chart. Machado knew that if Foster Farms could better understand the physical requirements of a job and then hire job applicants who demonstrate the physical capacity of the job, the frequency of injuries--particularly in the first year of employment--would decrease. What attracted Machado to BTE was that it had helped "dozens" of companies build protocol-testing equipment. BTE is a leader in functional evaluation technology and rehabilitation technology. If Machado could pull off a POET program at Foster Farms it would be a first in the poultry industry. Machado underscored that the POET testing is open to all employees--incoming and those who have worked for more than a few years and aspire to a better position. With POET they now have a chance to scientifically demonstrate their ability to handle a different job. "Prior to this, much of the job hiring and job advancement work, as well as expediting back-to-work cases, was done very subjectively," said Machado. THE RESULTS October 2, 2009 at 1:14 am To launch the POET program, a six-month-long job-site analysis was completed, test protocols were developed and validated and testing was implemented. One of the early challenges was a conundrum--how can you afford to screen out potential new hires when it is already difficult to recruit qualified candidates? The solution was to classify all jobs in three tiers of physical demand requirements, thereby facilitating selective placement. This procedure also reduced the potential risk of reverse-impact for females and older workers who can't handle the most physically demanding jobs. In addition, an important benefit of the analysis identified a number of ergonomic risks. Machado worked with plant supervisors and BTE's clinical team to implement equipment and process changes to mitigate the risk issues. Although both Foster's human resources department and organized labor leaders were skeptical of POET, they now are fully supportive of the program, said Machado. Results at the one-year mark last June? --87 percent of applicants tested were placed in jobs that matched their physical capability to safely perform the job. --57 percent of incumbent employees tested were able to progress to more physically demanding jobs. --47 percent of incumbent employees were not transferred to jobs that would have placed them at a high risk of injury. --In the year since POET was initiated, 100 percent of new claims have been closed. --A 300 percent reduction in cost in the targeted injury category of new employees, again a huge reduction. Machado is known to colleagues as very bright but also notably self-effacing. "He is fantastic to work with," said Connie Miller, vice president of business development at GTE. "He knows what he wants but he's flexible about how to get there." Added Marsh's Gary Pohlmann: "Ernie is the most knowledgeable, well-rounded safety and risk management person I've ever dealt with." --By Steve Yahn TRANSPARENCY WORKS October 2, 2009 at 1:14 am "SRS proved to our company that transparent pricing really works," Van Sant added. "I know it isn't easy selling a perceived higher price, however it has become a bit easier after (former N.Y. Attorney General Eliot) Spitzer exposed the contingent commission situation between insurance companies and brokers. This conflict of interest is very similar to what is going on in the TPA space." Boures said that the issue is becoming increasingly important because "price is becoming more driven by the economic downturn." For us, he said, "the issue is getting employees back to work and looking a total loss costs rather than just price." There are differences among TPAs and clients must have a true measure of how well a program is going, not just price, Boures added. "For us, the results were clear and measurable ¿ and our program has improved year-over-year," said Van Sant. "SRS has proven that transparent pricing works." --By Jack Roberts Editor's note: In the spirit of transparency, SRS is the sponsor of the Risk & Insurance Theodore Roosevelt Workers' Compensation and Disability Management Award program. THE $64K QUESTION October 2, 2009 at 1:14 am For a $25 fee, for five years subscribers have access to a more complete assessment report and can return to the site as often as they want to see if changing circumstances might alter the nonprofit's risk assessment and site suggestions. Once you register with the Web site, the exposure self-assessment questionnaire asks you a series of multiple-choice and yes/no questions to determine the type of business you have and where you're located. Then it asks the $64,000 question: "Does your organization have a risk management plan?" If you click on "no," a pop-up box tells you, "Consider developing a risk management plan for your organization. A risk management plan helps you take a more systematic approach to identifying and managing your organization's risk, including the purchase of the appropriate insurance for your organization's risk profile." Reiss explained that, "as you work through the assessment, you get information tailored to what your response to the question was." The series of questions are designed to be simple and easy to respond to, without revealing any identifying information, but eventually they get down to specifics regarding your exposures and insurance needs. PERI makes it very clear that it's not acting as an agent to sell insurance but only as an educator and conduit to help nonprofits eventually hook up with an insurer, if that's their goal. As with any business, Reiss's biggest hurdle now is attracting nonprofit users to the site through advertising or whatever means are available. Thus far the site traffic is small--just under 1,430 hits by July, with users spending an average of four minutes on the site. "We've had some spikes from our online advertising and an e-mail blast," she said. She's in the process of setting up a link with the Nonprofitexpert.com Web site, which offers information for nonprofits but doesn't offer much about insurance. So it's "a pretty important link for us." "I think for us the challenge is getting the word out," Reiss said. So now you know. --By Julie Liedman Kenneth P. Wood October 2, 2009 at 1:14 am Senior Director, Risk Management Knowledge Learning Corp. Portland, Ore. Telephonic medical triage assigns a nurse-case manager to every claim so patients can speak privately one-on-one with a nurse. As the chief risk management official for the Knowledge Learning Corp., Ken Wood looks out for the welfare of some 38,000 employees who face unusual workplace injury vulnerabilities. "You are not really lifting things like boxes. But you are lifting children, or you are bending down to hug children, or you are kneeling down to their level to teach children," he said. The Portland, Oregon-based KLC Corp. operates child care centers for infants through kindergarten age children in 38 states. About 38,000 employees oversee the welfare of some 200,000 children. Any workplace injury, no matter how engaging the source, requires the same diligence in not only providing treatment, but ensuring the employee gets back to work in some capacity as soon as possible. So how do you substitute a hug when that hug could exacerbate