Claims Transformation and Operational Excellence with David Fernandez from Kingstone Insurance

0:00In this episode of the Insure Tech Geek podcast, we explore claims transformation, operational excellence, and the future of insurance innovation. With Dave Fernandez, Chief Claims Officer at Kingstone Insurance out of New York.

0:27The InsureTechGeek podcast is all about insurance and how it's being transformed by technology. Join us on a disruptive journey, interviewing the leading voices of the insurance industry from all around the world. So enjoy the ride and geek out. Tara. This week's episode sponsor is revolutionizing the world of workers' compensation claims and policy management. Tara's cutting-edge platform empowers insurers with comprehensive benchmarking tools, robust management systems, and an integrated ancillary services marketplace. Discover how Tara is driving innovation and efficiency in workers' comp at tara.insure.

1:08Dave, how's it going, buddy? Everything's great. How's it going with you, Jim? Doing great. Doing great. So you came down here from Boston. Yeah. Where everybody's wicked smart. Wicked. Wicked smart. Yeah. Wicked. I lived in Boston summer of 2000. Okay. I turned 21 at the bell in hand. Oh, okay. I was like, I'm going to go old school. Right. The oldest bar in Massachusetts, I think. My ancestors landed in Salem in 1630. Wow. Go way back. JB. Wow. Same initials, same last name. John Benham has two sons, John and Joseph. Scamper out of the ship. They were indentured servants, so he had to work his way to freedom.

1:52Yeah. And then they had to go through a witch trial. Okay. Okay. Were they convicted or did they get off? She was acquitted. Okay, great. She was Winifred, the wicked witch of Wallingford, Benham, and Wallingford, Connecticut. Yeah. Because they went from Salem down to Connecticut. Yeah. And then they went to New York, and then they went. south. Yeah. Eventually all the way to Louisiana where I was born. Right. But whenever I go back to Massachusetts, I will say, Dave, I feel at home. Yeah. It's just something about it. Yeah. It's a nice place. Yeah. I love it there. I'm a Philadelphia native, but I've been in Massachusetts for decades and love it there.

2:26Yeah. That's great, man. It's just my aunt lives down in Southern Massachusetts. Yeah. South Dartmouth. Yeah. South Dartmouth. Yeah. And it's a great place. And obviously you work for Kingston Insurance, which is out of Kingston, New York. Yeah. Which is up the Hudson Valley, right? Yep, exactly. Yeah, and you're the head claims honcho. That's what I'm told, yeah. You're who they yell at when the claims go bad, huh? Yeah, well, fortunately, there's less yelling now than there was a couple years ago. So, yeah, things are turning right direction. You guys are a public company. We are, yeah. And congratulations, because I've obviously been following your stock price and the financial story, and it's been a lot of good news from you guys lately.

3:09Yeah. Our CEO, Merrill Golden, the entire team at Kingstone, every single employee played a huge role in turning the company around. And so the last couple of years have really just been getting the company back on footing. Now we're in a position to expand to other markets. So really excited about the future at Kingstone. Yeah, I am too. I'm excited to see. I mean, I love a good turnaround story, especially when it's great people. and your company has some great people leading it and really exciting. You're one of those great people, so let's talk about you for a second. Sure. You mentioned you were like South Philly or what part of Philly?

3:49I grew up right near Drexel University, so right near the Penn-Drexel area and on 34th Street, and it was a great place to grow up. So you're like Eagles 2 Die? I was. I'm now a Patriots fan, so I've now converted. But Eagles are my number two. But, you know, when the Eagles and Patriots play in the Super Bowl, I can't lose. You can't. You know, I grew up in Louisiana, and I live near Houston. And so I love the Texans. I hate the Cowboys, by the way. I still hate the Cowboys. I think everybody does. Everybody hates the Cowboys, except people from Dallas. Right. And you're, you know, Eagles and the Pats both hate the Cowboys.

4:29I hate the Cowboys. But I love our local team, the Texans. Yeah. But I'm still a Saints guy. I'm from Louisiana. So you were born in Philly. Then what did you want to be when you grew up versus like what did you go to college for? What did you do after that? Sure. Yeah. So I was a government major in college and I was absolutely positively going to go to law school. I was going to be a lawyer. I was going to be like one of my parents' friends, the happy, successful lawyers. And that didn't quite turn out that way. So it was after college. I'll tell you a quick story. So after college, I did a job for a year.

