Knowledge Center

Knowledge Center Items Podcast Episode 31

What if One Insurance Company Was Happy About Claims?

Published on

It all comes down to personal responsibility and doing the job you said you'd do.

That might be an oversimplification, but it's a philosophy that's hard to come by in the world of underwriting and appetite volatility.

It's easy to come in hot on new business and start excluding coverage when it's needed most.

It's an entirely different thing to hang in there with a business or industry when claims start getting real.

That's exactly what Prime Insurance CEO Rick Lindsey thinks is missing from insurance and why he's dedicated his career to doing just that.

For more Change Insurance episodes, click here.

Full Episode Transcript

Joey Giangola: Mr. Rick Lindsay, how are you doing today, sir?

Rick Lindsey: I'm doing well.

Joey Giangola: Great. Before we really get into it, you seem like an interesting guy. You ever just like killed a spider or any insect and left it as like a message for the other ones kind of crawling around the house?

Rick Lindsey: No. I always dispose of my victims.

Joey Giangola: I guess I've done it by accident, maybe, where I've killed when I was like, I'll let it sit there just for a couple minutes and let them see, and I forget to come back to it and I find it a day or two later. I don't know if it's a deterrent. I feel like I've heard that's a thing. Maybe I made that up, Rick. I don't know.

Joey Giangola: But more specifically, you seem like an interesting guy. It seems like you are kind of in some way sending a message to the insurance industry. Is there something that you kind of do inadvertently that you kind of want to put out on notice to insurance in kind of the way you approach things?

Rick Lindsey: Well, I mean, as an insurance agent or broker, many, many years ago I got very frustrated with the fact that I don't think insurance companies do their job. If we take somebody's money, we should have, and they should have, a clear understanding of what the expectations and what the outcome looks like. Over the years we tend to add exclusions, assault and battery, and all kinds of stuff, which if you're an underwriter in the company it sounds like a great idea because it's going to get rid of those claims and you're going to be profitable, but that never seems to work out that way.

Rick Lindsey: So underwriting to me is not a commodity where you buy it at the grocery store like you are buying bananas. Each situation, each state, each location, each insured is different and needs to have a real plan and a strategy. The question I get more now is don't you just have a website where I can go in and put this in like everybody else does? To me, that sounds really easy, but I know I would lose money doing it that way.

Rick Lindsey: So it's not a commodity. It's something where we need to take our job a little bit more serious. Like with COVID and active shooter and all of these things that are modern day realities, instead of trying to exclude them, how about including it. Why don't we help our insureds instead of trying to take their money and exclude more. So on every policy that we issue or offer to issue, we're offering them COVID coverage, we're offering an active shooter coverage, we're offering them assault and battery.

Rick Lindsey: If you own a habitational or a check cashing store or your business requires you to have some level of security, instead of excluding security and telling them they have to hire somebody else that has their own insurance, I think that's the wrong approach. If I'm going to insure somebody in section eight housing, I don't want them to have outside security. I want to give them security coverage and I want them to bring it in-house so that we can manage the claims more efficiently.

Rick Lindsey: I don't see anybody else taking that approach. If they did, I wouldn't have had to form my own insurance company. I could have just done business with good insurance companies that would do the right thing. But I do believe insurance has gotten too big, like banking. How did we end up in 2008 in the biggest mortgage crisis banking crisis in the world? The bankers were in charge. Those are the guys that are supposed to know who to loan money to and not to loan money to, and lo and behold, they got it totally wrong and ruined our whole economy. I would say that's what I see going on in the insurance business. We're doing the exact opposite of what we shouldn't be doing.

Rick Lindsey: You can't be cheaper than the guy that went broke and do the job right. So everybody thinks we're the market of last resort. I prefer to think of us as the market of first choice, because we're going to be a better partner and we're going to do it. Right.

Joey Giangola: So there's a lot in there, Rick, and you can go in many of different directions. You've basically built a career on doing the exact opposite of that. I mean, like you said, you wouldn't have had to start your own insurance company. How do you think we maybe got to this point and do you see a way back to where it is manageable? Or do you think there needs to be more people such as yourself that kind of starts out with a different philosophy altogether?

Rick Lindsey: Well, I mean, to me it comes down to personal responsibility. As an insurance agent or broker, I felt personally responsible to do the right thing, and so that's led me down this path. But whether you're a taxi cab company or you're a bar, restaurant, tavern, whatever, you live with the same reality. They have to run their business the right way.