an injury? "You engineer different ways in which someone can teach children, without having to say, sit in a child's chair," said Wood. Wood's team also developed a four-wrung stepladder up to the changing table to avoid having to lift a child in need of a fresh diaper. "You can minimize the degree to which they have to use their back by putting them in a stationary position in the center somewhere where they can supervise children safely and effectively," he said. The job remains the same, but must be done a tad differently, Wood said. Wood's team expected some resistance for a more exacting return-to-work policy. "There is always resistance to something new. But we worked through those issues and we don't often encounter huge problems with it," he said. With about 80 percent of employers having modified duty program, the issue becomes how you administer it and "we administer it at a very high level," Wood said. In other areas in the workers' comp realm, the exclusive use of preferred provider organizations (PPO) ensures more consistent care and according to Wood, "reduces the likelihood they will encounter a bad physician who will over treat them." Wood seems most proud of the telephonic medical triage his team developed. "We have assigned a nurse-case manager to every single claim so the individual can have a private conversation with their nurse over the phone. Between them, they can decide if this injury really warrants medical attention or if they can use some self-treatment options," he said. Ashutosh Riswadkar October 2, 2009 at 1:14 am Line of Business Director, General Liability Zurich Services Corp. Schaumburg, Ill. No, that's not a misprint. Ashutosh Riswadkar of Zurich Services Corp. is paid to think small, very small. At Zurich, risk engineering is known by one of its long-time engineers, Ashutosh Riswadkar, the father of what is sometimes referred to internally as "Rish Engineering." Riswadkar, who has worked at Zurich for more than 22 years, is paid to think large and small, in this case very small. He was instrumental in developing Zurich Nanotechnology Exposure Protocol (ZNEP), a proprietary algorithm that takes into account the different risk characteristics of exposures to very small particles. ZNEP, launched earlier this year, includes a Web-based tool designed for use by risk managers and risk management directors to help them track as much data as possible about exposures to nanotechnology. In addition, a database, which is constantly updated, gives Zurich underwriters the ability to price coverage more accurately to reflect the risk. "So far, no other insurance company has such a focused assessment protocol around nanotechnology," said Riswadkar, who serves on the Technical Advisory Group of the American National Standards Institute (ANSI). Riswadkar's challenge was to pull out the equivalent of a powerful magnifying glass and look at nanotechnology's unintended consequences--good and bad--and find a way to develop standards to guide Zurich, its clients and the broader public as the field develops. The goal is to have the protocol considered by ANSI as the organization drafts standards related to technologies that operate on scales equal to one billionth of a meter, far smaller than the thickness of the human hair. Exposure data on a dozen or more variables--from the solubility of particles to their chemical structures--needs to be collected and analysed, and Riswadkar enlisted the help of a nanotoxicologist and other experts within Zurich and its outside business partners. In the near term, the core model of the nanotechnology protocol has applications for the chemical and biotechnology industries, he said. Like a ship's lookout spending his days high above the deck in the crow's nest, Riswadkar is responsible for keeping the Zurich insurance enterprise abreast of trends just over the horizon so that underwriters and senior managers are prepared. "This is just a very sharp guy, a very humble guy," said Tom Coll, business development manager for Zurich Services Corp. "They know him from Switzerland to London to anywhere in the United States." And if they don't know him, they certainly know of him through his prolific publishing schedule--more than 50 publications at last count. RESOURCES TO BEAR October 2, 2009 at 1:14 am Riswadkar's function is important, as it has a bearing on what resources the carrier will bring to bear when evaluating general liabilities for which the company and its clients must be prepared. "He sets that strategic direction for risk engineering," said Coll. "Where do we focus the resources, and that becomes a service to the client and the carrier." In the past few years, Riswadkar has sounded warning bells on water shortages and the aging workforce. "He's in constant communication with professors on technology," Coll added. "They are into selling a product, but he's representing the insurance industry and he's looking at the tail on this stuff and the methodology we can use to flesh that out." Scanning the horizon for the next general liability risk is sometimes akin to looking for a needle in a haystack, Riswadkar admitted, but once you know what to look for there are plenty of resources available through the Internet to at least get started. At other times, knowing what the needle looks like is the easy part. Fighting for the C-suite's attention is the hard part, as Riswadkar's managers balance conflicting and competing interests. Even when a looming liability risk is obvious to Riswadkar, there's no guarantee C-suite executives will concur. Riswadkar's approach to his work demands collaboration and copious doses of humility as he solicits input on emerging liabilities from, and then distills and disseminates the essence of these exposures to, all corners of Zurich's global footprint. "Getting information and putting it in a form that everybody can understand, that 's probably a bigger challenge," he said. One, it seems that demands a little "Rish engineering." --By Cyril Tuohy FULFILLING THE OBLIGATION October 2, 2009 at 1:14 am As with anything really good, Vogelgesang and Murphy couldn't get into too much detail about this captive, especially considering that it isn't entirely completed and won't be in effect until the start of the NHL season this fall. But what the two men can share is that no other team or venue has done anything similar before. There are very few captives in general in the sports industry, and venues traditionally don't look to captives for property-catastrophe cover, said Murphy. "It's almost viewed as too creative," he said, adding that most people are used to paying whatever it takes to get the short-term protection they need. Creativity is what Vogelgesang needed to find an alternative to the traditional earthquake insurance market or to self-insurance. The property and business-interruption hit posed by a quake to an NHL stadium, estimated Murphy, could approach $200 million. "What really pushed us over, we just can't sit back and self-insure the risk. It could potentially be too catastrophic," said Vogelgesang. And rather than "write a big check to an insurance carrier every year and hope for the best," his company decided to "be in charge of our claims and