Dale Diamond: When a $25K Claim Becomes a $7M Verdict or More

Speaker A: Foreign.

Speaker B: Welcome back to Scouting for Growth. I'm, um, Sabine Van Der Linden and today's conversation is one I've been wanting to have on this show for months. Every property and casualty leader I speak with right now in the United States is dealing with the same shock to the nuclear verdicts, social inflation, a plaintiff bar that is technology enabled and aggressive, and a, uh, claims function that wasn't built for any of it. My guest Today has spent 30 years at the intersection of all of it. Dell Diamonds is vice president of claims at namico, the ancient arm, um, of the national association of Mutual Insurance Companies. He started as an appellate and bad faith defense lawyer in Chicago, ran multimillion dollars professional liability books as a regional underwriting director, and now defends Avery Mutual in namec in the United States against the rising tide of nuclear verdicts. He's one of the rare voices in this industry who has actually held all three lawyer, underwriter and claims executive. Del, welcome back. It is always a pleasure to speak with you. Thank you very much for joining me on um, the Scouting for Growth podcast today.

Speaker A: Hello Del.

Speaker B: Thank you very much for joining me today.

Speaker A: Hi Sabine. Thank you for having me.

Speaker B: Well, Del, you know, we have met actually a couple of years ago, right. Uh, first at Reuters where we actually planned quite a few of our conversations. So first tell me about you, your career and what got you into insurance.

Speaker A: Thanks Sabine. Like a lot of people, insurance, um, wasn't my first career choice. I always wanted to go to law school. When I attended law school, my interest was really labor and employment. Had opportunity to work at a labor firm. Unfortunately at that time labor, organized labor, was kind of on a downswing, um, and there weren't that many opportunities. And really, uh, a friend of mine from school was working in insurance defense firm during school and he got overloaded and told me, can you take this job for me? He said, just go down to this well known Chicago law firm, tell them you're here for me. They did insurance coverage. And I went, I said, I'm here for Frank. He can no longer do this, but I'll do it. And that's uh, how I got into the insurance end of legal.

Speaker B: So Del, you have worn three hats. Most people in our industry never were in one single career. You have actually also appellated and birthed defense lawyer at a top Chicago firm, professional liability underwriter running multimillion dollars book and now VP of claims at the insurance company that defends most of the mutual companies in the United States. It's called nemic. So it would Be great for us to tell us who Nemiq is. So tell us a little bit more about your sense of how all this connects together.

Speaker A: Oh, uh, yeah, great question. I've been very fortunate. Uh, my entree into, uh, the insurance world was through the law firm where our clients were all major insurance companies, all the names you'd know, and we would defend their bad faith cases. We did coverage, opinion letters. And after doing that for six years, um, it was always my plan to work at the company. I always thought I'd be much more useful before all the problems happened to prevent them rather than when we would get involved at the law firm. Usually it was because there was a lawsuit and a lot had gone forward by the time we get involved. And it was difficult sometimes to defend some of the decisions that were made. So I just thought I'd be more valuable. And it was very easy transition into the claim side of insurance companies. I started handling lawyers malpractice claims, which was very interesting. And from there transitioned to all non medical professional claims. Yeah, um, and really wasn't planning to do anything else but have a claims career when I was asked to uh, go to the underwriting side. And at first I was a little reluctant because I thought, well, I'm a lawyer by trade, I like the legal aspect of claims. But I was convinced to become a product line leader for employment practices.

Speaker B: Hm.

Speaker A: So what that did is just my job was to work with the underwriting team, work with our brokers. It was all surplus lines, hard to place business in employment, which was fairly new at the time for small employers. So it was a real challenge, especially in California. So they told me, you just need to keep this profitable, especially to fix California. And I said, okay, how do I do that? And they said, well, talk to the other products line leaders for the other products. So it was kind of something where I could make my own way, my own job and learn it. And it was just more interesting than I thought it would be. Getting out of claims. And from there again without looking. I was asked to work with all our, uh, surplus lines brokers and kind of be the connection between the other product line leaders, the underwriters and the brokers to make sure everything was working smoothly. So if there are any issues, it came to me. If there were new opportunities came to me. Making sure the book was profitable came to me making sure the underwriting team was working with the product line leader. Well, all that came to me. I was a little bit of a, ah, referee, interesting job, probably my least favorite, definitely the most lucrative in the hard market back in the early 2000s and did that for a long time, then left, went to another large insurer who is starting a book of professional liability from zero. That was a whole new experience. When you have no premium, nothing on the books, one loss can sink you. Yeah, yeah. So we had to grow that book from nothing very carefully not to experience a big loss. And we grew it with my team. Uh, we ended up writing in 10 years, about $100 million in business, um, at about a 70% combined ratio and made a nice 30 million for the company.

Speaker B: Congratulations.

Speaker A: Yep, thanks. And from there I retired for a year. I found retirement wasn't really for me and I got this opportunity with namec. And as you said, NAMIC is the national association of mutual insurance companies. So what they do mainly is advocacy and members, uh, support, uh, so services. They do their continuing education for members. They'll work with their, the agents and they provide them a lot of education. But mostly it's the lobbying at the federal and state level trying to change laws that will benefit the mutual insurance industry.

Speaker B: So it's interesting because I would love for uh, our listeners to understand your perspective as to what you learned from working in underwriting. You were also a lawyer and now you're actually educating in some ways and enabling m, uh mutual companies to really understand how to protect themselves from bad claims. If I could actually highlight that and take advantage of the really best, which is hard out there in the industry because when you look at what is happening within insurance, everything is getting really, really connected because of artificial intelligence. So I would love for our listeners to hear from you what you took from that which is connected in some ways from underwriting to legal to actually your work in NAMIQ today.

Speaker A: Yeah, that's exactly what's going on, Sabine. And for me, what I do at NAMCOA, which is the insurance entity of NAMC that was founded in 1986 when our members who are all mutual insurance companies, could not find professional liability for their insurance activities, they decided just to form their own company. So uh, as the vice president claims there one thing I do, my main job is to handle claims if they get, have an excess verdict or end up with a bad faith claim that comes to myself and my team and we handle that situation and get the best result possible. But more than that, with my perspective, what I work with, uh, our members and especially my insurance on is the communication, how everything interrelates. Working with your claims team, uh, and your underwriters, your actuaries and then your defense counsel. Because I've been on kind of all sides of the house and one of the big issues is the communication. And I always, I uh, taught back in the day uh, in Insurance 101 class for when I was back at Markel. Anyone who was coming into uh, the Chicago office at Markel, we felt it was important no matter what your role, if you were in accounting, uh, if you were in underwriting, uh, claims, you went through this insurance class because you would know what your role is going to be in the company. You didn't necessarily know what everyone else's was and how what you did impacted them. I said it's kind of like gears in a wheel. So if the claim department is giving bad reserving information to actuary, what they're doing with it is going to be bad information they're going to give to underwriting and everything will break down. Either you're going to be too expensive and you won't write any business or you can be too cheap and you'll write all kinds of business necessarily, uh, maybe the business that you really don't want or you'll get out over your ski. So you have to know how to price your business. You have to know what business that you really want, what business you don't want. And you can't do that without all the departments working together.