5:05I didn't like it. Quit trying to figure out what I'm going to do. And then now while we are waiting tables and doing some odd jobs, my car breaks down. So now I need a job and a car. Oh, hard to get a job without a car too. Exactly. So I'm going through reading through the Boston Globe newspaper and I see an ad for claims rep trainee with progressive insurance. And it came with a car. And I was like, I don't know what insurance really is. I don't know what a claim is. But this sounds like a great gig. But it pays$22 ,000 a year and a car. My problems are solved.

5:41So literally, it was a car that got you into insurance. Yeah, and back then they gave us Volvos. Volvo 240. That was the company car. So I'm 23 years old. Because it was the safest car as I want. Exactly, yeah. And so, but I fell in love with it. And I ended up staying at Progressive for 18 years and loved every minute of my time there. Yeah, so. What a great story. You know, that Volvo was a tank, by the way. It was, yeah. It was. It was the fastest thing on the planet. Yeah. But it could survive the nuclear apocalypse. Exactly, right. That's why they knew what they were doing. They had the data, right?

6:17Yeah. So you went into this really great career. Mm-hmm. And what led to the change in your career after Progressive? Yeah, so I love Progressive. after 18 great years there and then spent a decade at Liberty Mutual, which is, we were living in Massachusetts at the time, yeah. And really wanted the opportunity to do some things outside of just managing field claims operations. And at Liberty, I got tons of opportunities to do that as well as leave some great claims teams. So really loved my 10 years or so at Liberty Mutual, yeah. Yeah, and then you had Unum, and, or Unum, I'm sorry. Unum, yeah.

6:59Unum, and then you had Point32 Health. but then what kind of led to Kingston? Obviously, Kingston's personal lines, property coverage. What led into that job being cheap plans off? Yeah, so I've known the CEO at Merrill Golden at Kingston going back to our progressive days, and we'd always stayed in touch, and I taught prospective employees there. I always thought to myself, if I ever get a chance to work for her, I'm going to jump at the opportunity, but I assumed those days were gone, right? And she had moved on and everything. But when my phone rang in the summer of 2023 and said, hey, I've got this chief claims officer position, of all my career moves, that was the easiest one.

7:40Yeah, well, you already knew her. You had the trust. Yeah, exactly. And you'd already identified that you'd go with her. Yeah, and I knew if Meryl couldn't turn around and the team she built couldn't turn Kingston around, nobody could. And so I was confident that I could be a part of that story. So what experience in your career looking backwards, like really, if you identify one or two or three, really shaped how you view running claims org as the chief claims officer? Yeah. I think one thing that I really took from my time at Progressive was, you know, claims quality, driving claims quality, accurate service and efficiency.

8:18It's a grind. You've got to do it 365 days a year. You cannot take time off to work on a project or do something else. So a lot of, you know, just daily blocking and tackling on the basics, fundamentals, claims 101. one. And that's a really, you know, it's not, it's really hard to have that discipline day in and day out. So that's number one. And I've tried to bring that focus to the team at Kingstone. And I think the second and maybe even more important one is it's all about the talent, the team you have around you and the talent. And I got some advice from a senior person at progressive one time when I was kind of at a dark period with my team.

9:01And he said, until you have a team that you believe in, you're swimming up river. And he pointed out at the Hudson River, we were in New York. And he said, it is like swimming up river until you have a team that you believe in. And I've just always remembered that. And so anytime I'm in a new role or a new organization, I just think I want to have a great team and I want to be the best boss I can be for my team. Yeah, which is your main job. Your main job is to be a great boss. Right. Because you're no longer adjudicating claims yourself. Exactly. Exactly. I mean, your job is leading and running teams now.

9:35Right. And look, claims is a beat down. I mean, you just said it. You don't get time off. Right. You don't have a renewal season. Right. You don't have this peak season where you work really hard and then off. I mean, in fact, you have hard and then harder when you have cats. Right? Exactly. But Take like claim accuracy, making sure that we pay what we owe based on the merits of the claim. That's not an initiative. That's not something you do for six months or we do. That's a 2026 and then in 27, we're going to pay something other than what we owe, more or less. And you've got to do that every single day.

10:13And I'm really proud of the team at Kingstone. And they are so focused and do such a great job for the company and our customers every day. Yeah, well, and most people will never have a big property claim. Right. But the rest will have like one. Right. And it's the one chance you get to really interact with your customer, right? Right, exactly. We sell a piece of paper and a promise. Sometimes it's a PDF, but we sell that figured piece of paper and a promise. As he said, the typical consumer has an auto claim once every decade. Homeowners, once or twice in a lifetime. Yeah. And the premium is not cheap.