destiny." For all his success for Vogelgesang and other clients, Murphy feels a sense of thanks and duty. Thankful in that, in the 25 years that he's been a part of the sports world, he's met great and grateful clients who have helped him grow in his career. And dutiful in that he really values his role in the sports niche. "I think people like myself have an obligation or responsibility to safeguard the value or the importance of industry expertise, or industry knowledge," said Murphy. --By Matthew Brodsky THE CHALLENGE OF CONSISTENCY October 2, 2009 at 1:14 am Aon has approximately $54 billion of global premium flow, and sees a multiple of that value in terms of the information in the quotations. That volume of information generates a relatively accurate measure of where the market is at, at particular times, across a variety of product lines. Because GRIP has all the pricing data, it can show, for example, whether it might be cheaper to place a property catastrophe policy in London, in New York or in Hong Kong. GRIP is regularly updated to include additional data that will help risk managers judge how their risks are viewed by the market. For example, Aon Analytics' Lambrou said GRIP plans to add loss data fields to the system in upcoming versions. One of the most challenging obstacles to overcome was to standardize international policies by product line for a consistent analysis across geographies. In the past, for example, it was hard to compare a property policy generated in Spain from one issued in the United States, from one emanating from Japan. GRIP puts an end to that. Aon began testing the system with clients last winter and spring after extensive training sessions with Aon employees throughout the organization. The presentation itself, on a series of screens, is colorful, dramatic and easy to use. For carriers, the system contains potentially valuable information about a carrier's own pipeline and pricing strategies. For example, clients can quickly see whether other carriers are cutting prices on renewals or new lines of business. No one knows faster than Aon when a soft market will turn or whether a particular carrier is aggressively trying to gain market share. For clients, Aon can use GRIP to analyze what it calls a quote/submit ratio by industry, segment, product, city and carrier. It can also look at retentions and limits, and begin to discern the different risk appetites of carriers for a particular product. This is all based on the carrier's trading behavior as measured by its quotes and binding data. In this era squeezed margins, Aon itself has access to invaluable information on commissions, even before binding. If the commission rate on a particular risk is well below the average for that product line or for that carrier, then the placing broker and Aon management will know. If the commission is above average, then management will also know. Eventually, it should help Aon management better price its own services, especially important in light of a market of changing commission strategies. --By Jack Roberts Mark Ware October 2, 2009 at 1:14 am Vice President, Director, Technology and Life Sciences Practice IMA Inc. Denver Broker Mark Ware reminds us all that sometimes doing the basics, but doing them very well, is plenty innovative. One of the most vexing enemies of risk management in this day and age and perhaps always is technology and the speed with which it moves. Just try and throw an off-the-shelf insurance product at an exposure created by Internet-related risks, or at the complexities of financial trades or at the risks related to the advanced field that is the life sciences. If you settle for off-the-shelf products, you're probably not managing your risk very well. Not only is there no simple, standard product with which to hedge against such risks, but in many cases there isn't even a shelf. That's the world that Mark Ware, the Denver-based vice president and director of the technology and life sciences practice for IMA Inc., was looking at a few years back, as he stared into the complex and sensitive world of human cellular and tissue products companies. The people that run organ donation companies, cord blood storage companies, sperm banks, eye banks and other concerns in this area are sophisticated buyers who do not have a lot of time for someone who cannot grasp the sensitivities of their exposures. "We don't claim to know everything that they're doing," said Michael Brown, an account executive in Ware's group. "What we try and do is help them understand that if something doesn't go exactly right this is what can happen." The first thing that Ware did in developing this space as a broker was striving to learn the businesses of these companies inside and out. "They expect you to be as sharp as they are and unless you are providing them with solutions that are unique and different they get frustrated," said Ware. As he has progressed in his knowledge of the life science world, Ware has come up with several innovations that merit his mention in this issue. The most recent is his formation of what he and his teammates at IMA call the Risk Solutions Alliance. The alliance, which is getting its first market use specifically with cell and tissue companies, brings together a team of consultants and other risk management experts to address the risk management needs of medical device and life science companies. The alliance includes a crisis communications piece, a regulatory consultation piece, a risk management piece and an insurance product piece. BEYOND INSURANCE October 2, 2009 at 1:14 am "When we first got involved with dealing with one of the largest tissue banks in the United States in taking over their account, I realized that there was a need here beyond just insurance," Ware said. Ware has also been instrumental in the development of the TechAssure Association Inc., a nonprofit consortium of brokers dedicated to providing better insurance and risk management service to the technology, life sciences, digital media and venture capital industries. He chaired the group in 2007-2008 and was the motivator for the group to hire its first executive director. "He is a professional that knows his trade very, very well," said Mark Osmanski, the vice president and CFO of the Minneapolis-based ATEK Companies, which owns as a part of its portfolio a medical device manufacturing facility. "He won't counsel you on your business but he will learn your business enough to be able to tell you the aspects of risk that you would want to get coverage for and then the aspects of risk that are just inherent in your business and you need to get comfortable with from a risk returns standpoint," Osmanski said. "He just knows his insurance products so well and he is so meticulous and he comes up with what seems for us to be the right answers," said Bonnie Gillette, a Denver-based risk analyst for Gambro, the global medical device company. --By Dan Reynolds Mitchell P. Worbetz October 2, 2009 at 1:14 am Claims Manager CNA Insurance Cos. Cranbury, N.J. Structured settlements take the place of lifetime benefits, as CNA's claims team lops tens of millions of dollars off long-tail catastrophic injury claims. CNA claims manager Mitchell