Rick Lindsey: Again, you get involved in a lawsuit and you run to a lawyer and you expect a lawyer to help you. I think that like every business, there's good lawyers and there's bad lawyers. There's good agents and there's bad agents in the insurance business. So who you pick as your partners and the type of relationship you have, it's all personal relationships. The further away you get from the clients, the more people are able to kind of shoot the gaps like a linebacker in football and take advantage of those gaps.

Rick Lindsey: I just think it's personal responsibility. If somebody sues me frivolously, they ain't going to get away with it. You arrest me in Chicago, wrongfully, I'm going to spend $380,000 to kick your ass. I got $200,000 back, but it cost me 180 grand to be right. But that's personal responsibility. I could have pled guilty to a misdemeanor and been out safe.

Rick Lindsey: That's the thing about lawsuits is they always give you a door out. They hit you high, or hit you with the felony, or hit you with a million dollar demand, and then they always give you a door out and you feel lucky to get that door out. Well, if you did something wrong, then maybe you take the compromise. But if you're being played, you never take the easy road out.

Rick Lindsey: I think that's where we've made a mistake in all businesses, just not insurance. We always go ask some expert who has no skin in the game, right? In our business, it's lawyers, and we're always asking the lawyers to help us. I don't ask lawyers. I strategize with them and that I make the decision and I tell them what we're going to do.

Rick Lindsey: Most insurance companies don't tell the lawyer what to do. They're going to ask the lawyer. I get accused all the time, your opinion shopping. You don't hire a lawyer who doesn't tell you. Well, Am I going to hire a professional baseball pitcher that doesn't think he can pitch the ball over the plate? I'm not going to hire some lawyer that's telling me I'm going to lose, which what they've all done for 40 years. But I tell them, "Okay, I hear you say we're going to lose. Now we're going to go play the game and I believe we're going to win." So I take that part of it out of their hands because I know as much or more about it than anybody else because I'm personally involved.

Rick Lindsey: As the president of Prime, I can underwrite a risk, I can price a risk, I can manage a claim. So maybe that's why Prime does better is because I'm actually making the tough decisions where other people are going to their underwriter and asking them what should we charge on this risk? An underwriter has their experience, but they're not risking their own money, and they're not the one that has to manage the claim down the road either.

Rick Lindsey: In most cases, I think that's a mistake we've made as an industry is we've separated claims from underwriting. It's almost like a Chinese wall. Underwriters aren't supposed to talk to claims people and claims people aren't supposed to talk to underwriters, and I think that helps our opponent. It doesn't help us make happy customers.

Joey Giangola: Well, that's an interesting kind of way to look at it. The thing that I would be curious about from that standpoint is you have an unorthodox way of running an insurance company, from what I also understand, you also have kind of an unorthodox way of staying close to your clients in terms of you're an aviation fanatic, if I will, in terms of your ability to kind of go out there and meet with people. That's sort of, again, counter intuitive to definitely the environment we're in now. How much of that sort of mentality has kind of served you really across the board, whether it's from, like you said, that personal responsibility down to underwriting, just doing things differently really from top to bottom?

Rick Lindsey: Well, I think it gives you the confidence. I took a Katrina case to jury trial in Gulf Port, Mississippi. I've issued Lloyd's paper for many, many years. I could have never, ever, ever talked Lloyd's, any of them, into taking that case to trial. So what is it that makes it personal is your own personal knowledge and your own personal contact.

Rick Lindsey: So if I try and transfer that to one of my reinsures across the pond in London and get them to be as committed to fighting the bullshit lawsuit as I am, it's not going to work. They're not personally involved. They're not committed. They've never been there. They've never met the people. So I do believe that as an agent or broker back in the late seventies and early eighties, that's what drove me to where I am today is because I dealt with people personally, and you look at them in the eye and you commit to do the job.

Rick Lindsey: That's why I think that Prime, and I have almost 200 employees now, and we all do it the same way. They meet people. They talk to people. We're much closer to the client. Yeah, if you've never met somebody and grenades start coming over the wall, you're going to react like traditional insurance carriers. You're going to cancel everything and say, "We don't do that anymore." To me, that's kind of the ultimate thing that I never want to do, and I never have done, is stop writing. Now, I write less business because competition comes in and undercuts my pricing, but I've never canceled a class of business and said, "I can't write that," whether it's auto, or recreation, or go-kart tracks.