10:52So we need to show up and deliver great service, great, empathetic, timely claim service to them. Well, let's talk about great, empathetic, timely claim service because claims organizations across the industry, and I work for a bunch of them, are under a lot of pressure. First, the regulators, the reinsurers, the brokers, and the clients are all demanding a lot more data and a lot more access to data. So that's an administrative burden with the claims team. the handling instructions are getting a little more complex complex i mean the regulatory environment's really dynamic yeah and then on top of that um they're under a lot of pressure to improve customer experience make them happier yeah and reduce cycle time and cut costs right so it's almost like they want it the three things my dad said you can never have all three in combination faster better and cheaper yeah i said pick two right but it seems like out of claims orgs, you know, we as an industry want claims orgs to be faster and better and cheaper.

11:50And so because of that, like from your perspective, what are the biggest operational challenges that really kind of fly in the face of that, you know? And where are you seeing like the big opportunity for improvement, whether it's improvement in how you manage people's time or manage adjuster communication or manage, you know, where's the big opportunity? Yeah. Yeah. I mean, for us, I'll just speak for, you know, for a Kingstone. I mean, I think one, you know, every carrier is sort of in a different place, you know, starting in a different position from a footprint standpoint, technology standpoint.

12:24And so it's a little different for every carrier. But for Kingstone, you know, the one thing we think about all the time is catastrophe response. because if you get that wrong, it can set you back years, you know, and you can take a big hit on your customer service and your balance sheet. So we're always thinking about, you know, cat season. We get two in the Northeast, so we get both a hurricane, those storms. You also get the winter storms. So we got sort of both ends of the spectrum. And you have this thing called a nor 'easter, right? A nor 'easter, yes. We had this, in the first quarter, we had 11 declared catastrophes in New York.

13:00So, you know, that was a healthy diet. We got to test our cap plan. Wow. How did I miss that? 11. We had 11. It was mostly two huge snowstorms, a lot of really cold weather. And then March was the wind. Yeah, I was here for one of the really cold, cold, cold. My daughter lives in New York City now. So I was here for one of those hard, cold centers. I think when I went outside the hotel, it was negative eight. Yeah. I mean, it's brutally, brutally cold. Really cold. And, you know, for our customers, if they have a pipe freeze, the insidious thing about it is you don't even know that your pipe froze.

13:35Until it thaws out. Until it thaws out. And then you have water under pressure. I mean, put a garden hose on the second floor of your home and let it run for an hour or two and see what happens. So, yeah, so, you know, I mean, I think so. I think in terms of challenges, obviously, you know, different parts of the country have their different catastrophe risks. But if you're a property carrier, that's got to be top of mind. And then we just think about having a carefully prioritized list of what are the opportunities that are going to make things better for our customers and make the job easier for our adjusters.

14:11And we find that when we focus on those things, we're delivering the results from a claims accuracy, service and efficiency standpoint. And we usually don't we don't work on more than two or three things at a time. We try to do two or three things at a time really well, get them to a great place before we bite off something else. And I think, you know, something I've seen in other organizations is, you know, you've heard like plan, do, check, adjust. They do plan, do, walk away. You know, they plan it, they implement it, and they move on to the next project before they've really, you know, confirmed that they've captured the benefits of that.

14:46So the opportunities, Jim, as you know, being a technologist with artificial intelligence, you could do so many things. You could do so many things with it. And so I think, again, as a carrier, you've got to, in the panel you led, someone said, you know, pick a lane and just start going. And you have to recognize in this environment with technology changing the way it is, you're going to make mistakes. You're going to make some bets on a technology that maybe doesn't pan out the way you hope. And you can't let that sort of slow you down or stop you from trying the next thing. Yeah, I mean, because people who don't want change will use and weaponize that failure against more change.

15:35Yeah. Right. And often what I found is the meat grinder on implementations of any new idea and claims. I mean, any new idea, whether it's, you know, AI summarization, or whether it's two-way texting, or whether it's, you know, reserve recommendations, or whether it's, I mean, we can run through the laundry list, whether it's an adjuster dashboard, right? This is a major initiative. Or whether it's changing your print and mail operations, or whether it's changing your scanning operations so you can do it. I mean, you know, there's a lot of moving gears. Right. All of those are individual initiatives that we, hey, I want to do a major upgrade on this thing.

