CRÉME OF THE CRAP

TRANSCRIPT

[Bruce Silverman] Hey everybody. Welcome to another edition of "Managing Risk for Tomorrow, Today" Today I'm Bruce Silverman along with Henry Laville. Henry, great to see you once again let's give the folks your contact information that's 225-317-4265 is the phone number, hlaville@eliterisk.com is the email and eliterisk.com is the website. I love what you're calling this, this episode cream of the crap. But in fairness, you spelt it as "créme"

[Henry Laville] way is yeah in French - créme - the créme of the crap.

[Bruce Silverman] Hey, you're in Baton Rouge, there's all kinds of, of French aspects to the state of Louisiana. So I love it. Créma of the crap - let's talk about - good risk in tough classes.

[Henry Laville] Right, so when I say créme of the crap, or a cream of the crap what I mean, what I mean by that is there's businesses that aren't being punished for their performance. They're not being punished for not having a safety culture having adverse loss history, bad severity claims, bad frequency claims, any of that. They're being punished for what type of business they are. And there's limited solutions for those businesses. We found that those folks need a better solution, what they really need is control. So those are class of businesses that we are going to welcome warmly, whereas other folks are going to keep away with a 10 foot stick.

[Bruce Silverman] Let's talk about what qualifies on those classes that you're going to embrace. 

[Henry Laville] Sure. One of my favorite examples is concrete pumping. So concrete pumping is stuck between service and transportation. They transport concrete but then they pump it so they're some of the heaviest trucks on the road. When I was in retail insurance, I had fleets that would include 90,000 pound trucks when fully loaded, and they would have a large crane boom they have to put outriggers out inside the truck swing the boom over, they'd have to do things like get over walls get over bridges, sometimes they would even pump concrete down well holes for well casings or plug and abandonment jobs in the oil field. I even saw them pump from barges with when bridges were rebuilt post Katrina. So it's a diverse, it's a diverse the usage for that for that industry. But there's not a lot of diversity in their insurance choices. So I find that's a perfect example. They're very heavy vehicles, there is a general liability aspect, the trucks can flip. If the outriggers aren't there, I've seen a mile of powerlines get pulled down in New Orleans from a claim. But it's a perfect example because you can see rate risk in that class where they have low loss ratios. But they're just getting shellacked, there's just not a lot of options there.

[Bruce Silverman] What other industries whether the classes are falling into that category that you guys are just opening up your arms and and hugging everybody who comes your way?

[Henry Laville] Sure. So not necessarily everybody but if they're if they fit the cream of the crop model. Another one could be ready mix. ready mix concrete, it's very similar. There's there's aggregate haulers where they can be hauling crushed concrete, oyster shells, limestone, things of that nature hard. Then there's more niche industries within transportation. Here, sugarcane is a tough one. Quite a lot of their drivers have international driver's licenses sometimes as NBRs are tough. Our state allows those trucks not to wait waystations. So in some cases, you'll have drivers that may or may not be able to drive driving trucks that may or may not be able to stop. So it can be tricky. Beyond that, acoustical ceiling tile risk I've seen I've seen sometimes hard because they can have crane trucks really anything with a crane or rigging attachment. Coiled tubing on the on the transportation side can be hard with an oil and gas they often have extra heavies, really anything with extra heavy vehicles is is very tough. Waste management. Again, another one.

[Bruce Silverman] Go for it. Explain it. Sure.

[Henry Laville] Waste Management can be tough because they're hauling trash, which can be seen as a pollutant or they can be hauling liquid mace manage waste management, and then they're just very, very heavy vehicles. They have an intermediate or short driving distance. So sometimes they won't always attract attract the best drivers. It's just really a tough class.

[Bruce Silverman] What about some of the standard markets?

[Henry Laville] So the standard markets generally stay away from those classes. There can be options. There's not a lot in our state. For instance, pick it on concrete pumping again, NBIS, nation builders insurance is one of the best options they have a solution where they'll provide over the road hazard for mobile through a mobile equipment endorsement on a general liability policy. So they're picking up concrete pump trucks as mobile equipment, which by that definition is a good fit. And that's great and they have a great program. The cover is good, the rates competitive compared to the rest of the industry options are very good. But they've got their pick. And there's nothing wrong with that for the carrier where you have greater scarcity, you can have higher rates and they can exercise greater discernment on the classes or the businesses they will write. But if you have a business with one shot loss in five years, which is one severe loss, where sometimes things happen, maybe the person in front of you brakes hard and your 90,000 pound truck can't stop like a Honda Civic can... You get into those sticky situations you're jammed up that one issue can can push you out from that strong market and group captives are the same way the group happens for a lot of these industries are looked at as the light at the end of the tunnel, the auto rates are generally significantly better. One issue, one little infraction, bad cap scores, there's it's a slippery slope where you can not qualify for those solutions. And it's tough. The standard markets to the standard admitted carriers, travelers, CNA, they don't generally look favorably on those, at least in my little area of operation. My A.O. here in Louisiana, and the other South southeastern states. So it's hard out there.