Rick Lindsey: Every other carrier, all of a sudden, five years ago, they were writing every go-kart track on the planet and now they're canceling every go-kart back on the planet. To me, that means you got it wrong. It's not the industry. It's not the go-karts. Or it's not the trash business that we insured or the trucker we insured. The insurance companies are the ones going in hot, underestimating the price they need or the litigation that they're going to see, and then all of a sudden they wake up and they drop their weapons and run for the hills and leave a bunch of insureds in trouble.

Rick Lindsey: I believe, at that point, they overpaid open claims too, because now they're out of the business and they just want to show that they're getting out, they're not doing that anymore, and the sooner they can close all those claims the better.

Rick Lindsey: So as insurance carriers change their appetite, it doesn't help anybody. The insured got to go out there with a bigger uglier loss run looking for a new insurance company. Lucky for them, I see the ugly loss runs as an opportunity. Right? When I see all kinds of losses on the loss run, I think, "This insured should be pretty damn smart by now, and he should be pretty upset and want a good insurance partner who will do the job they need done." In most cases, they're going to have to pay my price now. Where before they wouldn't have paid my price because they got a cheaper price.

Rick Lindsey: Now, my commitment and the way I've evolved this now is I do want to reduce people's price. So if we write a brand new trucker at 10 grand or 20 grand a truck, my goal is to get him down to 10. But he has to perform, which to me, I had a conversation with an insurance department and they said, "Oh, you mean perform by not having any claims, being incident free." I said, "No, I want them to report incidences."

Rick Lindsey: Because everybody has incidences or claims. The guys who have a totally clean, no incident, they're lying to you. Somebody ran into them, they're not reporting it because they don't think it's their fault. The fact that they don't report it to you shows that they don't trust us. So tell everybody, "Look, if I take your money, it includes you having claims. So you have to report them to me and let me do my job, which is manage claims efficiently."

Rick Lindsey: That's really the only thing that we do is add value. Underwriting, issuing paper, pricing. But at the end of the day, when you hit the gas and you want performance, it's claims. Are you overpaying claims? Are you efficient about claims? Do you know what you're doing or are the plaintiff's able to leverage and get more out of you than what they should?

Joey Giangola: Not canceling policies and encouraging reporting, what has that done then for the confidence and the trust in the people that you do insure? What have you been seeing from their response to the way that you guys handle their business versus what they might expect of the industry?

Rick Lindsey: Well, I mean, I would tell you that the big trucking companies that we now insure don't want to leave us. They like the fact that we do business the way that we do, that we believe them and that we help them manage their claims aggressively. When they are at fault, we want to go pay the claim early. We don't want to have somebody have to go get a lawyer. If we run somebody off of the road, we want our insured to be on the phone with them asking them if they need a rental car, how can we take care of this, and get on with it.

Rick Lindsey: In many cases, they'll say, "Well, that'd be nice, but I was thinking of getting a lawyer." We want to say, "Yeah, you can probably get a lawyer, but if we'll be fair and upfront with you, there's really no reason to get a lawyer. But you're more than welcome to."

Rick Lindsey: But in some ways it's about making the right turn. You don't force people to sue you. You show up and you give them the opportunity to deal with you directly. I believe that this all is cyclical and the pendulum swings and most people don't like lawyers. The reason they go get lawyers is because they hate insurance companies more. So as insurance companies, if we step up our game, we can eliminate a lot of what we push to the lawyers. But that means you have to be proactive, not reactive.

Joey Giangola: Rick, there's got to be some decent stories in here in all of this sort of insurance experience. One, I want to know what's the weirdest risk that you guys have taken on. Two, what's the craziest story that you have actually going out in real time meeting the client sort of last minute to get a deal done?

Rick Lindsey: Oh, I don't know. I mean, we've insured so many weird things. Everything from the Bartman ball explosion after the Cubs game. We just wrote for Reverend Al Sharpton I Have a Dream Commemoration March in Washington, DC, that nobody else would.

Rick Lindsey: I talked with Reverend Al Sharpton. That was one of my requirements. If I'm going to insure him at this crazy time, I ain't doing it unless I talk to him. So we had a very nice conversation, made sure we were all on the same page. I gave him a price, he paid, and it all worked out pretty well.

Rick Lindsey: But litigation is where it all comes down to, and we have tons of litigation going on. This past week we made the news in Florida where one of our insureds who wouldn't cooperate with us got a judgment of $411 million. It's the largest judgment ever in Florida. So the good news there is we settled it for $991,000 within hours of them getting there, so I call it a fake judgment.

