Episode 3: How to Find a “Win” in the Data and Fill the Gaps – P2
Note: The Litigation Management Podcast is designed to be heard, not read. Unlike the transcripts, our audio includes tone, emotion, and emphasis that’s not on the page. Transcripts are generated using a combination of speech recognition software and human transcribers and may contain errors. Please check the corresponding audio before quoting in print. Listen to the full podcast here.
PODCAST INTRO [00:07]: Welcome to the second part of our podcast, how to find a “win” in the data and fill in the gaps. We pick up the conversation with Matt, queen, US claims vendor manager at one of the country’s largest leading specialist insurers.
Wesley Todd [00:20]: On the call are, let’s say, a handful or a good group of adjusters. And those adjusters have been stuck with the same software for their whole career, 20 plus years, okay, and it’s actually getting worse, they’ll tell you, or let’s say, and they’re you know they have, their options are to move up really right, their options and move up within the organization or do something completely different. So think about that person marry at the insurance company into litigation adjustment. What does she do with that info? And then I also want you to think about the attorneys, so forget about the Chief Claims Officer, or the VPs of claims, they’re most of them, there’s gonna be some exception, most of them are far removed from understanding her plight as the adjuster and actually dealing with the systems trying to do this analysis. So they don’t even know where they’re at right now. Mary knows as a client litigation adjuster, but let’s say you’re Bobby, the junior defense lawyer, and you’re in agreement with Matt as well. And you have two options, you can either try to get the ivory tower defense lawyer Rainmaker partner to do something different, which he has no incentive, he or she has no incentive to do, just like the Chief Claims Officer has no incentive to do, or as you see, a lot of times, they just want to go to the plaintiff side, because the plaintiff side does do more financial evaluation. So what if you’re those people 5, 10, 15 years into the profession, and I agree with everything, they agree with everything you just said, and they’re like, Okay, great. What do I need like, what do I do with this information? So you’re someone that’s actually taken experience, and then moved it into new things. And you’re, you know, just your books really just getting started. Imagine what it’d be, like 5, 10, 15 years, what you’ll actually get done with this information? What can be done? What advice do you have for these folks that are, you know, do they need to speak up more? I mean, should they be heard, or should they just stay quiet? And let things be the way, or are they actually contributing to it because they’re on the front lines, and they’re not making enough of this thing? I mean, what advice you have for those folks career wise and solving the problem wise?
Matthew Queen [02:46]: It is never the frontlines fault, what’s going on behind the scenes. So, you know, I think that people who are struggling in our career where they see the problems that I’m talking about, they need to be kind enough to themselves that, you know, it’s not their fault that they’re with an organization that doesn’t share the problem. And quite frankly, the organization may see it too. But you know, if your biggest problem so you know, if you’re a carrier, and your claims system sucks, but you know, you can’t figure out how to pay your vendors, obviously, you know, you need to figure out a pay to vendors and that’s just, that’s a stupid problem. But those problems do exist, show leadership may just have a different priority at the moment. So what do you do to go back to the question? Well, here’s if I thought that I was smart enough to be able to do it on my own. First thing to do is get to know you know, basically insurance, the insurance Twitter crowd is pretty solid little air. I think it’s there’s nothing like going on LinkedIn. I’ve looked all over Reddit for something similar. And it’s it doesn’t matter if Twitter’s insurance fears pretty good. There’s a handful of people in there who we could list and you know, Nick Lamp probably is probably the top, I started that insurance in earnest thing. There’s also Rob Galbraith, and the bunch of guys like Townsend, he’s another who view insurance risk first. And it really doesn’t matter what you do at that point. I mean, you and I can underwrite if you really wanted to, so long as you have the mindset of risk first. So then what do you do? So you meet these people, and then when you’re looking for, pivot into an area that makes sense for you and try to get into something new, it is the heyday for InsurTech and programs. So if you know what you’re doing with a risk, I mean, frankly you know, if I were to hire hiring someone for a role on a program or an MGA or an MGU, I wouldn’t be too concerned if you have no background and underwriting if you know the risk. So if you’ve been claims for something, and you get those claims, tell me what’s going wrong? What have you seen? How do these policies play out in the free market? And it looks for people who are looking for novel ways of insuring things. So the captive world is one novel form of risk financing. All it is just self-insuring a layer of the risk generally speaking, you have excess of life Insurance attaching at a certain point, we have a Kosher Reinsurance Treaty, not that complicated, you just get a big tax deduction for self-insurance. And at the end of the day, it may even look like commercial.