16:11Yeah. when it's likely not going to go well is not beforehand. It's after you go live. And it's that first three months of the new thing, whatever it is, that is a total grind. And then you have to really fight through and say, hey, look, we're not going to give up. We're not going to quit. We can do this. Unless you see an indicator that absolutely it's a train wreck and you have to go. I think that's a really hard politically, though, in some organizations to endure the fire that you're under. Yeah. Does that make sense? Yeah, for sure. And I think it's trying to figure out, is this just the whitewater?

16:51Because we've gone through the rapids. Or should I have gone left and not even taken this instead of going right? And so you've got to see it through. But I think one of the things I've learned throughout my career is you have to create an environment where people are going to say, hey, we made a bad decision. We made a mistake. We got to we got to paddle back up and go, you know, take it take a different path. And having an environment where people feel like they can admit that they made a mistake is huge, because if you're making decisions, you're going to make mistakes. The two things go. The two things go together.

17:28Nobody bats a thousand. And so I think that's worked really well for us at Kingston and other places I've been. And if people are afraid or they feel like they're, you know, the failure or something doesn't work out perfectly, that's a reflection on them. Then they spend all their time defending, you know, defending the decision that maybe wasn't the best one. And then you spend six months, you know, arguing over that rather than talking about how do we fix it and make it better? Yeah, or just saying, look, well, yeah, I mean, being intractable on any position is never good. Right. Right. Because you you you often will have decision bias and just say, hey, look, it's my neck on the line with this.

18:07Instead of me saying, hey, look, it didn't work out. I thought we could try this. Right. It hasn't been as good as I thought it would be. You know, this vendor didn't work out as well as I thought they would. And there's a lot. I mean, that's the other thing about claims. There's a lot of vendors involved in claims. I mean, there's thousands. Right. For you, you have everybody that makes a repair. Right. Right. Right. Plus all your inspectors. Right. Well, I mean, any guess on how many vendors you guys write checks to? I mean, it's got to be a big number. It is. You know, I mean, it's got to be, you know, 40, 50 vendors at any, you know, for whether, you know, there's a vendor for everything.

18:49Yeah, there's a vendor for almost everything. Yeah. And so. And often these are the experiments we're conducting in planes. Right. It's like, which vendor are we going to use? How tightly are we going to integrate them? How are they going to feed into our workflow? It's hard. One thing on the vent, so when I think about vendors, like there are vendors where we just, I think about vendors as those where you just have a very transactional information exchange. Our partners, like for our claims platform, that's not a vendor for us, that's a partner. Like we're in this thing, we want them to feel, We want our partners to feel like we both got it.

19:28We can help them make their product better, and they can help us deliver better claim outcomes. And that's true for all of our partners. Yeah, I mean, they help your organization be better. Big time. Yeah, they become part of your team. That's the difference. Yeah. Vendors are commodities and transactional and don't participate in strategy. Right. You need them. Yeah. I mean, you need your cell phone provider. Absolutely. You guys weren't for a claims order, but they're not your partner. Right, exactly. I mean, that's the difference. Well, through your career, you emphasized employee engagement and leadership development and building strong workplace.

20:05We talked about it. You know, your number one job is being a boss, building a great team, being a great boss. How important is the people side of transformation? Now, you just went through a claims software transformation. I don't want to talk about the claims software. I want to talk about everything around changing your claims software. What made that project work? Number one, well, we picked the right partner. Number two, the team that we had doing most of the work on that and sort of designing the system, doing the configurations, we had a small but mighty team. They were empowered to make decisions.

20:45We got input from across the claims leadership team when appropriate. but we trusted them to run hard at it and make decisions recognizing they're not going to get every decision right. And so then we'll go back and we'll fix the ones that maybe they didn't get perfectly. So that was the number one thing that we didn't have, you know, the two hour Friday steering committee meetings and PowerPoints and we didn't do, there was not a single slide for that whole thing. So that was the first thing. I think the second thing is our adjusters were not happy with our prior claims system. So we had sort of fertile ground.

21:26People were ready for a change. They wanted better. Yeah. And then we started to bring, as we were doing through UAT, we could have kept that to a small group that were the most efficient testers. But we brought in a lot of our adjusters who were, I'll say, our most experienced adjusters, I'll say the change champions. And they came in, they gave feedback, and they went back and they told their friends, hey, I think this new claim system is going to be pretty good. I think it's going to be a lot better. So they really helped this with the change management. And I think the last thing would be, you know, it worked like it, you know, whenever you go live, you're always thinking what's going to happen on day one.

