A conversation with Pinnacol Assurance's Kathy Kranz

Transcription:
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Patti Harman (00:07):
Welcome to the latest edition of the DigIn Podcast. I’m Patti Harman, Editor-in-Chief of Digital Insurance, and I’m joined today by Kathy Kranz, Vice President and Chief Financial Officer of Pinnacol Assurance and one of our 2023 women in insurance leadership. Honorees Pinnacol is a state chartered workers’ compensation carrier located in Denver, Colorado, but writes coverage in other states. Thank you so much for joining us today, Kathy.

Kathy Kranz (00:35):
Thank you for having me. Pleasure to be here.

Patti Harman (00:37):
So let’s just start with a general overview of your company, your primary focus and some of your immediate growth plans.

Kathy Kranz (00:45):
Absolutely, thank you. So Pinnacol has been around in one form or another since 1915. We were created to make sure that everyone in Colorado had access to workers’ compensation. We take all comers and we currently serve about 50% of the market in Colorado. I would correct one thing you said, we actually don’t provide coverage out of state. We provide services out of state, so I’ll dig into that a little bit more as we go. One of the things we’ve recognized is that many of our policy holders have employees outside of the state of Colorado now and trying to find a way to serve them effectively. We have some solutions in place, but they can be clunky and so we’re trying to get better at it.

Patti Harman (01:29):
Okay. Alright, that makes a lot of sense. And that kind of leads into my next question, which is that the pandemic really changed how people work and where they work, and I’m wondering how has this affected workers’ comp coverage and how it’s written?

Kathy Kranz (01:43):
Absolutely. So Colorado is a top five remote work state and we’ve realized that about half of the employers in Colorado have employees outside of the state of Colorado. So not being able to directly write coverage outside of Colorado or provide reinsurance outside of Colorado has made us get a little creative about how we attack that problem. We need to serve those policy holders, we need to make sure folks have access to it. So we’re really focused on three things. We’re focused on technology to make it easier to reach those folks. We’re focused on services, we’re really good at underwriting and claims and safety services and premium audits and all the stuff that we do in Colorado we think is translatable outside of the state of Colorado. And we could provide services to our policy holders outside of the state. And then partnerships. We need to have insurance company partners. We need to have companies that will put this on their paper and take the risks since we aren’t able to do that outside of the state. So that’s how we’re focused on solving that problem.

Patti Harman (02:44):
When I was preparing for this interview, I was really excited to see that you have a particular focus on small businesses. I have been involved for many years in trying to create resources for small businesses. So I’m wondering what are some of the challenges that small businesses face, especially when they’re looking for workers’ comp coverage?

Kathy Kranz (03:03):
Absolutely. It’s a great question. The businesses, small businesses have to buy workers’ compensation. It’s probably not their top priority. They are unlikely to have claims if they have one or two employees that I think a stat we found six years ago or so was that small businesses are twice as likely to go out of business in the next year as they are to have a claim, a work comp claim. So for them it’s a cost of doing business at least when they start out and we need to focus on making it as easy for them as possible and is just as fast as possible. It’s something they don’t need to spend a lot of time on necessarily. Once upon a time, Pinnacol had pretty much all the small business in the state because no one else really found it economical to spend the time writing that business and technology has changed that dramatically. So much more competition in the small business space today and we’ve had to get way better at how we do it as well.

Patti Harman (03:58):
Very interesting that technology would have such an impact on this particular line of business. And that was kind of the next thing I was going to ask is what role does it play in the workers’ comp field today and how have technology and new platforms even changed the entire all of the workers’ comp insurance space?

Kathy Kranz (04:17):
Yeah, I think in small business in particular to start there, really the addition of straight through underwriting for those really small businesses is what’s made it possible for insurance companies to do it profitably. Once upon a time, you spent so much time on it for so little premium that you couldn’t do it profitably by the time you had an underwriter take a look at it or somebody process a piece of paper. Today, all of that can just happen via technology and so you don’t have to have a person touching it anymore, which makes it way more accessible for so many people and gives so much more choice to your small business owners.

Patti Harman (04:52):
Wow. There’s a lot of key technologies that have been introduced in the workers’ comp field and I was wondering what were some of the ones that you’ve seen in the last 12 to 18 months?