Wesley Todd [05:11]: So for the audience, you probably should have done this a little bit early on, but like, you might be a fortune 500 company, you might have a couple 100 work comp claims, you might have a few other types of claims. And it’s more profitable for you to be your own insurance company more or less. And there’s, you’ve written a whole book on this by the way, but then there’s some insurance company that that gives you coverage above that, I’m oversimplifying this, and you’re the captive, and then you have this excess insurance that covers, if something really goes wrong, but it’s not covering the 80-20 of your claims. And, so if you’re one of these people that you’re talking to, that’s a place where you get to have a direct impact on the bottom line of that company.
Matthew Queen [05:55]: Exactly, exactly. So captives are just one form of risk financing, which I think, you know, if you’re listening to this and going, I mean, these guys get the risk, the world cap does maybe for you, join up with a captive manager, start your own management firm, there’s a pretty good market right now for captives. But that’s not the only place programs are another spot. So if you understand that property, so right now, I’ll tell you an opportunity in the marketplace. Property insurance right now is upside down. It’s terrible. If you go anywhere from Montana, south to Texas, property insurance rates are a property insurance policies deductibles are so high that it for commercial policies, they may not even cover the cost of replacing a roof. And the reason for that is because of hail, hail is extraordinarily expensive. So what they’ve created are these parametric solutions, and a parametric insurance policy abrogates the concept of indemnification in favor of a predetermined payout. So they have these sensors that they’ll place on property, and it’ll sense of when a hail comes if it’s a certain size. And if it’s between ‘X’ and ‘Y’, you get a payment at the ‘Z’, if it’s between ‘A’ and ‘B’, you get a payment of ‘C’. In other words, if it’s big enough, you get a little bit more money. But that doesn’t necessarily indemnify you for the forecast replacing the roof, all it is a super cheap insurance policy that gives you a specific amount of money based off the occurrence of an event. Now combine that with a commercial policy or captive solution, and you got yourself a brand new program, then what you do is you take that bright idea, you know, you probably want to work with an actuary, get the numbers right, get the policy correct, then you bring out somebody with the money. Now the money is going to be Hiscox, it’s gonna be AIG, it’s gonna be shot, it’s gonna be some carrier, and then you pitch them on a program, go do it yourself, go take out. I mean, if you see opportunities in marketplace, if you see there’s problems out there, just I mean, you did the same thing with your firm, you look at defense firms, you saw that they know how to when you look at the insurance carriers, they don’t know what the hell they’re doing, you fill that gap. And you’re you have a nice little company that sits there and says, look, there’s an opportunity here for us to provide value. So for these people out there who see the problems with the carriers, you know, so my carrier, you know, let’s pretend I’m worked for AIG, they’re no good for the you know, car dealerships in Texas, because you know, these property policies are no good. Don’t talk to the parametric boys, there’s a NEMA meters that you can go find, go get yourself some reserves, which will probably be through a front, or some sort of reinsurance carrier shoot, man, there’s captive risk pools out there with up to $100 million of assets, they’re just looking to deploy, you got to talk to them, sit there and say, Look, we’re gonna get some POS, ISO policy. I want your money, I’ll put 50,000 of my own. I put more money in that, let’s pretend I raise you know, half a million dollars to put into it of my own cash. All of a sudden, you have a program overnight, you can do it. That’s the entrepreneurial flank of insurance. That’s how you keep the carrier’s honest, at the end of the day, and it’s not just the capitalist doing it. It’s not just the parametric boys doing it. As we increasingly navigate our way through this hard market, you’re going to find additional programs popping up that take advantages of, I guess, opportunities and marketplace. Again, going back to my stomping grounds, skilled nursing, there should be telematics in place that demonstrate that nurses and LPNs are actually visiting these rooms and doing the flips such that when a plaintiff’s attorney comes around and says that stage four pressure ulcers because you were did not doing your job. You now have some evidence in the Blockchain showing that hey, no, no, no, no, no, we were there once every four hours. And we actually just inherited someone with a problem from a hospital. So that that flips the script. And that’s the kind of stuff that you can say, you can sell telematics, you can sell insurance policy that requires the usage of that and you go use the capacity for someone else. So you what I guess what I’m really trying