22:13And it worked. There are some things we had to work out, you know, fixes here and there, but easily the most flawless claims platform implementation I've been through. And I've on the PNC side. And I think part of it's because of those three things. We had a small but mighty empowered team and they made decisions because many times, and you may have seen this, Jim, making no decision is worse than making a suboptimal decision. Yeah, yeah. Most of the time. Yeah.

22:53It's so tempting though sometimes. Oh, I know. I mean, it's just, it's such a when you, you know, if you've had a rough claims month or you just had a bunch of stuff hit you it's so tempting to say we're going to kick this to a committee for a decision we're going to study this for the next three months from start to finish we implemented in four months so you know

23:23so I think we just they worked under pressure, they worked super hard but if you stepped into one of these working sessions and you tried to tell who's the claims person, who's the person from IT, who's the person maybe from actuary or some other function that has an interest, you couldn't have told the difference, oh, this is the IT person, this is the claims person. They're all just working together as a team. And it was really, it was a beautiful thing to see. It is. And, you know, you got a great team there anyway, right? That they like to work together as a team regardless of what the challenge is this is a big one yeah we it's a it's a big one that you just went through and now you're on the other side of it now you can focus on i'm sure you have a half dozen other initiatives that you're focused on now yeah we um you know we um we're our our um you know people everyone at kingstone will roll up our sleeves you know we we we're not going to compete you know we're a small carrier right we're not going to complete compete with the top 10 or even the top 20 on scale.

24:26We're going to compete by being nimble, by being fast, and by working as a cohesive team. So, you know, that's how we win. Yeah. And you, you know, market share says you're getting some real market share. Yeah. That's cool. So let's wrap up with this. Like if you had advice, and don't always ask this question, but I think this is a good one for us to wrap with. Like if you had a young claims professional you met who was maybe three years, two years into the job, their first job as an adjuster. Yeah. What would be your main advice for them? That's a great question. You know, the role of the adjuster is changing so much regardless of which carrier you're with.

25:09So I would say learn as much as you can about the technical part of the claims profession, whether you're in property or casualty or auto or specialty lines or whatever it is. And find a mentor. Because finding people that you can be a, that will be a sounding board for you, that will support you in your career. I've had so many, been blessed with so many fortunate mentors. If I had you pick your top mentor, who would it be? You know, I'd have to say, And this may be some of our recency bias. I never worked for him, but Brian Bissell, who is the claims president of Progressive, he's been a great mentor for me over the last 10, 15 years and before that.

25:56But actually, since we both left Progressive, we really have enjoyed staying in touch. And there's been many others. Yeah, mine was a guy named Skip Brechtel. Okay. And he taught me everything I know about insurance. Yeah. He was EVP of a large national TPA. He unfortunately just passed away from cancer about a year ago. And the wild thing at his funeral was the number of business people that came to his funeral. And I mean, over 100 all said he was their mentor. He mentored a lot of us. Right. And so I think the challenge for young adjusters is to find a mentor. Yeah. The challenge for those that have been there for a while is to be one.

26:39Yes. To actually take the time. It consumes time to mentor people, right? Right. And one thing, Jim, I mentioned the technical part of claims handling. That's so important because whether you want to stay in claims, whether you want to get into technology, whether you want to get into underwriting, having that technical foundation that you really understand the guts of claims, whatever the line of business is, will serve you in wherever you want to take your career or the industry. Yeah, that's awesome. I want to do a shout out to a longtime friend and colleague, your CIO, Sarah Mikulski. She's phenomenal.

27:18She is. And I know that she led a lot of these initiatives and projects really well. Yep. And I think she's been another great addition to the Kingstone team. So to Sarah, hi. Congratulations. I bet you are. You need your CIO site with your chief claims officer. So I just want to give her a shout out for being a great chief information officer. Yeah. And thank you for joining us. Keep it wicked smart up there in Boston for me. We will. We will. And thanks, Jim, so much for having me on. I appreciate it. Thanks so much. Thanks. And thanks to everybody out there in listener land for joining us for another great episode of the InsurTech Geek Podcast.

27:58This has been Dave Fernandez from Kingstone Insurance. Enjoy the ride and geek out.

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