Speaker B: Yeah, no, I get that. You know as you are speaking about which business you should go for, which business you should not go for. I just came back from one of those conferences in New York and one of the big uh, conversation as you would expect because we are talking a lot about AI energic AI is you know, finding your customer where your customer is now and a lot of those customers and I would assume it's the same for uh, mutual companies are going on to GPTs to find their business and finding your right business. So when you start looking at GPTs you have to make sure you are discoverable that people can find you regardless of what business you are in. That um, you can actually quote the business in those platforms nowadays. So you know technology we need to use, ah, include like API friendly restless API friendly technology, machine readable website. But lastly it's about being bindable and what you are saying around bindability is you know, making sure you're not just taking business you don't want and so adverse selection becomes super important. Making sure you are really understanding your profiling, your perfect customer, your icp, your ideal customer profile become critical using digital technology. Do you see this happening as well? Within the mutual companies, not as much.

Speaker A: In the mutual companies it should be. They need to do more of this because as you say, it's so easy in insurance to write the wrong kind of business or just not write enough business, depending on what you're doing. And the interesting thing about the underwriting side of the house is you're basically, you're doing sales, but you're trying to make sure that you're selling something that your customers aren't going to use too much of. So I was in sales way back in the day, just regular sales where all you need to do is go out, find your customer, make your sale. And what happened after that, you know, was, was not your issue here. You don't just want to go out and sell all you can, as you said, because you may be in a situation where you're not gonna make an underwriting profit. I always worked, we had to make an underwriting profit. We didn't count on our investments to make up that difference. So you do have pressure to grow your premium. Uh, but at the same time you have to make sure it's gonna be profitable business. And that's what makes it really challenging. And like you said, now there's more tools and there's tools coming online all the time to better analyze, to work with your data. In insurance, we collect so much data, but it's always been a problem to extract that data and to be able to use it. I did work a lot with my actuaries and that's something that not all companies have the luxury of. Actuaries are hard to find, they're expensive. Um, and I think when you talk about the mutual, some of them don't have, like I had an extra, I could call anytime and say, what are things looking like in California for the epl? Are we making money? Are we losing money? How much rate do I need to get? And the rate's also interesting because sometimes the people are making the decisions higher up aren't doing the day to day business. So you'll get instruction like, well, our profitability is falling a little short. We need to take a 9% rate increase. And I'd always say, well, if I take a 9% rate increase across the books, my better risks are going to be able to go find cheaper insurance and they're going to leave. My worst risk won't and I'll get 9% for them, but that won't cover the effect of the adverse selection. So we're going to take rate increase, but we're going to become less Profitable. Sometimes it's hard to convince them of, uh, that.

Speaker B: So I want to dive into something we talked about, I think, over a year ago. And that was for me, the haha moment of really understanding social inflation and nuclear verdict. We were speaking at a reuter, uh, webinar together. And I think that's where we started engaging, uh, a little bit more. And I want our listeners to hear this story straight from you, because this is one which I think captured the challenge of what is happening within insurance underwriting. Why, you know, insure getting potentially bad reputation as well in some markets, uh, around the globe. So this was a situation where we had a, uh, $25,000 auto liability claims that became actually a, uh, $7 million jury verdict. So walk us through what happened and what we need to be aware of as we think about underwriting, about insurance, about nuclear verdicts and how maybe we need to be more mindful as to why these things happen.

Speaker A: Yeah, that's an interesting situation. And it's typical of when a, uh, claim goes bad, it's not one thing usually it's kind of a series of unfortunate events. In this particular case, our insurance policyholder was a trucking company, Short Haul Trucking. And what happened was whether it was through lack of maintenance or just wear and tear, a wheel from their truck came off the truck and struck a driver going the opposite way down the freeway. It cracked the windshield. Well, the windshield cracked. That was something that was, uh, in dispute a little bit. But the driver was an elderly gentleman. He refused treatment at the scene, appeared, um, he had a bad wrist and he left. But later on he started feeling ill and ended up in the emergency room when the claim came in. And the adjuster, who is very experienced, looked at it, their thought was, well, no treatment and just a sore wrist. And so minimal damage case. But offer went out, $25,000 on the policy. The response came back is there's a concussion, a head injury. They had the medicals and whether it was from being overwhelmed. And as we talk about, you know, these AI tools where you can organize things these days, uh, when this took place, there was hundreds of pages of medicals, including a treater who said there was a brain bleed and that what cracked the windshield was a driver's head. Now, the problem with this case, uh, in the most dangerous cases are cases of clear liability. Yes, but a, uh, dispute as to the damages. So there could be large damages if your theory as the claims person and the defense attorney is incorrect. So the claims person here got with the defense attorney they said, the damages are being exaggerated, so we'll defend on that basis. I think the offer went to maybe $250,000. The demand was the policy limit at first, which was, I think they had, with the umbrella, about $5 million in coverage. So it was significant. But the negotiation broke down. The defense lawyer said, I think I can try this. And like you said to me, what wasn't taken into account was the clear liability, the sympathetic nature of this plaintiff, the nature of juries, which we'll talk about now, where they're just basically, uh, angry. The plaintiff's lawyer used reptile theory to perfection, saying, this could have been anybody. You know, this could happen to you. They were careless. They didn't take care of their trucks. It's just a random person. So that was, uh, the reptile theory, how that works exactly? The demand, when we were heading to trial, came in, I think, at $40 million for the brain injury. So at that point, the opportunity to settle it, gone. The case is tried. It came back. Like you said, I think 7 or 8 million. Even though the defense train kept saying, I think it's going great. I think, you know, we're going to have a good outcome. And he was shocked. And actually, he pulled the jury after and said, what did I do wrong? Why didn't you believe me? And the jury said, no, you did a great job. That's why we reduced what the plaintiff was asking for, basically from 40 to 7. We thought you did well. And that also gets to the anchoring. The plaintiff's lawyers asked for a lot. And figuring, well, you know, if the jury reduces it by half or three quarters, we'll still get plenty of money and the jury will think they've been fair.

Speaker B: Fascinating for you. You know, what were the warning sign? I mean, you work with mutuals, right? And so I'm, um, curious to hear for you. What were the warning sign that this would actually move from $2730,000 to $7 million?

Speaker A: The, uh, first warning sign is clear liability.

Speaker B: Okay.

Speaker A: It's really hard to defend if you have clear liability. Those are ones to take to mediation. And if you can make a reasonable deal, make your best deal. I don't think this was ever mediated. The second was it did not appear this ever got roundtabled with upper management. It was one person's opinion working with their defense counsel. And it should have been a case that was discussed among several people who might have different opinions. Uh, the third was the claims person seemed to really rely on their defense counsel and defense counsel. One they like to take cases to trial. They want the right case, but you have to work with them. But you can't rely on what they say. There was no mock jury, which, if there's potential large damages like this, something that's probably worth spending the money just to see how it might come out. So there were several stages along where things could have been done to prevent this. And as I said, I don't think there was ever a mediation where if you have a clear liability case and the arguments about the amount of damages, you need to go to mediation. And then finally, I just think whether it was due to volume or organization, I'm not sure that the plaintiff's medical records were gone through as careful as they could have, because once you see a treater saying that there is a brain bleed, that should have been the end of taking the case to trial.