to say here is you don’t need to have a billion dollars to start your own insurance company. Alright, you can do you can basically rent the capital from some other carrier, get it up and running, and then leverage any sort of insurance idea out there. But to get in this world in the first place, you do need to spend a little bit of time, like I said in that Twitter sphere of looking at the people who are doing the cool stuff, parametric insurance, market index based insurance, there’s other another thing you need to understand is, I guess I’m kind of jumping on the concept of trigger. So you’ve got claims made, you got occurrence, they have other things out there. Parametric is a different type of trigger for indemnification. So what about an index, they haven’t got the right now PhD papers talking about how they’re linking insurance policies to indices. So this is really popular in crop insurance, where they’ll sit there and have you know, a whole nation of Sudan will have a crop failure, because directly, so then you have a policy that pays out all the farmers instantaneously as soon as that index is created. Other indices exist that we haven’t measured yet. And then you could sit there and link that to some sort of an insuring agreement, and boom, you just have a brand new insurance product. So what were some of those indices be literally whatever you want? There’s systemic risks all over the place. You know, when bank failures occur, that creates a chain of events that leads down to reinsurers. That’s the kind of thing that if you can model it out, you can put a risk number on it with an actuary, maybe go get yourself some capacity, and insure that sucker create your own forum. That’s a brand new type of insurance. And it could be for literally anything, great index for dentists you know, whenever we have, you know, too many dentists using this crappy tool where we can basically guarantee there’s gonna be an uptick in the number of some type of incident, maybe that’s a bad example. But there’s others out there and there’s a shortage of semiconductors right now. So supply chain risks are a legitimate problem. In fact, you know, where COVID is, and the fact that we are heavily relying on places like China, that may be an opportunity right there start to suss out the network stream of, you know, if this breaks down, what are the logical places that we can ensure create opportunities for that?
Wesley Todd [12:09]: Well, so, okay, we talked about advice, we talked about at a high level litigations here to stay I didn’t, you know, with all the innovation I heard us talking about, none of that was around, we’re gonna be able to avoid litigation altogether. And then you started talking about, okay, if you aren’t satisfied with the status quo, but you do have this budding expertise in claims, underwriting insurance litigation, you are in a perfect position to start ingesting this content, which you’ve done over the course of several years, and you can convert from handling a few cases to understanding some of the larger things that play in the industry, and then you’ve been able to pick from probably blows your mind, you probably causes you as much frustration as excitement, all the opportunities that are out there. So I think that that’s really good advice. I agree on following up with the insurance nerds, Twitter, nickname Perrelli, I tried to tweet some of those things that case glide news, and I know you do as well. So tying that all together. Okay, we are looking at what sounds like if you could, if you could come to this realization, from seven years and a profession, and ingesting all the content that’s available, which there’s a lot of good content out there on insurance and innovation. And it’s actually very tactical, a lot of us can very tactical as they start examining the hundreds of millions of dollars getting pumped into Insurance Tech every month. So with that being said, what is the biggest change, if any, 5 or 10 years from now in the industry? And I know I kind of talked about this at the beginning, but I want to kind of come back together, I almost feel like you’ve convinced me of that there is this very strong feedback loop going on. And people are learning a lot more about different niche markets in the industry. So do you think that in 5 or 10 years, everything looked and we also talked about, by the way help out the current status quo and technology in the insurance industry? Do these employers, claims departments and clients from an insurance defense attorneys sampling, do they look the same? Do they look completely different? Do they look more like the innovators you’re talking about? You know, and again, maybe you don’t care. Because if you’re an attorney, you’re getting litigation either way, but maybe you should, because your clients now will not be your clients in 5 or 10 years. I mean, what do you think happens in 5 or 10 years given the ability to ingest his expertise and become an expert on this thing, and then deploy hundreds of millions in capital, which we’re seeing every month for the past nine months into insure that? Have you convinced yourself that in 5 or 10 years, it’ll be completely different?