Kathy Kranz (05:02):
With what we’re doing, we’re very, very focused on the front end experience and then the customer service experience when something needs to change. There are a lot of things happening though also, particularly as you said, the last 12 to 18 months. I think there’s so many things going on in the safety arena with people both able to make jobs safer through automation of some sort. I know people are worried about automation taking jobs away, but I think the great use of automation is using it in high risk, really unsafe areas to make things safer for folks. I think that’s one of the reasons you’ve seen work comp get more profitable over time. There are fewer claims, I think in large part because of automating some of those really risky areas. So safety is one. There’s also medical technology which works on the other end. It’s great for the workers and for the employers because people are able to get back to health more than they were able to in the past. People that have had catastrophic injuries can have better quality of life or live longer than they were able to in the past. It also, the cost of that medical technology is high. So that can work in the opposite direction of the automation for safety is it does increase claims costs over time. Yeah,

Patti Harman (06:16):
Very true. And I was wondering, you talked a few minutes ago about the importance of partnering. How important has it been for Pinnacol to partner with other companies to expand your services or even your technology capabilities?

Kathy Kranz (06:29):
It’s the only way we can do it really, but we have to have partners, particularly again, insurance company partners and then technology is the thing that makes it all run. We made a purchase at the beginning of the year. We made our first acquisition of a tune who is an MGA for the small business space, and we bought them in large part because of how great their technology is, how user-friendly it is, how easy they’ve made it for people to purchase insurance through that platform. And we wanted to be able to offer that to our small business policy holders as well. So we’re starting that from a service perspective outside of the state of Colorado and then going to take some learnings from that and move it back into the state as well.

Patti Harman (07:12):
It’s just amazing how many opportunities you have and just when you kind of expand your horizons and you’re looking at, we could do this or maybe we could, you’re just trying to find new and different ways to service this important audience. So what excites you the most about being in the insurance industry at this time?

Kathy Kranz (07:31):
I think the unpredictability of it and how many things are changing really quickly. I think the way that we’ve provided insurance for 108 years is not the way we’re going to provide insurance 20 years from now. And so thinking about all the things that have to change between now and then, it’s daunting, but it’s also really exciting to think about what is going to have to be different to really serve our policy holders, our injured workers and our other partners well in the next 20 years or so.

Patti Harman (07:59):
I think insurance is a lot more invigorating and exciting than maybe people actually realize and there are just so many different opportunities there if you just take the time to look for them. One of the things I wanted to ask you, Kathy, I was at a conference earlier this year and they were talking about how the workers’ comp field, there are so many opportunities to use technology to adopt it and that sort of thing, and I’m wondering what are you seeing from your perspective in terms of technology usage in this space?

Kathy Kranz (08:32):
I’ll attack it from a couple different areas. The first place I’d like to start is legacy systems. One of the things we have run into, and I know we’re not alone, is that there is a lot of exciting technology out there and our legacy systems can’t handle it, or it takes so much work to integrate it into the legacy systems that you lose a lot of the value of speed that it can bring to the table. So I think the first problem is getting on modern systems. I know almost everybody’s dealing with that and it’s not fun to talk about because it’s not moving you forward in leaps and bounds. It’s really just getting the platform able to deal with the new technology. So that’s one of the things we’re working on. I think when I think about AI and how AI is changing things, we’ve used AI for years.

(09:16)

We’ve used AI in predictive models, we’ve used it the straight through underwriting that we do uses a lot of different forms of ai. But I do think the generative AI that we’ve seen sort of start with chat GPT changes the way people think about using ai and we are still in the early stages of figuring out some use cases for it. I think there’s so many to think about. I think internally at Pinnacol, we’re thinking a little bit about just making lives for our tech developers easier. Can the generative AI write code for them and can we do some experiments there? And I think all of that’s great and I’m sure our tech people are really excited about it. But when I think about it more from a business perspective, we’ve done some theorizing around how you could take existing paper forms that your agents or your policy holders might have and actually turn that into a quote, take the information off of that, scrape it and put gobs of it into the system and let us produce gobs of quotes with almost no time and effort, at least once you’ve built it in the system.

(10:20)

I think there’s a lot of exciting ideas, and I am not the idea person from that technology perspective, but I’m really excited to hear from the people that have those ideas and to figure out how we can turn them into something real

Patti Harman (10:32):
Well. And there’s such a concern that people think, oh, if we start using AI in all of these different ways, I’m going to lose my job or I’m going to lose this, or whatever. And when you start looking at all of the many different types of uses, and yes, it will save time, yes, it will increase customer service and being able to deliver a more accurate personalized product, all of those types of innovations are very exciting then. And I think sometimes we lose sight of that when we’re worried about holding things too close instead of just letting it go to see what happens. I know somebody was using it to rewrite some information. I was like, oh, I never would’ve thought of that. And then in my mind I’m thinking, oh, so eventually they won’t need me to write anything.