Speaker B: Yeah. So it's fascinating. Can you actually also tell us what this reptile theory is? I think it would be helpful for our listeners to really understand what we are talking about here.

Speaker A: Sure. The plaintiff's bar has been talked about a lot. And, you know, at a lot of the conferences we go to, there's always the discussion of reptile theory. And what that is is that in the. Oh, so the reptile that if it's a situation like in this one, where what happened, it could have been that juror, this could have happened to them driving down the road and all sudden, for no fault of their own, they're hit by a tire. And instead of sympathy, which used to, uh, plaintiffs lawyers used to count on saying, oh, this is an elderly gentleman, you know, and he's injured, you should feel bad. You still have that. But now it's anger. These companies don't care. They're trying to save a few dollars by not doing maintenance, and they don't care about you driving down the road. And it's just lucky it wasn't you. It was this person. So you get the jury worked up and angry, and the plaintiffs will say, the only way to send a message to these companies that they have to put our safety over their profits is to hit them hard. So it's not just that you have a verdict against this particular company. It's a verdict against everybody out there, all the companies that should be paying more attention to these type of things.

Speaker B: So when you look at Nemico now, how do you play into that ecosystem? You know, how you educate the mutuals? What is your role?

Speaker A: We are, uh. One is a lot of education, but not only with our Mutuals. But with our panel council, we try and limit our panel council, we try to have a good relationship. And most people are getting it. It's been out there a long time, but still we want to make sure, um, not only a claim by claim, but overall, that our defense counsel and our insureds are aware of what's going on. That since for whatever reason, since COVID juries are just angry, juries are the different makeup. There's younger jurors who have a different sense of what money is than older jurors. I mean, they think a million dollars is not giving someone much money. You know, someone's a football, uh, player, whether I was going to ask you about that American football or English football, they make millions and millions. So giving somebody 7 million or 10 million if they're injured and it wasn't their fault is not that much. And the plaintiff's lawyers know this. And again, the plaintiff's lawyers get the juries more angry.

Speaker B: Yeah.

Speaker A: And jurors think there's not much they can do. But when you're on a jury, this you can do. You can send a message. So it's not about that one case. It's about what's going on in society overall. And if you are the type of claims person, maybe they've been at a long time, who back in the 90s or early 2000s, thought, well, it's three times the medical. We had a case where it was a slip and fall underlying case, broken arm surgery with a very tough scar with a, um, physical therapist. And so it limited her work. She's about 50 some years old. Uh, and the medicals were about 100,000. So the claims person looked at it and said, three times the medicals. This is a 300 to $400,000 case. Um, that's what they offered on a policy limit, I think of 1.2 million with the umbrella. Um, that was rejected. The case went to trial and that was another $6 million. And they were shocked. And when we talked to them, it's like, that's not shocking. That's what a jury thinks is fair. You cannot do three times the medicals. And we do a postmortem. We look at the picture. The picture was, you know, you have to take the entercount. It was a nasty scar. She really couldn't do her profession. Once you get past that summary judgment, where it's going to a jury and not the judge, which is not too hard to do these days, most judges will, if there's any question they'll send it to a jury once. You didn't prevail in that type of case. On summary judgment, you need to mediate. You need to use alternative dispute resolution before going to trial. We say that when to our insureds, when you're going to take something to trial, you have to be very sure it's the right case. And please, we tell them m contact us. Let's go over it. Go over it with other people. Go over your defense counsel. We should get defense counsel on the phone, the claim handler, the vice president claims, you know, my claim handler, and myself. And we'll all go over it because different people see different things. Yeah. And we'll come to a consensus. Usually a majority wins. This is one to settle. And usually we come to the decision, uh, that the case needs to be settled. We're not encouraging people to try cases unless there's really no other alternative. If the plaintiff wants $20 million, uh, and it's above your policy limit, I mean, they don't give you a choice. But where there's a choice, you need to pursue that.

Speaker B: It's interesting because one thing you just highlighted is claims today. Once upon a time, 1 million owes

Speaker A: a lot of money.

Speaker B: Money today. It's not actually partly because of sports. The sports industry has inflated the cost of, I would say, the price of insurance. A footballer, a soccer player, or a, uh, you know, European football player, you know, earns millions. And so being able to understand liability and that a claim may actually result in millions of dollars is very important for any insurance company, big or small. And that means that also when we look at the price of insurance, you know, why insurance is so expensive as well, is because of the claim. So all of us actually end up having to pay for inflated claims comes into the premium payment as well. I think it's also important to understand that logic right behind the scene.

Speaker A: Yes. And I think that's, uh, an area where juries a lot of times don't really understand when they're giving these large verdicts that they're ultimately going to be one that pay those verdicts in higher premiums. They just think, well, it's coming from this company. The company has plenty of money. So at the same time, as you say, you know, people who won't get off the couch if the lottery is only a million dollars, it has to be a billion dollars are going on juries and giving someone who's been Damaged, you know, $500,000 are giving them $10 million, but then they're complaining about their insurance. Premiums. It's the same in the legislatures. They're passing laws aimed at punishing insurance companies, but then they're dealing with insurance crisis in their state and they don't understand when companies start pulling out of their state. Like I'm in Florida, it was getting almost impossible to find homeowners insurance, my auto insurance, even though my car kept getting older, my insurance kept going up. They passed tort reform. A lot of effort by namec lobbying saying you need to get this under control. And when they passed that tort reform, we saw the insurance prices come down. Places like Oklahoma, they've gone the opposite way. They've really incentivized the plaintiffs bar, probably with a lot of the plaintiffs bar lobbying to have very easy, very favorable legislation to punish insurers. And now they're seeing an insurance crisis. So it's a bit cyclical. So we have to educate which NAMC does a lot, not only the legislatures in the states, but also the population in the states that if you keep doing this, you're not be able to find insurance.

Speaker B: You mentioned tort. Can you explain what tort. Because this is a technical term. Can you explain what tort reform?

Speaker A: Uh, sure, yeah. Tort reform is when the legislature enacts legislation that in some way impacts the legal environment. The torts, of course, are cases where there's negligence, where you're dealing with fault and the legislature can throw on incentives. So if you, uh, as a driver are negligent, there's the damages you pay. But as the insurer, if you don't handle that case correctly, whether it's the policyholder, say in a first party property or the third party in the auto case can also get extra damages, punitive damages, emotional distress damages, reputation damages. And sometimes they'll double, sometimes they'll triple, sometimes it's unlimited. Whatever a jury thinks the emotional distress was, they can throw a number out there, and that's in the statutory law of the state. Okay, so what, uh, Nancy, So every

Speaker B: states have their own torture.

Speaker A: Every states have their own, um, and it varies around the country.

Speaker B: Okay.

Speaker A: Uh, some of them try and limit it and say, well, you can only get, you know, this much. If it's, if it's bad faith, great. You can get your attorney fees and you can get a maximum of $60,000. Like in Illinois. Some, like Oklahoma say if it's bad faith, you can get unlimited penalty damages. If you're an individual, emotional distress damages and, or reputation damages. And that was really meant for the health insurance industry where people were being Denied, say life saving cancer treatment.

Speaker B: Oh wow.