P. Worbetz solved a challenging and very expensive problem with an innovation that came from the heart: the renewed focus on the person and the family with a catastrophic claim--in other words the client. When CNA sold its personal lines business in 2004, the company had to assume a book of catastrophic claims stemming from those policies. Those were not easy claims, and they amount to tens of millions of dollars. The claims, coming from car accidents in Pennsylvania, New Jersey and Michigan, involved traumatic brain injuries, quadriplegic and paraplegic injuries, and other near-fatal medical catastrophes. Laws in these jurisdictions, and the specific no-fault provisions in play, meant almost all of the claims involved unlimited lifetime medical benefits. The total exposure was estimated to be about $50 million with the liability, in some cases, extending as long as 30 years. More recently, complicating factors have entered into the equation: more enforcement and new regulations under the Medicare Set-Aside laws in the case of a settlement. It can often be difficult for the victim's family to agree to a settlement, especially if there is little or no contact between the victims and the insurance company. If lawyers aren't shy about making cases more adversarial than they often need to be, then the claim takes even longer to resolve. Worbetz's first action was to build a team that could "develop a rapport and a relationship with all the insureds and their families." The more technical parts of the process were relatively easy to handle. Medicare Set-Aside costs and provisions could be identified and handled relatively easily, and special trusts could be set up to pay benefits. A "structured settlement," typically an annuity, could fund the costs upfront. At each step, Worbetz and his team had to make sure they had the family buy-in, or the process could quickly come to a halt. As part of the settlement process, total future medical costs were calculated and endorsed by an actuary. The issue was to try to resolve the cases to the satisfaction of the claimants, and, at the same time, incur a long-term savings to CNA. With the potential savings so large, CNA and Worbetz had added incentive to find a solution. "One of the key solutions was the power of a structured settlement in these cases," said Worbetz, based in Cranbury, N.J. "Another key component of eliminating this risk was to meet these injured (parties) on a face-to-face basis to understand their personal and medical needs. What we accomplished was to get a clear picture of the risk and exposure of multimillions of dollars in the long-term risk." Every step of the way, the injured parties had to understand the issues and the options available to them. The challenge, of course, came when CNA had to work with the insured and the insured's lawyers, to give up rights to unlimited benefits in return for the structured settlement. The result has been that nearly every case has been settled, or is nearing settlement. Victims received a funded guarantee of future medical care, and CNA will save more than $100 million over the long term. "We accomplished what no one else in 20 years to 30 years could do, settling high-risk catastrophic claims and providing a benefit to the insureds, their families and our organization," Worbetz said. --By Jack Roberts Steve King October 2, 2009 at 1:14 am Corporate Director of Risk Management The Kroger Co. Cincinnati, Ohio Temporary total disability payments plunge by about 10 percent after reforms to a supermarket chain's workers' compensation program. Successful return-to-work systems are a critical component of workers' compensation programs that truly serve the needs of both the employer and employees. For that reason Steve King, Cincinnati-based corporate director of risk management for a supermarket industry leader, The Kroger Company, decided to completely revamp Kroger's approach to this function. At the outset, King saw the advantage of rolling up all return-to-work functions, including vocational rehabilitation and nursing operations into one location. "It was important to bring all players into one location where they could function under one process," he said. In prior years, the many divisions of the company used differing services and processes with varying outcomes. "We wanted to get our nurses closer to our injured associates, so we could rehab or work with the doctors better to achieve the goal of getting the associates back to work," he said. Prior to this, Sedgwick CMS, the company's third-party administrator, had worked individually with the company's 18 divisions. "It was more triangular at that time and this is more direct. So we really have streamlined the process to work quickly, efficiently, and closer with the injured workers," he said. Meanwhile, the company is working on a schedule of light-duty jobs that injured employees can perform. The numerous banners under which Kroger stores operate complicates the task since each traditionally has its own operational methods. Moreover, various state laws and union agreements also come into play. "Basically, the unions work well with us because what we are trying to do is best for the associate," King said. The chain operates its stores east of the Mississippi under the Kroger banner, and west through numerous other names acquired through acquisitions. Wherever the location or store banner, getting the injured worker back on the job as quickly as possible is the name of the game. "I think having quality medical care is critical to the assessment and return-to-work process necessary to bring the associate back to work as soon as possible," he said. In addition, each worker is assigned a return-to-work coordinator, who acts as ombudsman for the injured associate. This person ensures necessary appointments are made and works with local management to find the proper work within the worker's restrictions. Judie Tsanopoulos October 2, 2009 at 1:14 am Director, Loss Control St. Joseph Health System Orange, Calif. Taking the guesswork out of what an injured employee can and cannot do makes returning to work safer for employees and less risky for employers. In a way, understanding the exact physical demands of every job in an organization seems so logical, so common-sensible. Figuring them out, however, seems complicated and downright tedious. And so it was. For Judie Tsanopoulos, director of loss control at St. Joseph Health System, the 3,600 bed, not-for-profit Catholic healthcare system sponsored by The Sisters of St. Joseph of Orange, headquartered in Orange, California, developing the program was kind of a mission. Tsanopoulos developed and implemented the Job Function Matching Program, a system that objectively measures the physical demands of each of the system's 24,000 employee's jobs and provides testing to measure the ability of injured employees who are returning to work to perform them. Now, physicians can make precise and medically sound recommendations regarding return-to-work assignments based on specific work restrictions. "She challenged the normal way of approaching the return-to-work process," said Leif Guerrero, manager of disability and employee health at Mission Hospital, part