Kathy Kranz (11:21):
I know one of the things we talk about in the company is people talk about how much change there is going on in the organization, and I hate to tell ’em this, but this is probably the least amount of change we’re going to have for the foreseeable future anytime in the future. This pace of change is going to seem quaint a few years from now, and I think we all just have to sort of adapt to that and get used to it. It’s not the insurance world that we were in 15 years ago, not even close.

Patti Harman (11:49):
And I’m so glad that you said that because I’ve been involved with programs just trying to expose high school and college students to the insurance industry because I think there’s this preconceived idea that insurance is just stolen boring and it’s a snooze. And my friends, when I start talking, they’re like, oh my gosh, there she goes again talking about insurance and how great it is. And it really is because to me it’s so fascinating. It is constantly changing and there are so many opportunities in there. And when you consider that there is insurance to cover just about any type of risk that exists, that to me is just mind blowing in some respects. I remember since I’ve been covering the insurance industry, I remember a couple of years ago when we started looking at Airbnb coverage and coverage for Lyft and Uber and that sort of thing, and insurers were able to adapt and adopt new types of coverage for all of that sort of thing. And so I want to know what are some of the things that you’re doing at Pinnacol, and let’s talk a little bit about attracting talent to the industry and to different organizations because there are going to be a lot of folks retiring in the next couple of years. So this takes on a whole new level of urgency and importance, I think, for the industry.

Kathy Kranz (13:09):
I think that’s exactly right. The talent we have in the organization is amazing, and we have a lot of people that have been there 20 even 30 years, and they obviously aren’t going to be with us for that much longer. They’re going to go on and enjoy their lives in retirement and have a great time, but we’re going to lose a lot of institutional knowledge when that happens. So we started thinking about this probably 10 years ago and started a program about five years ago within the state of Colorado called Career-Wise. It’s an apprenticeship program for high school students that they join in their junior years, and they basically go to school and work at the same time and they get credit for their work experience. We bring in a new cohort of probably close to 10 every year, and they are with us for three years.

(13:58)

They’re with us for their junior year, their senior year, and then one year after that, which at which point, they’re usually doing community college or other college classes at the same time as well. And we are very deliberate about the program. We have full-time people running the program. The first year is really about learning about different parts of the organization, and they’ll do little jobs across the whole organization during that timeframe, but then in their second and third years, they specialize in an area and really get to work in one area full time. And we’ve had really great success with hiring some candidates from that program over these years. I think I probably shouldn’t give a number because I’m going to give the wrong number if I do a percentage, but we do have some great people that have come on from that program, and it’s a way to really bring in new talent. One of the things we deal with in Colorado is there’s only one risk management school. The college program west of the Mississippi, it’s in Denver. We help sponsor it, but it’s pretty brand new. There aren’t that many people that go through it. So finding people that intentionally want to get an insurance is hard. So instead we have to take people that haven’t been in insurance and convince them that it’s a really great thing to do. And the apprenticeship program is helping us with that.

Patti Harman (15:09):
That’s a great one. And that’s so important. And even for people who are considering a career change, letting them see how if you worked over here and whatever your skillset was, especially I know a number of insurers have programs where they’re reaching out to people who have served in the military because they have very unique skill sets that just translate so well into the insurance industry. And that’s why I’m always trying to let people see, you could do this. I remember talking to my son about it one time. I was like, you love to do this, this, and this. You know that you could be an insurance adjuster, you could be an underwriter. There are just so many different things you could do. And he would just look at me and roll his eyes like, okay, I’ll stop now. But I want people to see what the possibilities are because there are just so many at this point in time.

Kathy Kranz (16:01):
Yeah, no, a lot of people fall into it accidentally. I’m one of those people. I just randomly, when I started my first year of public accounting, I got assigned to, I had two big clients. I had State Farm, and I think I was Upjohn back in the day in Kalamazoo, and I enjoyed the State Farm audit so much. I ended up specializing in insurance. And now here I am.

Patti Harman (16:21):
So thank you so much, Kathy for sharing all of your insights today. This has been a great opportunity to kind of give people an overview of the insurance industry. Thank you very much for listening to the Dig In podcast. I produced this episode with audio production by Kellie Malone Yee. Special thanks this week to Kathy Kranz of Pinnacol Assurance. Rate us, review us and subscribe to our content at www.dig-in.com/subscribe. From DigIn, I’m Patti Harman and thank you for listening.