Speaker A: And the legislature wants to say if you do that, be aware that if uh, you're found to be in bad faith, the damages are going to be harsh. Yeah, but they didn't say health insurance, they said insurance. And the plaintiffs bar being very creative and on top of things went after these first party property claims where someone roofs, some of the roof blew off and or was damaged and the insurer says well we can fix that for $50,000. And the plaintiff says no, you know the property, the policyholder says no, I want a whole new roof for you know, $800,000. If they don't agree and it doesn't get replaced then they get a lawyer and then you get the bad faith claim where they can get 10 million, 20 million. There was one that was on appeal now that I think was 92 million in a first party property case.

Speaker B: First party property, 92 million for about,

Speaker A: I think the number was about 150. It was a commercial building. Maybe 150 or 200,000 in worst case scenario damages.

Speaker B: Incredible. It feels like there is, you know, a lot of anonymity. Uh, right when you think about insurance and then the verdicts and you know today we have a lot of social inflation. During the conference in New York just now actually Dale, we talk about trust. What trust mean in that environment. When you start thinking about, you know, the fact that you are educating those mutual to care for their customers a little bit more.

Speaker A: Yeah, the trust is, is um, a huge aspect of it for an insurance company. Your policyholders have to trust that you're there to take care of as you know, insurance. You're selling a promise.

Speaker B: Yeah.

Speaker A: You're selling a policy. It's probably if something bad happens, whether it's a property damage, whether it's a bodily uh, injury, whether you're sued for liability for an auto case or a slip and fall, we'll be there to take care of you. And right now there's a little bit of a, a breakdown in trust. A lot of it's things in the media and social media in reviews and we've seen it, a lot of it. I think maybe it's because I'm on the non medical side of the house. Stems from what's happening in the United States, especially with medical claims, um, and some of the positions that uh, insurers are taken. We all heard about the very unfortunate situation with UnitedHealth, um, and the publicity that got. But I think a lot of people don't break down. That's healthcare it's totally different with property and Casualty. They just say insurance. And I think it's eroded the trust. So especially our mutuals, a lot of them are in smaller communities. A lot of these people, they, they know the people that work at the insurance company. A lot of them have been, uh, policyholders for years and years. It just works better when you have that trust, when claims have been handled correctly and we're there to help our insurance companies, our insured, uh, maintain that trust and to advise them and to educate them and say, when a claim comes in, these are the things you need to do. And we do a lot of seminars on this. This is good faith claim handling. Acknowledge quickly, return phone calls. It's got a lot of common sense things but that, you know, people being busy or can fall by the wayside. You know, do your investigation early. Be if there is a problem with coverage, be upfront, don't hide anything. So we have a whole checklist that things you want to do when that claim comes in to establish that trust that your householder thinks I'm being taken care of, they're looking out for my best interest. They're not just looking out for their profit. And I think our mutuals, for the most part, do a really good job of that. I mean, things can fall through the cracks. That's why they have insurance. But for the most part we do that. And likewise, I'm there with my team to establish trust with our insured, these insurance companies that if something happens, they can call me, they have my cell phone number, and we're going to take care of it to the best of our ability, whether it's beforehand, whether it's, you know, they've had situations where maybe they've had an embezzlement, they have a Department of Insurance complaint. These things, especially small companies, make them very anxious and nervous. They call me with their cyber. Even though we don't handle the cyber claims, um, there's another entity that does that, but they'll call me with their cyber. I've had people that have been, um, uh, had their systems, uh, held hostage, extorted. I've had ones that have been scammed into paying. And sometimes once it's happened, there's not much we can do except say, you know, you should have had a cyber policy. Here's what you can do for next time, or here's ways you can try and recoup some of that money. But they call me for all types of things because they trust that we'll take care of them if something Happens

Speaker B: going back to that claim. Because I want to understand if there is something else we could have done if a contributory trust signal had fired. When you think about this claim, we talked about Dell, not a verdict, right? Just a, uh, look here. When the chain would you expected that to happen.

Speaker A: Where that would have happened is when you're going through those med records and as soon as you see the red flags, when you see. It's always been for me, certain things, injury due to burns just so painful. You don't want to try cases with burns, of course, you know, paralysis, um, but brain injury. So the brain injury should have been that red flag. There's certain things you can't take to a jury. And I'll give you an example. We had, uh, we also, in addition to insurance companies, we insure insurance agents either captured ones that work for the mutual or independent. And we had a case where the insurance agent was not expert in professional liability insurance. She handled for a pathologist who was retiring her personal lines. And she said, well, I can take care of you and get you a tail policy, a retirement policy to make sure you're covered in your retirement. Well, she didn't do it or didn't do it correctly. So this pathologist was bare in, uh, her retirement. Of course, the claim came in. Now, this claim revolved around the pathologist reading slides, giving her opinion as to it was a prostate situation. Gave a very kind of negative reading of the slides. Based on that, the surgeon performed a procedure that was very radical that we would never want a jury to hear about. So we didn't have a claim against our agent. But what we did, we stepped in because the retired pathologist couldn't even afford the defense. It's very expensive to defend. We said, we'll help you get the right lawyer. We'll defend. As part of defending our agent, we're going to defend the medical malpractice claim. We got a lawyer who knew medical malpractice and, uh, insurance agent, professional liability. And what I did early on, when you say this is one we can't try, we have to figure out a way out of this early because it's also going to be very expensive and we're paying the medical defense in addition to the lawsuit that ended up coming in against our agent. So I used artificial intelligence. There were two questions I wanted to know at the beginning. One, uh, can the surgeon reasonably rely on the pathologist's slides alone in determining what procedure performed? Secondly, the procedure that was performed, I wanted to know about that and Is that a procedure that's commonly done for this type of diagnosis?

Speaker B: Yep.

Speaker A: Both those questions came back in five minutes. Uh, one pathologist cannot, the surgeon cannot rely solely on the pathologist. They have to do a PET scan to see if there's metastasis. All this stuff that I would have had to dig in for hours and research came back in minutes. Secondly, in addition, the procedure that was done is really not done anymore. No matter what the diagnosis, there's other things that could be done. So now I can't rely on the AI alone. We talk about that, I get back to my lawyer and I say, here's what I found. What we want to do, if I'm correct, make sure this is correct. We're going to call that plaintiff's lawyer and we're going to say the target is the surgeon. And here's why. Uh, we will settle out and you can have your case against a surgeon, but that's your real target. We did, it worked perfection. We settled out for a reasonable amount. We weren't going near a courthouse. So you have to spot it early and get your plan with every lawyer. We say as soon as possible, when you've done enough discovery. We want liability, uh, and damages analysis. We want your litigation plan. What are we doing here and how much is it going to cost? And a lot of times in claims department they don't get that you're just kind of flying blind. You give it to a lawyer, they run with it. There's no real serious analysis. You don't know what the plan is. You're just kind of going from phase of litigation, phase of litigation and you don't know how much it's going to cost you. So how do you reserve? So we kind of demand, we insist on getting that in every file.

Speaker B: So what I hear is, you know, often what we do anyway in business is strategic analysis.

Speaker A: Right.

Speaker B: Planning, uh, is critical to actually really understand where you are going. And then based on the strategy and the planning, you can actually have a great defense. Actually protect the customer, the plaintiff, as much as you can protect the mutual, the insurer, the agent in that case. Right, Del. It's all about the strategic design and actually making sure that all parties are being cared for. Is that right?

