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Tom Hebson—Captive Insurance Person of Interest

February 21, 2018

We had the chance to interview Tom Hebson, vice president of large guaranteed cost workers compensation and captive services at Safety National. Since many captive insurers were initially formed to provide workers compensation insurance, we thought our readers would enjoy hearing Mr. Hebson's take on the current state of affairs in the market.
You are our first person of interest from a fronting insurance company for the captive insurance markets. So instead of asking how you came to be involved in the captive market, we'll ask how you decided on insurance as a career? And how did you come to specialize in workers compensation?

Like many people from my era, I kind of fell into insurance out of school and it evolved into a career for me. I started on the finance side of the business and, after a few years, moved into the broader commercial property and casualty (P&C) underwriting area via an underwriting training program at a previous employer. I still stay actively engaged in the commercial P&C area in my captive role and, in the past 20 years, I have found myself with a specialized appreciation for the workers compensation area and the direct impact this line of coverage has on employees and businesses.

Safety National has been active in the alternative risk markets, including captives and public entity pools, for a long time. How did it come to identify this market niche as being attractive to allocate capital to?

Safety National has been supporting captives for over 20 years as opportunities arose within our customer base. In the past few years, we undertook a comprehensive research and development project and determined there was an opportunity to serve our current and prospective client base with both admitted and nonadmitted product solutions. Many of our customers are part of the Fortune 1000, and others have specialties within an industry where captives are utilized as a part of their overall enterprise risk management (ERM) strategies. With this in mind, we felt that we had a current revenue base that would support the capital investment to bring solutions to our existing clients as well as attract potential clients that have captives as part of their risk management solution.

Starting at the 10,000-foot level, what issues/trends are you seeing in the comp markets that bear watching? Secondly, how many of these are germane to the captive insurance space?

The great news here at Safety National is that we have invested in staying on top of issues within the industry. We focus on attending many industry conferences each year to keep current on emerging trends. In addition, our vice president of communications and strategic analysis, Mark Walls, maintains an ongoing conference blog and is a cohost of the "Out Front Ideas" webinar series. Having this resource internally has helped us identify and stay up to date with issues or trends within the workers compensation space. Some of these issues include artificial intelligence, pain management and related opioid use and abuse, workforce alignment, cyber threats, regulatory challenges, workplace violence, and many more.

I believe all of these issues are germane to the captive industry because they impact the potential losses and expenses of the captive. As an example, increased regulatory burdens and possible regulatory erosion of exclusive remedy can materially impact the cost to handle a claim as well as the ultimate cost of the claim due to rulings at the judicial level. Higher costs of claims handling based on regulatory compliance and increased litigation are a direct hit to the captive's overall bottom line.

As the tail on workers comp has gotten longerwe've heard some say it's approaching 50 yearshas Safety National changed how it underwrites the risk?

The workers compensation tail has grown. With modern medicine and treatments, people who have suffered serious injuries are living longer. As an insurer who sees many catastrophic and serious claims, we stay on top of our underwriting, claims, and data analytics to determine the impact or potential impact of these types of claims. With this information, we are able to identify potential issues, discuss the impact, and approach both internally and externally with our clients.

With the advent of the Affordable Care Act and a focus on holistic healthcare management, there was a debate on how this would affect workers compensation. From our view, there doesn't seem to have been a lot of change. But what are your thoughts?

When the Affordable Care Act was introduced, we saw potential for doctors with specialties and rural doctors to possibly cease or change their approach to servicing patients. This probably occurred on a national basis, but services such as urgent care or 24/7 nurse triage have helped fill some of the gaps that may have occurred. Additionally, there may have been doctors working within a traditional health network who saw their compensation decrease move into the workers compensation system as the patient reimbursements were greater.

We've read about how both artificial intelligence (AI) and health wearables are likely to change workers compensation. Where are we with this technology? What has Safety National been working on in this regard?

We are monitoring several trends. Having the ability to use AI to predict outcomes or assist in tackling tough exposures will assist in performing certain tasks on an employer's premises or jobsite. Further, enabling employees to wear/carry smart devices to help them manage their daily work assignments will improve the potential to prevent injuries as well as help to treat injuries when they occur. Just think, in the near future, the watch I am wearing will track my vitals pre- and post-injury (heart rate, oxygen levels, or others as the sophistication evolves), allowing medical personnel to triage injuries faster and more accurately. 

Looking into your crystal ball, how do you see captives evolving in the next 1015 years? Obviously, workers comp was the main driver behind the initial formation of captives. Do you see comp continuing to be an integral risk covered by captives in the future?

As long as workers compensation is a more predictable line of business, I suspect that it will continue to be a risk that captive insurers will undertake as a core captive strategy in the future. With the increased ERM pressures on both a national and international basis, I see captives forming an integral part of bringing solutions (and profits) to businesses around the world. In addition to the workers comp, I see professional, property, and specialized coverages being reinsured/insured through a captive structure and forming an integral part of an overall risk management solution.

Any closing thoughts or comments that you would like to share with our readers?

Captives have evolved in many ways to meet the challenges faced by employers and are considered to be on the cutting edge with many new products emanating from their creation and ongoing operations. I believe, for those persons looking for an exciting and creative career, captives will be a great area to explore. 

 Thanks, Tom. We appreciate the insights.

 With over 30 years of experience with both insurer and brokerage operations, Tom Hebson has extensive experience in alternative risk transfer (self-insurance, captives, and risk retention groups) and risk management and is a frequent speaker and resource within the insurance community.

He holds an undergraduate degree with an emphasis in business and accounting and a Master Certificate in Quality Management. He has authored and coauthored many insurance and related articles for various publications and has been a featured presenter at numerous state and national insurance industry meetings.

Mr. Hebson is currently enrolled in the International Center for Captive Insurance Education Certificate in Captive Insurance (CCI) program and expects to obtain this certification in mid-2018.

(Photo of Mr. Hebson, above, is courtesy of Safety National.)

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