Rick Lindsey: The attorney didn't want to settle with us, and basically we would have paid him the money, but he wanted the headline. He wants to be able to put that on his website, that he got a jury to award and 400 million. Again, he's not focused on his customer. I don't know what he charged his customer to put on the Zoom trial, but I know he didn't do it for free. So one of my questions now is how much of the $991,000 we paid did the injured party actually get?

Rick Lindsey: From what I know of this claim, had our insured cooperated with us we would've fought and won this claim, because this guy drove his motorcycle into the ditch. He didn't even hit our truck. But again, the insured is the wild card. In that case, the insured ran away, wouldn't cooperate, wouldn't talk to us, wouldn't do anything. So that's my worst day is I got to pay the million dollar limit.

Rick Lindsey: That's happened to me once in 40 years, I'm glad to say. Most people I deal with don't act like that and we do a very, I guess, stringent job of talking to the insured before, visiting the insured after we insure him. So at this point, that's my goal is to dig into this and figure out why this insured didn't act the way he should have, and we could have done much better than we did on this claim.

Rick Lindsey: So the plaintiff's bar is all about leveraging it to their client's advantage, which should be their job. As an insurance company, we should be just as interested in representing our insureds just as aggressively. That's really where I think most insurance companies fall down because they don't know their client, they're not close enough to the business. So our asset is we do it close, we know our customers, and most of the time we can keep them confident that we got their back. In this case, for whatever reason, the insured got panicked, wouldn't cooperate, so we're paying a million dollar claim we shouldn't have paid.

Joey Giangola: Or like, Hey, hit on one more thing that I would guess we would add to the list of unorthodox or unusual things that you do is just, even in the way that you talk about the industry, everyone is a little more close to the vest, a little more stifled. That's something that you think limits our ability to communicate effectively with people and just kind of speak to them plainly as we kind of sanitize everything.

Rick Lindsey: Yeah. I mean, I think, to me, it's not rocket science. Even all of the lawyers I talk to, they want to use big words and make it real complicated. That's what all of these industries do is they come up with their own terms and slogans and it makes it foreign and confusing to us commoner folk.

Rick Lindsey: Everything can be broken down into very simple terms. Good lawyers, good people I deal with, that's how we deal with stuff is very basic, very common sense approach. So I think being honest and upfront and not using big words, making it simple for people, is the way that you make things comfortable for them. You can make anything real simple or you can make it as complex as you want to make it.

Rick Lindsey: I do think that being upfront and frank with people... I had one account I really wanted to write. Great guy. Runs a great operation. We go meet him. He comes out with this great quote, $4,400 a truck, and he hasn't had a claim in two years, and he wants me to compete with it. I just said, "Look, I can't make you happy at $4,400 a truck. You should take that quote." I said, "I don't think that's a really good company. I think they're in turmoil like everybody else is. They're banking on the fact that you haven't had a claim for two years, which I don't believe." With 800 trucks out there on the road, there's something going on there. But I says, "You should take that quote."

Rick Lindsey: I don't believe that there's many people in our business who are going to tell people. Now, if it would have been a shitty unrated company, I'd have told him, "You can take that quote, but I probably wouldn't because it's an unrated company and there could be trouble down the road for you."

Rick Lindsey: But in most cases, the companies we deal with and compete with do have a good rating. My focus, and what I tell everybody, is what's their combined ratio? If they're above a hundred, they're not going to be a good stable partner for you because at the first sign of trouble, they're going to head for the hills. They're going to cancel you. You know?

Rick Lindsey: Again, the only reason I cancel somebody is because they lie, cheat, and steal. If you have a claim, I am never going to cancel you. That's why we took your money. We should actually be happy when people have claims. That's our business. But what we want to do is try and not cover it or exclude it, and again, I say a lot that people say, "Oh, we can't insure that. We can't insure terrorism. We can insure COVID." So do you think the government can do it? I don't agree with that. The government can't do anything right.

Rick Lindsey: So the World Trade Center and terrorism, I can cover it. You just need to charge enough premium. It's like wildfires in California. The reason everybody's canceling is I guess they thought there weren't going to be wildfires in California. There's always been fires in the West. So the problem is is they didn't get enough premium. So it's amazing to me that as a business, we're always selling on a lower price. Every ad you see and every buyer wants a lower price. Save 15%. Save $100, $419. I wonder how well Mercedes would do if they were selling on a cheaper price all the time.

Rick Lindsey: So it's up to us to raise the bar and not only do a better job of telling people what they don't want to hear, but we have to provide them the coverage they really need. If I insure a home in Florida, I give them wind, flood, and everything included in their homeowners. I don't exclude wind and flood because that's what they need in Florida. You know?