Speaker A: Exactly.

Speaker B: So you have described what is coming at insurers as a three headed monster. So we'll go into the three headed monster, class action litigation, third party litigation, funding, and now AI being weaponized against carrier. And so I would like to go into that to help our listeners see each head Clearly. Which one bites hardest? Actually, Dell Noi are, uh, mutually especially exposed to the bite.

Speaker A: Wow. They all bite pretty hard. One that we really are focused on at NAMC and, uh, we look into it at NAMCO as well, is the litigation funding. Because this really enables the plaintiffs to bring these cases not only volume, but to sustain them. Class action litigation, for example, is very expensive.

Speaker B: Yeah.

Speaker A: And would not be doable without this investment. But we really feel we don't want to make litigation, which, as you know, is already, uh, a bit out of control in the United States as compared to the rest of the world, even though the rest of the world's trying to catch up a little bit. But this is just adding fuel to a fire that's already burning and allowing more litigation, uh, and litigation to go on longer. And it shouldn't be a, uh, profit center for investment companies, for private equity, for foreign investment in litigation. We just think, don't think that's right. So on the NAMC side, they're working very hard to one, if there is going to be litigation funding that that's discoverable, it's not hidden. Uh, Namec has had some success in some jurisdictions, um, with that saying, okay, if it's litigation funded, we want that to be out in the open, to be discoverable, but we don't think it's really healthy. Uh, in the long run, there should be other things to invest in. That's a big one. But in addition, the AI is opening up litigation as well. Especially we see with pro se plaintiffs. You used to be able to tell a pro se complaint, maybe get dismissed easily because the person really didn't know what they were doing. It didn't look like something that was done by a lawyer. Uh, they didn't know all the things to plead correctly with AI now you can't tell. They go online, they put in their information, they get a really good complaint that's hard to get dismissed. So it's making it. Another barrier to litigation has come down. You just do your AI. So that is also really driving more litigation and the fact that you can do more work, whether you're a plaintiff's lawyer or pro se, just a lot quicker to get your, um, complaint drafted, filed, get your documents done. One of the things we used to count on back in the old days, I'll say, is that the plaintiffs firms were smaller and things were time consuming. So I'll give you an example. We had a really bad case when I was practicing law at a male firm. Terrible again. So you wouldn't Want to take to a jury with an infection. A guy who was in our hospital, small, um, plaintiff's lawyer. This was going to be his retirement case. He sued the hospital, the doctors, the nurses even. But now you had three big defense law firms involved. And we just overwhelmed this poor plaintiff's lawyer with discovery, with motions, and he settled for a lot less than the case was worth because he couldn't keep up with the deadlines and get the experts with AI. Even if you're a small firm, you can do that. But also now the plaintiff's firms are big. They're well funded. They, there are hundreds of lawyers to a plaintiffs firm. That's Morgan and Morgan for example. Um, that's another thing that's changed. It's really added to not only the amount of litigation but the duration of the litigation.

Speaker B: Yeah, fascinating. So let's go into AI becoming a class action vector. Why? I think it's what you are saying just now, actually Dell, each one of us have access to AI and we can go and put uh, information around our case and get response from AI. Now, even though AI may actually hallucinate, uh, and create things that do not exist still today people are going to use AI to actually get some answers. Right. So how do you protect or how do you educate the mutuals to actually be more wary and aware that each one of us have access to this intelligence on tap. And each one of us, if we have a case, we can actually ask questions to AI to help us out in our defense.

Speaker A: Yeah, great question. And we've seen this before, before the AI, we've seen it in computer software. So for example, um, we had a class action lawsuit involving uh, the value of salvage of automobiles. Let me take it in. And you know, again, these companies are trying to do more with less. So instead of having a person go through and determine the salvage. They had computer software before AI. Well, the plaintiff's lawyers got onto that and said, well, your salvage is um, undervaluing these salvage autos maybe by 500 or $1,000. But times all your clients and they brought the class action suit, it's going to be the same with AI. So if you're using AI to value your small value claims or whatever decision point you're doing, the plan store is going to come in and say, you use this AI, it shorted uh, your policyholders a thousand dollars and they'll get an expert like they did with the software to say, yeah, I went through this. This is not correct. You know, here's what it should have Been times, how many policyholders. Um, and we're seeing it already and it's just, it's tough to defend. So the education piece is you don't want AI to be making that final decision. So it's that balance. Of course you don't want to have, you know, uh, insurance adjusters working on a lot of these small claims. But you want to use the AI up to a point. It makes it efficient and easy for your adjusters just to make sure this is correct, it's fair. It's not something that, uh, makes it easy for the plaintiff's class action lawyers to make a suit out of a minor damages. But on every claim you're handling, I

Speaker B: remember, I think we were together on a call with Zurich, and Zurich mentioned that they actually have a defense attorney summit. Do you think that every should start doing those summit for their partners, people within their ecosystem to be better educated,

Speaker A: for example, about AI I think those are great. The more education, the more you share and more has to be shared with defense counsel. Um, uh, on how to use AI, um, how we can partner to best use it, who's doing what from the claim side and defense side, but also all sorts of things. Um, again, not just telling defense counsel we need that liability and damage analysis early or what your philosophy is in trying cases or like you say, how you get to that decision point where this is one that has to be resolved so they understand where you're coming from and then we understand where they're coming from as well. We did a summit years and years ago when I was doing the med mail, the uh, legal mail claims where we brought all our council together in Pennsylvania. Cause we had a huge volume. We insured the Pennsylvania bar. We're the sponsored carrier for all the smaller, uh, plaintiff firms and some defense firms in Pennsylvania. So we had a lot of volume and our defense counsel handled a lot. But they didn't understand that if they didn't report, they didn't tell us what was going on. Our bosses looked through files, those were the paper file days where they'd go through if something was missing, then you got marked down. So I said you could come up with a great result. But if you didn't report and someone audits my file and they find no reports, that's not a good outcome for me. Uh, even though it was a good outcome for our insured. And they said it was amazing. They said we didn't know that. We just thought we got the case and we ran with it.

Speaker B: Outcome. Yeah. So another thing which comes to mind is when we were actually on this discussion with Lynn Moretti. There's another thing which actually stayed with me because she said most nuclear verdicts are, um, self inflicted. And I was surprised. And she was saying as well that the window to fix them closes in the first six months. Now with a. I wonder whether that has become shorter, though, from where you sit. Actually, Dell, what are, uh, claims handlers consistently missing in those first 180 days?