of the St. Joseph system. "She put so much into it. Most of us would have thrown in the towel, but not her. She would not give up." The program has significantly reduced modified workdays at a test hospital, St. Joseph Hospital in Orange, from 3,642 in the first year to 672 in the third year, and is now being implemented in the 14 other St. Joseph Health System hospitals in California, Texas and New Mexico. In Guerrero's hospital alone, he said, the program has saved more than a million dollars in workers' compensation costs in the first year of operation. The Job Function Matching Program was developed in response to what Tsanopoulos felt were vague and ambiguous work restrictions that physicians placed on injured employees returning to work. The restrictions often were based on subjective judgments that reflected anxiety about misdiagnosis and uncertainty about the nature of the tasks an individual could safely perform. So Tsanopoulos asked: How do we know what an employee can or cannot safely do in relation to his or her physical work demands and how do we communicate that information effectively to medical providers? To answer those questions, Tsanopoulos assembled a team of physical therapists, supervisors and employees to identify such physical metrics as force demands, physical movement demands and specific requirements of the essential job functions. To validate the process, activities were created for each job task that simulated forces, movements, positions and specific requirements. During this process, more than 3,000 job descriptions were narrowed down to 350 physical demand descriptions, all catalogued according to the physical demands of both essential and nonessential tasks. OBJECTIVE BAROMETER October 2, 2009 at 1:14 am The process that was developed covers how post-injury evaluations are provided to the employee's treating physician, physical therapist and nurse case manager to determine the employee's course of treatment and return to work. During the recovery period, the employee takes a weekly Job Function Test, which enables the employee and physician to see the improvement. As the injured worker's abilities increase, so do the job demands, acting as an internal work-hardening program. The result is that employees now can be measured against the physical demands of possible jobs with an objective barometer. "She took away the subjective approach and brought measurable, clinically driven outcomes to the process," said Guerrero. "As a result, we're seeing employees coming back to work much sooner now--three months versus 16 months, for example--which decreases workers' comp costs." The process also had some other, unexpected, results. For one, the comprehensive assessment of the whole work environment allowed the team to identify several re-engineering opportunities to make jobs safer and reduce risk. For example, microfiber mops were introduced, eliminating the need to lift heavy buckets. In addition, Guerrero said, employee morale has noticeably improved. Negative language describing a patient's status has been replaced with more positive language. The idea of "work restrictions" has been eliminated and now the idea "physical abilities" is emphasized. "The whole process fosters positive reinforcement, provides a safe, controlled environment that protects the individual from the fear of re-injury and preserves the patient's dignity during recovery," said Guerrero. "And the cost benefit of reduced workers' comp claims and less litigation makes employers very happy too." --By Julie Liedman Lambros Lambrou October 2, 2009 at 1:14 am Executive Vice President Aon Risk Services Chicago Aon's GRIP Team October 2, 2009 at 1:14 am Tracking carrier quotations for different lines in separate markets gives Aon a wealth of information and power in its grasp. In the past, brokers really just speculated on the direction of the insurance markets. Markets moved up or down, turned soft or hard, went tight or loose. Brokers could make an educated guess about the market's direction. Going forward, however, most clients and brokers, and even carriers, really don't know where the market is headed, except by trying to draw conclusions based on what has happened in the past, typically during last year's renewal. But today, if you asked your Aon broker that same question, you would get a very different answer because last November, Aon began to roll out its "Global Risk Insight Platform" known internally as "GRIP." This system gives Aon brokers and clients a grasp, in real time, of what is going on in the insurance buying markets in the months to come. The platform is designed to anticipate pricing and carrier behavior. If the market hardens, the analysis may show prices beginning to go up in a particular location, and then show how that hardening is spreading to other locations or to other lines of business. The roots of the system date back to contingent commission controversy when the big brokers agreed to disclose all the commissions with any particular carrier to the client. Today, when Aon asks its carriers to quote on specific business for a particular client, it creates a disclosure reporting form for its clients. Using the data in those disclosure reports as a base ? coverage, limits, retentions, pricing, commissions and more--Aon created an ongoing, real-time reporting system that could be used to bind policies in a way that gives clients the best placement options, regardless of geography. Every effort was made to keep the graphical user interface simple, and new data is entered into the database every day. The idea had its beginnings in February of 2008, in the wake of a decision by Aon to reduce the number of worldwide sales and marketing tracking systems from 27 to one single program ? Salesforce.com. The development of the GRIP system itself was accomplished through Aon's Centre of Innovation and Analytics based in Dublin. A team of executives from Aon's information technology, risk and consulting divisions, was established to create the procedures needed to implement such a big change in the analytics of placement operations. Key to the project's success would be acceptance from clients and Aon's army of brokers around the world, explained Maureen Burm, chief operations officer, Aon Brokerage Group. The executive team included Ted Devine, president, Aon Risk Services; Michael R. Moran, president, Aon Carrier Consulting; Peggy Stewart, executive vice president/COO, Aon Risk Services; John Elliot, chief information officer, Business Unit, Information Technology; Burm; Brian Parkes, chief of information management and global risk insights, Aon Commercial Services & Operations Ireland; Dennis McClaughlin, CEO, Aon Center for Innovation and Analytics, Dublin; and Lambros Lambrou, executive vice president, Aon Risk Services and head of Aon Analytics. Data on each insurance policy quotation for every carrier for each risk being placed is entered into a newly created database from the commission compliance reports and other sources, according to Aon executives. The quotations are called trades and represent specific bids that carriers have made to get the account. When a policy binds, the information is updated. Thus, usually months