Matthew Queen [15:33]: No, I don’t think litigation is gonna change. I think that the law is generally speaking good, grind slowly. But I’m finally, I’m not necessarily bullish on criminal law, I think that that area could use some reform. But I generally support the American Civil Practice system, which is probably puts me in the extreme minority of people in insurance, I would expect that there’s going to be a shift toward data. I think that, you know, we may be able to know when to hold them and when to fold them a little bit better. Eventually, someone’s going to crack how to value a case, and that person is going to be super, super rich. But once you crack how to value a case, there’s going to be adjustments made on the plaintiff side of things. So it’s a constant battle back and forth, it needs to be done. That’s for sure. We should not be trying the wrong cases. And you know, ideally speaking, we should be managing risk better. But I don’t see the fundamentals of litigation changing anytime soon. But I do see changing in probably a 10 year timeframe, is that we will see the rise of the risk coin. I don’t I don’t foresee US dollars remaining, the best way of transferring risk. I’m not bullish on the one. So the way I think about this is, you know, the dominant sport, at the beginning of the 20th century was not boxing or baseball, it was polo, polo went away. Boxing phyllodes, and baseball, eventually football became number one. And then after football, it’s going to be, that’s right, nothing is we’re entering into a multipolar world because the medium is the message in the medium is no longer television. The medium is no longer television. And the concept of a superpower is antithetical to everything that you and I lived through. So you and I are analog children, but we’re definitely digital adults, and now we have digital children. And the concept of some sort of a message, a unilateral message is just never going to happen. Your kids are going to pay for food with currency ‘A’ pay for risk and currency ‘B’. Alright, so the United States dollar may remain the world’s reserve currency for an indefinite period of time, because the one like I said, the Chinese government lies. And there’s a number of reasons we need to have transparency in the world of finance. So the boys in London and New York are not going to jump on board the one consequently, unless the pound gets or the euro steps up. We’re stuck with the dollar for some time. Although the relative power of the dollar is going to probably come down as China continues to ascend, and the world realigns itself, which is nothing more than just the world following technology, the internet has created a federated mindset. I can’t even tell you what the truth is, to Fox, CNN and Twitter, I’ve got three different realities that I live in at any given time. Consequently, I declined to believe that we’re going to be continuing to finance risk through Dollars and Yuan and Pounds if there’s going to be a risk coin. And what’s cool about the risk coin is that this gives us an opportunity to create an ecosystem just about risk. And where this is going to take us as you know, if you have 10 risk coins can finance the risk for a category five hurricane, all of a sudden, you’ve got a highly liquid product or a token that can sit there essentially function like an insurance like security, but also as a currency. And maybe only takes half the risk coin to finance or GL for, you know, a whole bunch of you know, Target stores across the US. And I know the actuaries in the underwriter’s audience are going to pull their hair out. But remember, all money is green. So the risk coins don’t need to be underwritten 10 particular risk, it is merely a medium of exchange, focusing on risk. And we know that this is going to be somewhat prevalent because Bitcoin is increasingly adopted. It’s in the reserves for Tesla, it is not unreasonable to think that insurance companies will soon be adopting Bitcoin into their reserves themselves. So alternative currencies are here. They’re here to stay, the risk coin is coming. And I think it’s going to change the world. Risk, and this is my thesis. It’s a little world but I genuinely believe that we just don’t understand what risk is but the risk coin will create an opportunity for us to measure something we’d never really understood before. If the relative value of a risk coin is that it’s going up, all the risks linked to that coin are being well managed, or we believe that they’re being well managed. But if the relative value of the risk coin goes down, maybe that’s because there’s literally a category five hurricane in the Atlantic basin. So you’ll have this extreme liquidity or I guess, you know, value volatility, that will be directly linked to risk that are going on to the extent that the note risks, the value of the coin should be changing. And this will create the most efficient medium of exchange in terms of risk, people will want to have risk coins, because if these things are well managed, it’s good for everyone. Risk, at least in the insurance sense, we don’t like risk of loss, people die, people lose a lot of money. But more importantly, people die. So if we have an another incentive to accurately manage risk, and we start trading our insurance called policies based off of these risk coins, and we hold those risk coins as reserves in our insurance company, the fewer the claims we have as a plan, the greater the aggregate value of these of these tokens. And that’s a direction that you know, that Bitcoin has opened up, it will radically change the way that we view the concept of what we’re doing in this industry.