Speaker A: Yeah, great question again, uh, Sabine. And it's what we talked about before. It's getting that early analysis from your defense counsel and going through it and where they say, here's your problems, here's your strengths, but here's your weaknesses. And when those weaknesses really outweigh the strengths, at that point, you know, this is not one to try. I used to tell my claims teams, these are back in the paper file days. When that file hits your desk, go through it, see if it smells a little. Because if it smells a little on day one, three months in, six months in, it's going to smell real bad. If it's not good, it's going to get worse. So you're going to spend your money doing discovery, making the claim more valuable, especially as the plaintiff's lawyer puts in the time. And as you said, you're going to lose that opportunity to settle. Uh, we used to tell the plaintiff's lawyers, you know, we want to settle this case, we want to settle early. You have a lot of cases, go on to your other ones to try before, they put a lot of work in, uh, plaintiff's lawyers, now they're bigger, so it's a little different, but they don't like to have to draft summary judgment motions or respond to summary judgment motions. They don't like, uh, putting in a lot of work if they don't have to. So if you can settle early, like you said before, they put in a lot of time, invested a lot, you'll probably be successful. The mistake that a lot of claims people make, a lot of companies, is they get cold feet. The lawyers sometimes get cold feet. Right at the end, they'll say, oh, we can try this one. I think we'll be okay. We can try it. And then when you're about to see the jury, they're like, oh, I don't think we should try this. At that point, the plant's lawyer is likely to say, no, I'm all prepared. I put in my time. Let's go to trial. And we see this time and again where the company at the last Minute throws in the limits and the plan rejects it when. If they had put in that limit six months before, it would have been gladly accepted. Yeah.

Speaker B: What does a NAMICO grade triage protocol looks like? Partly when you think about the mutual, which actually often cannot manage complex claims.

Speaker A: Yeah, uh, that's a key element. So we're small enough and we have, um, you know, we're handling bad faith claims for these insurance companies. So it's a major thing for them. Or a DNO suit or an EPL suit. Um, everything goes through me. If I'm in the office, I take that first look and we triage it. We say, uh, it goes on a 30, 60 or 90 day calendar where, um, the claim handler looks at it and I look at it. So two sets of eyes we'll put up. We have a reserve that signals that this has potential for severity. And we think our, uh, insureds on their claims should be doing the same thing early on. You have to note those claims and treat them differently than your run of the mill. Sometimes a severe claim will just get lost in the volume and we don't have the volume of some of these companies that are doing property and casualty. But still there's a way to go through and mark those claims that could be potentially difficult, potentially nuclear verdicts and make sure that those get special attention.

Speaker B: So is there an authority, someone who has the authority to escalate and what is the human cost of not having that authority embedded within that process?

Speaker A: Again, a great question. And every claim department should have a person who is accessible, who has the most experience. There should be a chain, especially in bigger claim departments. And the claim handlers should have a reasonable volume. And we know that it's getting tougher to find claims people. There's a lot of retirement, but the problems happen. And I experience this myself, uh, handling, uh, professional liability claims where you just have too much volume and the person next to you gets overwhelmed or burnt out, they quit and then you get their file. So you're just putting out fires. You want to be at the point where you can look at your claims, like I said, at the most 90 days, and then elevate those claims that are going to be a problem. Get a second set of eyes, go up to a supervisor. So for example, our claims go when we're a small team, there's only four of us go from the myself assigned to the claim handler. If they find something, they'll send it back to me. If it's really something bad, it goes up to our president before for example, we would um, disclaim coverage that has to be signed off by the president. So it's important that uh, people at different levels in the company are getting a look and nothing falls through the crack where something goes to trial and only the claims handler got a look at it before it went to trial.

Speaker B: So where does the billable hours model quietly sabotage the timeline though?

Speaker A: Boy, that's been something that's been debated for a long, a long time. And like you say, billable hours is a bit misleading because you can have a firm that bills less, but actually you pay more depending on how much time they put on. You could have insurance company that bills more but is more efficient. So uh, and companies have tried to get away. They've tried to do, you know, just a kind ah, of a lump sum payment. You know, we'll pay you this much and we'll handle what comes in. They've tried all kinds of different billing methods but they keep coming back to billable hours. If you're going to have that again this way we talked about with some of the analytics we have now, uh, even the AI where you can have the data to see this is how much we should be spending, this is how efficient this firm is as compared to that firm based on a similar case. So I'm not sure we're going to get away from billable hours. Maybe if you're doing a real high volume, there's things that come up with, you say you're going to do a flat fee on a case because you think it's a simple case and all of a sudden something comes along, discovery that makes it a complex case. How do you handle that situation? We also with our insurance companies, they have, a lot of them have high deductibles. So what we do is uh, under defense, we take down the deductible as the bill wowers are incurred and paid where they're. We have a few that are in flat fee arrangements and kind of for us it's like well, uh, how do we compute your deductible for the defense cost? So we think the billboard is not perfect but what still works. And it's interesting because many, many years ago I left the claims during the dot com revolution and we were trying to do just that. We're trying to work with claim departments and um, their defense counsel where everything would be done online. We're an application service provider and um, we would take in the information, uh, between the claim department and the lawyers, we wouldn't look at anything. So there Was no privilege issues. Yeah, the bill review, which we don't use. Um, some communities still use the argument always been that that can, depending what's in those descriptions, negate the privilege. So that was an issue. So they said we don't touch that. And we were going to aggregate all this information so we could tell an insurance company in Cook County, Illinois, here's what you should be spending to defend a legal malpractice case. But we're a little bit early back in 2000 and the insurance companies were just like, sounds interesting but we can't deal with this. We did get uh, quite a few to go on. The company was ultimately sold to a company called Bottom Line Technologies which I think then they were bought. But so it was in use and the uh, software people were brilliant with this. It was a great idea. Just a little bit early. And as I told the guys when we were doing that we probably should have been doing Facebook, but that would have been a whole different story. But it was a great experience.

Speaker B: So one thing you highlighted, I would like to just drop into the talent gap we are experiencing in insurance. So I was reading some stat from the labor website in the United States. Based on the transformation we are going through, it sounds like demand for underwriters will go down by 5%. Demand for claims adjusters will go down by 3%. Demand for uh, actuaries will go up by 22% over the next few years. However, we have a talent gap. Five people are leaving the industry. One person is joining the industry. We are going to need 18,000 plus claim adjusters in the next few years. We are going to need 8,000 additional underwriters, uh across the next few years. We are going to need 2,300 uh, adjusters, new adjusters within the next few years. But we don't have those people joining the industry. So looking at this gap, uh, Dale, where does technology can potentially help those mutual companies body because they rely on you when they can't do the complex stuff, you know. Can technology help them a little bit?

Speaker A: It definitely can Sabine. And one thing that I'm doing uh, as part of, you know helping my insured and NAMEC members is uh, going to things like Reuters connected claims or CLM or our own claims, uh, conference and um, meeting the exhibitors, seeing what tools they have that can help in the claims handling process that you're always going to need those claim handlers but you want them doing the decision making the ultimate. You don't want them doing the mundane tasks that can now be done through these technology companies, through AI that can reduce the number of people you need. Um, so it's that balance of what can we do with the technology that's out there now, um, that will help us be able to reduce the number of claims folks we need as they become tougher to find. Because you are correct, there's um, less people going into insurance. Not really, uh, what young people are thinking of coming out of school. Even though there's a lot of good insurance programs, more insurance programs at universities now. So it's helping. And then for us on the claims side, usually that's not the first area that the uh, students want to go into or the recent graduates want to go into. They like risk management. Claims is more, they think kind of the drudgery. I happen to like it a lot, but it's not the first thing they think of. And then when I came into claims, it was from the law firm. So there were a lot of us working in law firms who, it just wasn't the right environment. I like team environments. I like people working together. Not the more individual type, dog eat dog environment of a lot of law firms. So the companies would get their claims to people from the law firms. We're not seeing that as much as either. Now the gap, one of the things, the gap in pay is a lot and we all know inflation things being more expensive. A lot of people can't leave that $200,000 job in a law firm for the 100,000, uh, dollars job at the insurance company as much as they maybe like to do it. So it's not as easy to get people from law firms. So it's a real challenge. And I think that technology isn't going to solve everything, but it can make it.