before a policy binds, GRIP can see the shape of the markets to come based on the quotation data. BROADENING DEFINITIONS October 2, 2009 at 1:14 am Diaz is also behind much of what's to come: big improvements to the software as the definition of risk, like an ever-expanding universe, continues to broaden. "We have a bright future," he said. "There's a sense of energy again. Some of these clients were blown away, and by how quickly we intend to move forward." Risk managers are clamoring for tools that can help them make sense of all the data. As far as Diaz is concerned, there's no reason for CS STARS not to move at the speed of light. As the No. 1 risk management information system, with about 1,000 clients and "tens of thousands" of users, delays are unacceptable, not when you're in charge of the STARS ship. Three times larger than the next closest competitor, "we should move three times faster," said Diaz. The Goggles tool is delivered through the STARS Enterprise risk management technology platform, according to Diaz's application materials received for this nomination process. To extend the capabilities of the platform, Diaz has also finished the integration of a suite of audit capabilities to support enterprise risk management (ERM), for which all associated data is accessible through Risk Goggles. It looks like Diaz, appointed last September, is just getting warmed up. There are plenty of the other software overlays coming to STARS' massive data warehouse. If nothing else, the buzz is back at CS STARS where Diaz has put the staff on notice that they're in for a challenge. "He's challenging them so that he next release is not just cosmetic," said Pickens. "New versions I would expect will include something new and valuable from a business perspective so that clients are anticipating the next thing." Companies that are market leaders need to act like leaders, and that means innovations need to be put to use in the service of clients, Diaz said. Brilliant ideas wasting away on library shelves, whiz-bang applications too complex to use, market-leading platforms eroded by complacency, Diaz said he has seen it all before, but that such stumbles are not going to happen on his watch. He's wearing his goggles. "When you're the market leader it should mean something," he said. "It should mean that you get more innovation, more service and more choice, and we intend to deliver on that." --By Cyril Tuohy Gisele Posey October 2, 2009 at 1:14 am Senior Director of Workers' Compensation Kindred Healthcare Louisville, Ky. Comp director had reduced costs and saved millions of dollars but she wanted to do more. So she dug and dug until she figured out how. Question: What's the difference between Gisele Posey and a pit bull? Answer: A pit bull eventually lets go. In today's economy, most people would be content if the costs of whatever program they were responsible for simply didn't rise as fast as their peers' and competitors'. Posey is not most people. As senior director of workers' compensation for Kindred Healthcare, the Louisville, Ky.-based healthcare services company, Posey is responsible for some 53,000 employees in more than 600 facilities in 40 states. Committed to reducing the cost of workers' comp., she instituted practices, particularly by emphasizing transitional duty, which reduced workers' compensation claims and saved the company more than $40 million in four years. But even a successful program has trouble reducing costs year after year and last year Posey realized that her costs were rising despite a decrease in claims. True, the cost increases were less than the industry average. Posey could have been content to blame inflation and rising rates and pleased that Kindred Healthcare still was doing better than most. She wasn't. Posey felt that the answer to why costs were increasing existed in the data. Global analysis showed a decrease in claims duration, which she felt might explain a temporary increase in claims costs. But this change was not sufficient to explain the scope of the increase, she felt. After all, there were no catastrophic claims that would have had an impact on the results and there were few changes in individual categories of payments in medical or indemnity. Again, the data supported the fact that by payment groupings, Kindred was doing much better than its peer organizations. Yet Posey didn't particularly care about such benchmarks. She cared only about Kindred's results. So she analyzed by pay code and by state. Eventually, trends began to emerge. Posey saw decreases in Kindred facilities in most states but facilities in three states generated the highest workers' comp. claims volume and payments, which resulted in an increase in costs. Wondering what was happening in those states to make total costs increase, she concluded that the answer could be found by focusing on first-year costs in the top 10 highest-volume states compared to subsequent year costs in those three outliers. When those results were compared to the managed care results for the same period, the data began to show important differences. How did she do it? The answers were found by getting team members in one room at the same time and analyzing what the comparison suggested against what the Kindred workers' comp managers were seeing in everyday claims handling. Herman Wilks October 2, 2009 at 1:14 am Workers' Compensation Department Director Texas Association of School Boards Austin, Texas Herman Wilks tightens the lid on the pill bottle as the cost of medications increase. As many parents and teachers know, students often live up, or down, to their expectations. So success is often determined by managing expectations. The revelation from Herman Wilks, workers' compensation department director for the Texas Association of School Boards (TASB), is that the same is true of getting injured workers back to work. His focus, say colleagues, is to keep workers, doctors, providers and staff focused on the goal of getting the worker back on the job. Wilks' program has been developed over more than a year, but it has been implemented in earnest this year and has already realized savings, mostly in reduced costs for prescription drugs. "Herman's great realization was the balancing act," said Melissa Steger, manager of the University of Texas Systems. "When public entities were allowed to form combinations, Herman was careful to integrate treatment with cost-effectiveness. TASB handles bill review in-house and provides feedback to providers and suppliers. He really knows about providers and communicates that to workers." Workers' comp is often tedious business, but colleagues remarked how passionate Wilks is about helping injured workers. Wilks, for example, has conducted role-playing with his staff and physicians so they can better handle situations with doctors, adjusters, workers, and pharmaceutical providers. "He is not just concerned with cost-containment," said a manager for one provider. Wilks himself espouses more of a Texas Rangers philosophy of doing his duty. "I saw the need where the cost of medications were taking more and more of the spending," he said. "If a drug is the latest and greatest, fine, but we had to take a hard look at overprescription