| Providence Washington Insurance Solutions: Claims Adjustment |
| Insurance | |||
| Written by John Zorabedian | |||
| Thursday, 01 May 2008 | |||
 Jeff Mack explains how a centuries-old insurance company is getting a new lease on life in run-off and claims management.
 Jeff Mack , CEO Mack, who was formerly COO of Swiss Re’s $1.5 billion financial services business group before he was charged with turning around Securitas’ investment in PWIC, said the reborn company will seek to purchase other insurance companies in run-off—a market that was recently estimated by PriceWaterhouseCoopers as being roughly $200 billion to $300 billion in size in the US alone. “There’s quite an active sub-industry of professional companies that manages these run-off companies,” Mack said. “We had a vision to transform Providence Washington from an underwriting company into a service organization.” What makes the value proposition of the new service organization even more enticing, Mack said, is that Rhode Island has a unique statute that accelerates insurance run-off, a process that can normally take 30 years or more, trapping capital that could otherwise be better employed. “The Rhode Island statute is modeled after run-off legislation in the United Kingdom, where it has been used quite successfully,” Mack said. “Being positioned in Rhode Island and having Mr. Ray, who helped co-author the legislation, as a partner provides an opportunity for PWIS to manage the run-offs of other insurance companies wishing to take advantage of the benefits of an accelerated run-off.” PWIS now is continuing to manage the run-off of Providence Washington. “That gave us a core piece of business to build third-party business around,” Mack said. “We’ve been building up our claims adjusting capabilities and have won a couple key third-party contracts. We’ve begun to diversify our earnings stream, setting us up for good, solid future growth.” In February, PWIS expanded its product offering by buying a third-party claims adjuster in the aviation and transportation insurance business and won a major contract to manage and administer the US aviation claims of insurer Arch Insurance Company. With this new source of revenue, PWIS is generating new business in a specialized market niche. “What’s nice is that more and more insurance companies that underwrite aviation are moving toward an outsourcing model,” Mack said. “We view it as a real growth area.” Running down, building up Transitioning into a new company, Mack and the management team had to downsize the staff of PWIC. But the company was able to retain some of its key talent in claims adjusting. Management brought the new company together under a new strategic vision, Mack said. “We started with a vision for what to do strategically with the people and the company of PWIC,” Mack said. “We had to reinvent ourselves to give people a longer-term prospect of employment. One of the keys to run-off is maintaining your key people.” By building around the core competencies of the old company, Mack said PWIS will compete by offering those services to other companies interested in outsourcing their claims management. The company is also developing an expertise in run-off management that PWIS will look to leverage by either buying other companies in run-off or managing run-offs for other insurance companies through a contractual relationship. In the meantime, PWIS is generating revenues through its new aviation business and in outsourced claims. “The run-off part of the strategy is very lumpy,” Mack said. “We could go a year or two without buying a new run-off company—it’s a competitive marketplace, and they don’t come on the market very often. We need a steady stream of income, which is where the outsource part of the company comes into play.” The basis for future success in these ventures is the company’s 60 employees, Mack said. To inspire a renewed focus on service, and to instill an entrepreneurial spirit, the company instituted a gainsharing bonus plan based on exceeding expected profits. For every dollar PWIS exceeds its profit plan, $0.25 is paid into the gainsharing pool, which is paid out proportionately to every employee of the company. “We really needed to start with a very clear vision of what we wanted to do, and we needed to have that vision shared by our employees,” Mack said. “We provided the requisite incentives to our employees, so as we achieve successes they would share.” Through incentives and a new culture of service, Mack said PWIS is creating excitement about a transformed organization. “We essentially took a dead company and gave people a new lease on life in terms of securing their employment and being part of an organization that’s growing, where they can share in the profits of the company,” Mack said. “It’s a nice change management story, and we’re very excited about our prospects.” |
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© 2008 American Executive - RedCoat Publishing. All rights reserved.
American Executive is a RedCoat Publishing publication.
American Executive is a RedCoat Publishing publication.