Speaker B: So I mean, I guess that makes me think about, you know, if we had one signal at first contract, for example, or first contact, you know, a vendor neutral platform risk assessment, potentially able to augment the human, you know, what does that, you know, 180 days we were talking about earlier look like in a lean mutual environment, potentially, you know, taking the noise out of the claims process.

Speaker A: Yeah, there's so much out there, Sabine. It just seems like something new all the time. So I met a gentleman from a tech company who's an adjuster. So one of the issues we see again with the plaintiffs firms is that in a first party, say a commercial building roof claim, the claim will be made and then very quickly an attorney will be hired and you'll get that demand there saying, we want, you know, our Business is shut down because we don't have a roof and we can't do business. Uh, we need this paid in 30 days. We want a new roof. It's $4 million. And if you don't pay it in 30 days, now, we're going to sue you for business eruption. We're going to sue you for the amount of damages. We're going to sue you for bad faith. We're going to sue you for our loss of reputation because we can't do business. A lot of pressure. One of the issues is one, getting the right, say, independent adjuster. But then you're. Before you're waiting for that independent adjuster's report so you can respond. You don't want to respond. You certainly don't want to pay $4 million till you have the information. Does it need a new roof? Can it just be repaired? I met these people from this company where they can go do the inspection using their drones now, which is new, and then using, um, technology. So instead of going out doing their photographs, you know, figuring out how to get up on the roof, and then you're waiting and waiting for the report. They do it in real time, um, here at the place. Here's what we're looking at. Here's the drone, here's the shot, here's the damage. Um, and the report's gonna come to you in 24 hours, not three weeks. Wow. So you can respond with the information things like that companies need to have and not all the companies know about that. Sometimes it's, you know, it's gonna be a little more expensive. But like we were discussing before, sometimes you spend a few more pennies to save a lot of dollars. So it's those kind of technologies, and that's just one example. There's so many things out there that are making it easier to handle these claims efficiently and when you're getting more pressure from these aggressive plaintiffs.

Speaker B: So, you know, looking at the technology part. Right. So what would a, uh, great hire look like in 2026, going to 2027 now, when you start thinking about this mutual. Looking for the talent, maybe we can find some talent with amazing tech skills. I guess we need to make the, if you don't mind me saying, the industry a bit sexier as well. But what would that great hire look like for us?

Speaker A: That, again, is a great question. And there's so many things going on now when you're looking to hire someone. One, you know, during COVID everyone was working remotely. Yeah, I usually worked with part of my team. In one office and then the, uh, rest of the team in the another location. So I was in an office, but I was supervising people in a location. So I have no problem with that. But some companies want someone with experience saying claims. They, if I was looking, you could say, well, I want some with professional, I believe, experience. I want them in the office three days, we're in Indianapolis. So Indianapolis isn't where you see a lot of especially professional liability claims. Especially, uh, insurance company professional liability. So it's hard to check all the boxes. So you have to look at other things. Things. So for me, back In December of 21, in the middle of COVID when I took over this claim department for a while and the person I was working with left great guy. But so it was just me. I was dealing with two sick elderly parents. So I was running almost 24 hours trying to keep this going. I needed to hire, so I couldn't be quite as picky. So I was so fortunate to get two people. And when you say great hire, the one lady who's my successor in waiting, she didn't have professional liability background. She handled trucking claims, including fatalities. So her company, she was there 15 years, kind of just toiling away. Never no one paid a lot of attention. They didn't invest much into her. But she single mom, she would be on call with the company jet because when there's a trucking fatality, you have to be there within 24 hours. So African American young lady, these trucking accidents would be somewhere in the middle of rural Arkansas. They would drop her in, she'd have to go see some truck driver and get him who's just killed somebody.

Speaker B: Ah.

Speaker A: And when she told me that, I'm like, well, she can handle professional liability claims. She knows claims. She's handled these high stress, high volume claims. I can teach her professional liability. That's not an issue. Very intelligent. I'd rather have someone with that type of background who's a clean slate so can do the professional liability the way I like. I can teach them professional liability. And the other gentleman I hired came out of a insurance, uh, program at his school, handled, um, property claims. And he's just really good at getting these claims in, getting resolved, getting them settled. So I thought, well, he's perfect. I'll teach him professional liability. He knows the underlying cases. So I was really lucky. And we've been together now, um, going on five years as a team and had, um, a lot of success. So this real, real fortunate. Got four resumes. Two of them were were perfect. So it's a little bit of luck. But also don't be someone who thinks you're going to check every box. Maybe you need a remote person, maybe you need a person with not as much experience. Maybe you need to be creative. But mostly it's a fit personality wise. Um, so like I said, just don't look for the perfect person.

Speaker B: Yeah, don't look always for the perfect person. I think now I hear a lot of companies saying to me that they actually looking for, for the soft skill more and more than just hard technical skills, because you want people who are, uh, keen on accountability and responsibility more and more particularly. I was going to ask you, when AI takes the routine work right, where does a senior claims professional become a litigation strategist, a negotiator, a relationship handler? What do you think the future role of the claim handler will become when we actually get comfortable with AI?

Speaker A: I think it is going to be more interesting. I think you're going to, as you said, be at the decision points. I think you're going to do the work that leads to the result and not be caught up in, uh, the early work, the paperwork, organizing the files, especially in liability claims. We're working with, uh, um, a company right now founded by a lawyer from Switzerland back in 2019 who saw the issue himself, trying to work on these bodily injury claims, that if you could use AI to organize the volumes and volumes of records, uh, police accident reports, medical records, all the things that come in into something that's manageable, then you can spend your time really analyzing that case. So they do a timeline. They're not going to make any decision for you. They're not giving you a value. They're just putting it in a format that says, look at this, look at this. You know, here's what happened. You know, here's why the other driver may have been at fault. Here's why your driver may have been at fault. And so it's going to take that, um, you know, busy work and take that off your plate and you're going to be doing the hands on. It was amazing what those reports could do. How it changed your analysis of that file and the time it took to go through and analyze the file, um, is incredible. I just, you know, it would have been nice to have that, you know, 15 or 20 years ago. But for the people coming in now, they'll think, you know, they can't imagine a time when you won't have something like that.

Speaker B: Yes. They won't be able to imagine a world where, you know, all those capabilities uh, is available to us. You know, when I talk to senior um, leaders and we talk about that role, you know, that rule changing partly in the legal field where um, you know, contract will leave. We work in a highly contract driven industry where contract now can be read by AI systems, uh, not a probabilistic, can be read by deterministic systems. Well what you actually find is imagine if that works perfectly, then our role as human is to handle much more complex activity and making sure that we still leverage our empathy. So claims is all about taking care of the customer, the plaintiff. It's about uh, the empathy part of the job. It's about the relationship so we can't hide behind our computer. So Del, you know, when AI takes routine work and a trust signal handles first pass triage, what does a senior claims professional at a mutual company becomes right? Knowing that, you know, when the trust is there and we are honestly handling the claimant faster. Right. You know, what would be the ideal, looking at the future, what will be the ideal profile of that person for you?