and overuse, even potential dependency." Members of the TASB Risk Management Services Division noticed that the organization's costs had soared over the past few years. The spending was alarming to the TASB, a self-insurer that employs more than 600,000 Texas workers. In 2008, the TASB, along with a seven-member team of pain management and pharmacy experts, legal counsel and risk managers, was charged with researching and implementing a solution that would contain future costs. The approach was to prevent new problems, then to address remaining ones. "We opened a dialogue with the physicians that included peer reviews for courses of treatment, and also with patients to put them on notice that the goal was to get back to work," said Wilks. Colleagues say he has instilled a straight-forward approach that makes it easy for workers, doctors and providers to do the right thing and difficult to do the wrong thing. Dr. Archibald Tewarson October 2, 2009 at 1:14 am Senior Research Specialist (Ret.) FM Global Johnston, R.I. FM Global's Archibald Tewarson plays with fire ... and (usually) wins Deep inside FM Global's research campus in Johnston, R.I., a quiet, humble man who originates from the Indian state of Uttar Pradesh toils quietly in the heat of the flames and the crackling of the industrial-strength Bunsen burners. At 73, when his peers in retirement are playing golf or boarding cruise ships, Tewarson continues his research into the chemical properties of plastics under intense heat. Three simple goals matter to Tewarson. The first is to increase a plastic surface's resistance to ignition; the second is to slow the spread of ensuing flames; and the third is to reduce the smoke and the heat. To say that Tewarson is an expert in the highly specialized field of the physics of fire retardants would be an understatement, said Lou Gritzo, vice president and manager of research for FM Global. "He speaks softly but boy does he have a lot of horsepower upstairs," said Gritzo, who has worked with Tewarson for more than 20 years. Tewarson's been studying the science of flame since he emerged from Penn State in the early 1970s with his doctorate, and went to work for FM Global. That was a time, Tewarson recalled, when Factory Mutual, the predecessor to FM Global, was paying a lot of money in claims to replace properties damaged by fire--properties built with what today might be considered minimal standards. It was also a time when the environmental and consumer protection movements were born, and when many interest groups began to lobby in earnest for better standards from government agencies, and from the private sector. "When I joined FM, it followed the minimum (government) standards and FM was losing left and right," he said. "My job was to review those standards and to improve upon them." Did he ever. His research contributions helped lower fire risks in dozens of industrial applications, everything from power cables to polyurethane, to hydraulic fluids, to children's sleep ware. In recent years the semiconductor industry has taken an interest in his research for its so-called "clean room," in which companies like Intel can store millions of dollars worth of expensive chips. The fire-retardant plastics, which Tewarson helped develop, used in those rooms will guarantee that flames spread much more slowly, cutting into the property and business interruption losses suffered by an insured. Jane Keegan October 2, 2009 at 1:14 am Port Enterprise Risk Manager Port of Oakland Oakland, Calif. Risk manager for the Port of Oakland reels in an environmental deal worth bragging about. When it comes to managing risk in the country's ports, the West Coast poses some unique challenges. Narrow in on the San Francisco Bay area of California, and environmental issues are particularly troublesome. "Environmental is a major issue in West Coast ports," said Jane Keegan, risk manager for the Port and Airport Enterprise Department of the City of Oakland. "The biggest threat for our development can be environmental litigation, and I don't think it's anywhere near what it is on the East Coast. You're really doing risk analysis every day with environmental issues." In the 20 years that Keegan has been with the port, she's become quite acquainted with its known environmental issues that had not been covered by insurance or third-party indemnification. The port is on 19 miles of property, largely created land on the waterfront that is highly regulated. Issues inherited from prior tenants include heavy metals in the soils from ironwork, military use in the first and second world wars, manufacturing facilities, rail yards and more. Timothy C. Smith, a senior vice president with Marsh who nominated Keegan for the Risk Innovator award, was impressed by Keegan's vision of a multiyear environmental insurance program. Her plan was for comprehensive coverage for first-party cleanup and third-party liability, as well as enterprisewide coverage for known and unknown environmental liabilities. It was to cover sites ranging from a golf course built on reclaimed land to rental car facilities to abandoned manufacturing sites. Keegan created a team with representatives from the port's legal, engineering and environmental departments to determine what exposures were out there, the extent of them and how hazardous they were. After conducting studies internally, Keegan met with Marsh brokers to craft a policy that dealt with all exposures affecting the port. "I think in terms of the depth and the study, the due diligence was certainly exceptional," Smith said. "She was very thorough in the submission she made and in the sharing of information that the taskforce had. The underwriters thought they had a very complete and thorough knowledge of the exposures." Coverage for known liabilities is a unique feature in environmental insurance policies, particularly for the port, which had substantial liabilities. Convincing the underwriters to take this risk on was no small feat. Good thing they were all well acquainted with Keegan. She began developing a relationship with all the players 10 years ago when Oakland became the first port in the United States to use risk transfer through an environmental policy for a military base. That decade of good relations made all the difference. Not only was Keegan able to secure enterprisewide coverage for unknown and known liabilities, she did it at a competitive price. Smith said it helped that Keegan is a leader in the risk management community in the San Francisco Bay area. "Her respect in the risk management community was a major plus. She has been at the job for 20 years, she is very active in RIMS and an officer in the California Port Authority. She has a very high professional reputation and image." PBM BIG October 2, 2009 at 1:14 am The key change was when Wilks brought in a new pharmaceutical benefits manager. "We have seen savings of close to 39 percent overall," said Wilks, "mostly on medication spending. But we have also seen a significant reduction in the number of injured workers on Class II medications (narcotics). One of the most rewarding things has been the feedback from doctors. In many cases they were looking for help in dealing with