Rick Lindsey: Yeah, that's at a higher price, but that's what we should be telling people. You shouldn't own that home down there in Florida if you can't afford it. If the only reason you can afford it is because Citizens gives you a cheap homeowners quote with no wind and flood, somebody should tell you you're an idiot. Unless you can afford to self-insure, which I know a lot of guys down there who don't buy insurance. That's what they do, they self-insure. But they've got the money to do that.

Joey Giangola: All right, Rick, I've got three more questions for you. Really simply, what's one thing that you hope you never forget?

Rick Lindsey: There's always opportunity. I always want to give everybody the opportunity. Again, people look at your claims run and think you're a bad company because you have bad claims. That's short sighted. There's always an opportunity, but you don't want to provide the opportunity to the wrong people, but you know, having an open mind.

Rick Lindsey: Many cases, these people are doing what they think they have to do. They're not reporting claims because they think that's how they're going to get a cheaper rate is by having no incidences. To me, that's not right. You should pay the right premium, you should report your incidences, and everybody would be a lot better off.

Joey Giangola: Now on the other side of hat, what's a one thing you still have yet to learn?

Rick Lindsey: How to make a woman happy.

Joey Giangola: Fair enough.

Rick Lindsey: Along with a lot of other things.

Joey Giangola: Fair enough. All right, Rick, final question to you, sir. I think this entire conversation has probably been an answer to this question, but I'm going to go for it anyways. If I basically handed you a magic wand of sorts to do something a little bit differently across the insurance industry, what maybe more specifically is that thing, where is it going, and what is it doing?

Rick Lindsey: I would say everybody's looking for an algorithm or some type of computer solution. I think we need to go old school, and that's about relationships. It can't be done in a box. So I would encourage people that sometimes that phone in your hand that's as powerful as that rocket ship that went to the moon isn't everything that it's presented to be. I prefer to deal with real people, real stuff. I think all of this technology, it's easy to think that's going to solve our problems, and technology gets you further away from people in reality, I think.

Rick Lindsey: In the legal world, it's the best legal system in the world, but you've got to show up to play the game. That means I've got to show up and I've got to have a good insured, and a good insured needs a good insurance company.

Rick Lindsey: So technology is great. The best use of technology, this phone, when I insure somebody's home, I want them to go video the inside and the outside of their home because then I can tell them exactly what their stuff was worth in their home. It's amazing to me that we still have claims today, all these hurricane claims in the Gulf now, and people with a $20,000 trailer have $70,000 worth of contents, but they can't prove it. Right?

Rick Lindsey: So as an insurance industry, how hard is it for us to have them send us video of their own? At the time of binding, they'll do it. They'll send me the video of the inside and the outside of their trailer, their house, or whatever, and it makes my job so much easier that it's unbelievable. But we don't use it for that easy stuff. We're trying to build the new greatest app that's going to do it all.

Rick Lindsey: I think old school. I liked the old way they did business in London where the underwriter took the risk on the napkin at the Lloyd's Coffee House and there wasn't some regulator sitting there telling him you can't do that. You can't. Now there's regulators all over the place telling them you can't do stuff.

Rick Lindsey: You've got AM, Bass, you got all these guys that supposedly know the ins and the outs of the industry, and from what I've seen over my 40 years, most of them get it wrong. Most of them are changing direction. All the guys I know, or most of the guys I know, that were in London have been fired, and now they're blamed for the fact that the syndicate lost money. In my experience, they did what they were told to do by the bosses, right?

Rick Lindsey: So again, the old fashioned way. Be responsible, do the right job, and I guess the best way to do that is risk your own money. Every underwriter, just like in Countrywide in the mortgage crisis, why did Countrywide do stupid shit? Because they weren't risking their own money. If you made Countrywide risk some of their own money, they probably wouldn't have been that stupid.

Rick Lindsey: So as an underwriter, I'm risking my own money, and I think that underwriters, producers, everybody in the supply chain should have some skin in the game. If the insured is a total shit show and the insurance company loses money, the agents and brokers should walk away with a big, big payday. They should have received a fair commission, and if it works out well and everybody makes money, then the insurance agents and brokers should participate in that reward. But right now, most of our model is nobody has skin in the game except the insurance company.

Rick Lindsey: So our model does take into account profit sharing with all of our producers. We want to pay producers as much or more commission than they've ever been paid. But we do that in profit sharing. We don't do it upfront.

Joey Giangola: Great. This has exceeded expectations, so I'm going to leave it right there.

Rick Lindsey: Okay, thanks.

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