Wesley Todd [21:22]: Wow, did not see that one comment. So where should the investor send their checks to Matt?
Matthew Queen [21:29]: I don’t want to start.
Wesley Todd [21:31]: I love it. I’m already thinking about lit, I’m thinking about lit coin. I’m like, Ha, well, if he’s gonna sell the risk, I’m gonna sell the litigation. Okay, there we go. So we’re on something right. I love it. The lit coin, I can see the logo already on it’s got the little fire emoji. I mean, we’re on here. That was awesome. I mean, they look, I mean, this is exactly why I had John, there’s not a lot of people thinking big. I think there are on the Twitter sphere, like you said, but you know, there’s a lot of people that just don’t have access to information, I am very fortunate. And I’m very glad that for whatever reason, people like you are willing to talk to me. And so I got a handful of those that it’s going to be good for the 1000s of people that have been dedicating their lives to the 150, you know, overloaded claim files that they had. So, I mean, you have to think big, by the way, you know, you’re have just as good of a chance of being right, as the experts do, as we all know, if not a little bit better on these type of things. Because that’s what’s proven to happen is everything’s moving so much faster than we think. And I think that that makes a ton of sense. And I can imagine people all being able to invest whatever, they want fractional shares, you know, and everybody having a little chunk of a little bit of risk and making their money and losing their money. And but it’s you know, I think the idea is that, it’s things like this are inevitable, in that that’s what’s happening with Bitcoin. And, you know, we’re in what happened with Robin Hood, I mean, where people can, there’s a lot of money just sitting on the sidelines. So this is the kind of stuff, this is I’m so glad I really appreciate you jumping on the podcast today is exactly the type of perspective we wanted. And, like I said, we’re going for home runs, not singles that was an absolute home run. And I could talk to you for another five hours, which I probably will. But for purposes of the podcast, I just want to thank you and we all owe you a debt of gratitude for sharing your insights. There’s not a ton of folks that would do that. And where are we you know, where do you recommend people you know, reach out to you or find your follow you or anything like that because I am sure there will be a lot of people that want to try to play catch up to all those big ideas and big insights.
Matthew Queen [23:52]: Yeah, I monitor my Twitter feed pretty well. I’m at @matthewqueen84. That is my, or you can find me as Matthew Queen on there. That was my AOL handle from when I was in eighth grade, and I’ve kept it alive for all these years.
Wesley Todd [24:06]: So a lot better than mine. It’s a lot better than mine. That’s awesome. So thank you, on behalf of all the people listen to this podcast, Matt, and really appreciate it. You heard what the rich person ideas, can you value a case at the beginning, I know what I’m gonna do as soon as I get off of this call. So thank you for you know, sharing your story with the Litigation Management podcast. And I think you’ll be back on again soon. But for the in the meantime, I really appreciate your time today, Matt, thanks for joining the pod.
Matthew Queen [24:40]: Thank you very much.