[Bruce Silverman] I think once again, we've talked about it on other episodes with you and and with Adam. And with Jeff. Creativity really comes into play.

[Henry Laville] Absolutely, it does. So NBIS is a great, a great example of somebody who's got a creative solution, we are too. So we allow for participation in our risk that allows for the possibility of distributions on the back end, which is a complicated way of saying you're gonna get some of that money back. Normally, once you write your check, you're kissing that money goodbye, you have no losses, great! Next year, you had a 10% increase, instead of a 75% increase or in some cases 100% increase, but you're not getting any of the dollars back. We we have a different program. And we do we do offer that for for the risks that fit and for those who really want to take control, if they're serious about taking control, and they'll put skin in the game. And we're serious, and we'll bet on them. Constant consumer equally to what that bet on themselves.

[Bruce Silverman] It's amazing for me, I've always been a very creative person. And that's why I do what I do. Numbers interests me, but not in the same way that the actuary tables work in insurance and everything else. And I remember the first conversation I had with Jeff Klein, and we were talking and I realized, at least the way that elite risk approaches, creativity is absolutely key. And it seems like that is what is separating elite risk from a lot of other companies. 

[Henry Laville] It absolutely is. So what we do and our model around collateral versus versus funds withheld really makes this possible we have our own carrier, we have true Hand in Hand strategic partnership with MSI, and that just makes it work. It's something where otherwise, you'd want 130% to collateralize the deal. So it scales these solutions out of the middle market, it scales the solutions out of the smaller, large market. And it leaves great risk that may be in concrete pumping or an aggregate hauling at the mercy of whatever carriers are available. And those carriers aren't necessarily bad. They underwrite to expect for large losses. So they have to charge that premium to be able to make a margin and there's nothing wrong with a business being profitable. I don't know any business that's out to make a loss, at least not in earnest. So it's it's a it's a significant issue for the business owners though.

[Bruce Silverman] Let's talk a little bit about the drivers. You've made mention about the quality of drivers, depending upon the industry, depending upon the class. How does that affect rates and the ability to write policies. When it comes to drivers when it comes to the classes of what those drivers and what industries those drivers work in?

[Henry Laville] It affects it in a big way, it makes a very significant impact. So at the high end, you'd expect the best drivers and transportation or in anything where they're driving heavier vehicles or extra heavy vehicles to drive hazmat vehicles so so vehicles hauling hazardous materials, that would be significant pollutants could be caused it could be explosive, could be highly flammable, could be radioactive, we've seen as well. Those are generally going to pull the best drivers and for good reason the stakes are high. But that is not to say the stakes aren't high driving a 90,000 pound pump truck. So you've got business owners who need to keep their trucks on the road.

There's a cost they're paying notes on the vehicles or Greenly high maintenance costs on these vehicles well they are heavy diesels they need to keep them out there making money. So you see some of these businesses hiring drivers who would optimally fall below their their hiring standards. When I was in retail, I saw drivers hired that had reckless operations and things of that nature. If you're with a carrier that has a good scenario, or has a good solution for you, and you found yourself not jammed up in that way, but you're hiring drivers, you're really looking to solve a short term problem. But you're creating more long term problems down the road, your losses are going to stay with you for at least five years. So when that driver hopefully he doesn't maybe maybe you're you gave him the hammer her the shot to turn his career around. But quite often, they repeat their mistakes. When that driver does that. You're whole business is adversely affected, your rates skyrocket, your renewals are gonna go up every year. And your cover may suffer as well. You may not have the coverage you need for the claims you may have slower TPA service, or claim service through through whoever that carrier works with on the claim side, whether it's in house or third party claims administrators TPAs.

So hiring bad drivers makes a tough situation much much worse. But the converse is true as well. If they're patient if they can pay more than they're going to get better drivers investment and good drivers is an investment in a good safety, culture. And investment in a good safety culture is a huge investment in a business it protects the business's loss ratio protects one of the other businesses or one of the business's other strongest, strongest assets, which is its human capital. You want your drivers to go home safe for their family every night, and you want drivers that you're going to hire prospective hires down the road to say these folks have it together. If I work for them, we want our families we want to be back at home with our families tonight, and we want to be paid competitively. So me personally I would always encourage where it's available to pay your drivers. Well. Do you pay your drivers? Well, you can be more selective on hiring better drivers. 

[Bruce Silverman] Absolutely. You get what you pay for is the adage says Right? Absolutely. He's Henry Laville. This is "Managing Risk for Tomorrow, Today." Henry. I know I'm really looking forward to continuing the conversations with you. This is a long term project by elite risk and so excited to be working with all of you managing risk for tomorrow today with Henry Laville. It's  225-317-4265 is the phone number, hlaville@eliterisk.com is the email and the website is eliterisk.com. He's Henry, I'm Bruce, thanks for being with us. We'll see you next time.