Speaker A: It's a great question again. And you really have to balance. There's many things that the AI can do, like you say from doing the intake. So you have to think, um, when my policyholder has their auto accident or has their uh, property damage, their fire, we could have the intake done through AI. And I've heard these, you've probably done it, I've demoed them. It sounds like, like a voice, it sounds like you're talking to somebody. So you call up for example, and you say, I've been in auto accident. And the AI on the other end will say, are you okay? Do I need to call an ambulance? But it's not a person, it's AI. So um, do you want that? Do you need it or is the relationship more important where they talk to a real person? Um, that's a decision you have to make. Or do you want your people actually handling the claim and not, you know, it's hard to pay someone to be sit by the phone at midnight and take those calls. So where do you implement the AI? Depends on your relationship with your policyholders, um, your volume, of course, your um, staffing. And so that's company by company. You're going to have to see what works for you, where you can implement the AI without losing that personal touch, the relationship, the trust. And uh, that's kind of a changing landscape.

Speaker B: I'm thinking about climate cat events. You know, those are increasing and they are, you know, across the United States, they are here as well in Europe. You know, we go through heat and we go through cold. You won't believe but just a few weeks ago I was uh, just uh, going into a meeting, central London and there was hell in spring. So when you start looking in some of the, you know, climate Cut events which are affecting us, and then you know, imagine uh, an office, right, getting 250 claims eating at once. Your independent adjusters are stretched thin and the plaintiffs attorney are uh, already issuing 30 days demand letters before you have even finished your investigation. How is Climate Cut plus aggressive plaintiffs bar reshaping? How mutual insurers have to think about how they handle things, those type of claims.

Speaker A: Yeah, it's a huge issue and we're seeing it more and more. These incidents, um, weather incidents are so common now, uh, almost daily. It really is a challenge. And that combined with as you said, the aggressive plaintiffs bar, the ability to get these letters out and lawsuits out on the plaintiff side using AI quicker pressure to handle the claims faster and correctly. And then knowing that if you don't do it, if you end up at trial, you're going to have the um, reptile theory, the social inflation, the possible nuclear verdict. It's just a place that these insurers have never been before.

Speaker B: Absolutely.

Speaker A: So one thing we do that helps is we offer on our policy coverage with no deductible. If you have one of these incidents, every policy comes with $25,000 to go get your independent adjusters and get them quickly and not worry about how am I going to pay them. You can endorse that to 100,000. So for example, there was a typhoon in Guam which was declared uh, a federal disaster. Our insured was able to go quickly, hire all the independent adjusters in Guam, handle every claim, pay those claims to make sure they didn't get any bad faith, late delay in payment. Um, they called me up, didn't cover everything, but we were able to give them $100,000 back. Ah after they showed me. So you really need that type of coverage so you can pay to get the right resources for catastrophe. And again it's like we're talking about you're going to need to have the right technology to handle these. Again, talking about where you can do the on site investigation and get real time feedback to know how much to pay on that claim. You know I remember the, when I lived in Denver, the hail claims, people just drive, they'd set up at a Lowe's, you know, State Farm, just drive the car through, cut the checks, you have to do it that quick to avoid these late payments and these disputes because usually if the policyholder can get the check quickly, they're going to be less combative about how much they're getting. So it's uh, being ready, being prepared, knowing it's not if but it's when for one of these events. And then um, knowing what your plan, you have to have a plan and knowing who you're going to go to for your independent adjusters and knowing um, how you're going to pay for it, you have to be uh, out front, you have to have your plan ready to go now.

Speaker B: And so that takes me to some of the technology which are out uh there. We have predictive litigation intelligence solutions as well out there. Without actually naming uh, names, you have a solution able to read adjusted note, maybe medical records, even provide some sentiment analysis. And so if we think about those intelligence layer becoming standard within our industry, what changed for a small mutual that is still on facts and spreadsheets, right. When you think about that, uh, actually Dale. And then when you actually flip it around and think about the same intelligence layer, right? Because we are talking about trust, we are talking about good faith. You know, how do we actually make sure that this mutual who actually are uh, really based on you know, small states. Right. They are based on trust. The entire brand is about members trust. You know, how do we make sure that good claimant we can actually handle them faster and then you know manage those relationship in such a way that we retain them for the long term.

Speaker A: Yeah, that's a big challenge. And I know that our mutuals uh, and the industry in general is, is dealing with that, trying to learn more. We see, you know, you go to the conferences and you see the exhibit halls, uh used to be, you know, people would go out and talk and have their drinks. Now the exhibitors are really getting a lot of attention because the type products they're bringing. So um, again how do we uh, help these mutuals find the right products and everything that's out there. The ones that really um, as they triage this is what you need most. There's only so much money to put into it too they that you know, they can't spend unlimited dollars on this new technology. So which ones give you the biggest bang for your buck that we talked about? Which ones are going to prevent the bad faith claims? Which ones are going to allow you to run your apartment with less people while you're trying to hire? So you have to go out, you have to see what's out there, you have to, if you have someone, maybe you don't have someone as their full time job, but someone who's assigned as kind of the technology liaison, who's going to tell everyone else, here's what's out there, here's what we need, here's what we need to demo. And most of these companies will let you try it out. So say this is our drone technology for, you know, making your, doing your roof assessments, whatever it is. They'll say, try it with no payment for a month and see if it helps you. And you have to take advantage of that because absolutely, you need to be leveraging and using this new technology or you're going to fall behind and your competitors are going to be able to offer lower premiums. Um, so you don't want to get into that trap. And it's happening really fast now.

Speaker B: Yep. And price is still very important in the industry. So here's my last question, and it is about the 2026 mandate for mutual insurance leadership. So if you walked into a boardroom of a, uh, namec a member tomorrow and the CEO said something to you like, Dale, tell me the one things we have to do differently in 2026 going in 2027, not 2030. It's too far for me, Dale. So what is your answer and what is the real cost of not doing anything right now?

Speaker A: Great question again, Sabine. Um, just like we were talking about, the one thing that the CEO should be doing is making sure that the company is familiarizing themselves with the technologies out there, including the AI, and then leveraging it and having that be a priority. Uh, you have to talk about it at your board meetings because that's again, going to keep you competitive. And if you're not doing it, your competitors certainly are doing it. So the number one thing I'd say going forward in 2026 into 2027 is familiarize yourself with all the technologies that can make you more efficient, not just in claims across your company, and help you do more with less while you know, your people are retiring and you're having trouble replacing them. Um, and make sure you're using the ones that are really going to impact your overall profitability and your performance.

Speaker B: Well, Del, thank you very much for joining me today.

Speaker A: Thank you, Sabine. It's a pleasure to be here,

Speaker B: Del. Thank you. This has been one of the richest, most honest conversations I've had on this show. And I think every claims leader, every underwriter, every CEO of a, uh, mutual listening today walks away with a different sense of urgency than they had this morning. If you are a NAMEC member, reach out to Dale directly through Namico. If you are not, this is your reminder that the Playbook is changing whether your organization is ready or not. Subscribe share this episode with one colleague who needs to hear it, and I will see you next time on, um, the Scout for Growth broadcast. Thank you very much for being here with us today.