aggressive patients. We have not only seen reductions in our new claims, but also in legacy claims. In some cases we have been able to get some of them into detox." Such high-profile results come from careful preparation. Before they could deal with physicians effectively, Wilks and his staff created procedures and protocols that would communicate to doctors in terms they would understand. TASB also developed a series of template letters to send directly to physicians, alerting them that one of their patients had been red-flagged by the TASB as a potential case of excessive use of medication. The letter served as a cornerstone to engage the physician and injured party in a peer-to-peer review. Not surprisingly, TASB adjusters and medication managers underwent extensive training to prepare for communication with physicians. The effectiveness of Wilks' program cannot be determined until full-year numbers come in, but an early indication comes from comparing his savings to national estimates. According to a recent study by the Workers' Compensation Research Institute, inappropriate use of prescription medications results in overspending of up to 15 percent per claim. TASB's cost-containment has been at least twice that number. That is a strong argument that Wilks' approach is achieving cost savings and effectiveness well beyond keeping the lid on the pill bottle. --By Gregory DL Morris Kent E. Paul October 2, 2009 at 1:14 am CEO Amerind Risk Management Corp. Santa Ana, N.M. Amerind CEO Kent Paul opens the property/casualty world to American-Indians. The question is not one of risk transfer so much as it is one of trust. Sovereignty is the boon and the bane of all First Nations, but risk management brings those contradictions into focus. Kent Paul has won recognition from his constituents, as well as from the mainstream insurance sector, for finding resourceful and effective solutions. Amerind Risk Management is a multitribal, multijurisdictional IRS, Section 17 federal corporation, owned by a vast majority of federally recognized tribes and based a few miles north of Albuquerque. One initiative this year, initiated by CEO Paul, offers a good example of Amerind's unique challenges. The project assigns GPS coordinates to all of the structures that Amerind covers, which is important because with a hugely diverse and overwhelmingly rural base, few of the properties Amerind covers even have addresses. As every property-casualty underwriter knows, a physical address is the point of departure for P/C coverage in the non-native world. "We have a very diffuse base," Paul said. "We cover more than 55,000 structures worth more than $7.5 billion across 32 states, but most of that is so rural that they have Post Office boxes. Our risks include tornadoes and wildfires to hurricanes and floods. Hurricane Katrina and the wildfires in California had particularly traumatic impacts on Indian Country. We were among the first responders to get money to our policyholders in those cases." The GPS initiative is "a massive undertaking," in the words of one insurance industry executive, noting that the project will take years to complete. Even so, the project's already yielded results. "The data that we got for this year's renewal was night-and-day different from the data we got when the policy was first issued," the executive said. The enthusiastic response to the GPS program emboldened Paul to launch another program to help make tribal policyholders more visible: giving Amerind policyholders, many of whom are poor, live in rural areas and don't have checking accounts, access to debit cards. Paul is preparing to start a debit-card program later this year. "People are issued the card when they get the policy," said Paul, "but it has no value at the time. If there is a claim, we can load it up easily. That is much better for getting money into people's hands than checks or wire transfers." Marny Maahs October 2, 2009 at 1:14 am Risk Analyst Nike Inc. Beaverton, Ore. EMBRACED October 2, 2009 at 1:14 am Again, resistance was negligible. "The program was embraced because the employee felt they had an advocate in this nurse," he said, noting the nurse had no incentive to dissuade the worker from seeking medical attention. The most critical metric for success remains the 30 percent reduction in medical inquiries, Wood asserts. Joseph Boures, president of Hartford-based Specialty Risk Services, the third-party administrator for KLC's workers' compensation program, said that Wood's ability keep all the players in a diverse nationwide program on the same page is a tribute to his personal dynamism. "He has a lot of energy and experience and these combined talents enable him to get the most out of his resources," he said. Devising a return-to-work program without the traditional options of lighter duty jobs at his disposal required strong communication and diplomatic skills, topped off with a bit of innovation. "It was a bit of a balancing act in that you have to get the buy-in from all the operations so that they we not necessarily missing a beat from a quality of care or education standpoint," he said. That buy-in remains critical. "Ken and his team quickly realized that changes would need to be made to ensure that all KLC employees understood their role and felt empowered to take the necessary steps to ensure its success," Boures said. Wood's emphasis on communication can be seen in the risk hotline he set up that enables employees in the field to reach the 21 risk staff members for questions on a host of issues. The program now manages more than 2,500 calls per month on issues such as drug testing, student accidents and illnesses. --By Steve Tuckey PRACTICAL RESULTS October 2, 2009 at 1:14 am It turned out that people working on the same program, despite the best of intentions, were influencing global results through the individual decisions they made because they were not looking at the big picture and didn't understand what their roles were in the overall process. By analyzing those decision points, Posey was able to identify solutions. She found that a change in reporting criteria intended to save on claim fees would affect the success of data-driven analytics used for case management referrals. In fact, the criteria selected and the timing of referrals directly affect the cost savings. In the end, practices that yielded immediate practical results were developed. Opportunities to improve savings through specialty networks were identified and are being implemented or refocused. Causes for claim reporting delays were identified and plans were made for intervention at individual facilities where needed. Regular conference calls involving the whole team, including Kindred managers, are now being scheduled to talk about results and opportunities. "A lot of people look at data and assume what it's going to tell them," says Susan Klakoff, an account executive for Sedgwick CMS, of Memphis, Tennessee, a third-party administrator that provides claims administration, managed care, program management and related services. "They try to justify something they want to do. "Gisele is different. She's very focused on digging into details," Klakoff says. "Very focused." --By Julie Liedman