Can One Insurance Company Pave a Better Path for Everyone?

It certainly would be nice if that path was littered with improved information and data.

That way it would have the potential to finally come to life and enhance the performance of everyone who has it.

Now all of a sudden you can start to see a reality that clearly improves the traditional insurance transaction.

At the very least, you're left with business insights that dramatically outpace what you've previously operated with.

David Nelson, Senior Vice President at Nationwide, talks about all the investments they're making to help lead the way.

Joey Giangola: Mr. David Nelson, how you doing today, sir?

David Nelson: I'm doing great Joey.

Joey Giangola: David, I got to know. Before we get started, is there something that you have a tendency to learn compulsively and just can't help but find yourself improving on, even though it probably has nothing to do with really any significant value in your day-to-day life?

David Nelson: Boy, I'll tell you, from time to time I feel like I try to get a little bit better at that game called golf. Sometimes that can be a little compulsive, but unfortunately the day job gets in the way of my professional career when it comes to golfing, though.

Joey Giangola: Was there ever a possibility on the table David? Were you close enough to that level?

David Nelson: No. No.

Joey Giangola: No?

David Nelson: There's probably a possibility to go the opposite direction. Take up [inaudible]

Joey Giangola: All right. Fair enough. Fair enough. Any other games that you know or maybe around the backyard? I found that Bocci was a nice substitute for the golf when you couldn't get out there.

David Nelson: You know, it's interesting you bring that up. I have not played that, but I've got a couple of friends that do, and they've been trying to get me into that.

Joey Giangola: Listen, I'll tell you what, David. I'll tell you. If you find a nice court, you got a nice league and it's somewhere close, I mean, it's definitely worth trying. Very competitive. You got to be careful, but I think your skillset might translate a little bit longer in terms of your ability to compete at a high level.

David Nelson: There you go.

Joey Giangola: But in all seriousness, let's talk about maybe insurance at a high level. I mean, because that's kind of what you guys do. I mean, just give me a rundown. Where is your head at right now? What is happening? If you had to just kind of give a blanket statement of your experience over the last couple of months and maybe where you think we're headed?

David Nelson: Yeah. So it's certainly been a very dynamic marketplace from my perspective. And you know, I think we were entering into a dynamic marketplace, even before the external environment, that being kind of COVID-19, hit. We were seeing a lot of different things, you know, rates going up at an accelerating pace, capacity drying up a little bit and limits being reduced.

I think we're in an environment that has accelerated that and really trying to think through the dynamics of what all this means to us and how we see the future playing out. So it's been very interesting. We've learned a lot about the work from home environment. We've learned a lot about how our technology stands up. I think we've learned a lot about the product sets that we offer and what the future holds, so it should be very exciting. I think it's a great time to be not only in the insurance industry, but if you're a wholesaler or for that matter, even a retailer, I think it's just a great time to be in insurance.

Joey Giangola: Yeah, and talking about the wholesale side of things, you know, at Nationwide, what do you think the opportunity is moving forward? Is there something that you guys are putting your eyes on just saying, "Wow, this really opens our eyes to some possibilities that we maybe didn't consider before."

David Nelson: Yeah. I think there's probably a couple of things that I'd tell you, Joey. One is the data and data and analytics, and really trying to leverage what I call like a treasure trove of data that we have from the legacy or the history that we have being in the E&S industry and the wide breadth of products that we offer.

But I think, for any carrier, for any distributor, for that matter, leveraging that data to better understand their portfolio business, I think is tremendous. I think another thing that's out there that that the data helps is, is as it comes to new products or innovating, making sure that we can continue to stay relevant on the innovation front and particularly in the E&S industry, you know, thinking through what coverages are out there that aren't being covered adequately and providing product for that.

Joey Giangola: Yeah. It's such a unique space because, one, you have such an opportunity to be creative with it and offer coverage for things that, you know, haven't maybe hit the mainstream, we'll say, but how do you balance that conversation of, "Well, we could probably insure it, but yet we also need to have people that can sell the insurance." So where does that sort of cross section hit where we want to develop things that are on the cutting edge, but at the same time we also need to know we need to generate awareness within the aging community and things like that.

David Nelson: Yeah. I think it's an interesting dilemma dichotomy that you bring up. It's really around, hey, you could probably develop a ton of products out there, but you also have to have the folks that are out there selling it and the understanding of what it is that it's being put forward. You know, we spend a lot of time actually working with our partners, not only on existing products, but sometimes it's focusing on those areas that aren't being covered adequately.

It's challenging because you really have to do your homework and, not to keep bringing up data, but having the data around that, sometimes that's very challenging on a new product, really having the data to understand the performance of it. But sometimes it's about taking risks, right? And that's the business that we're in and really lining up not only yourself and your underwriting teams, but your distribution partners to make sure that you're all aligned on what it is that you're putting into the marketplace and how it might perform.

Joey Giangola: Yeah. What are those conversations been like about having the data to support some of those decisions? I mean, is that something that has been everybody's kind of on board? Has there been sort of some back and forth because again, data and technology and speed of adoption is not something where we've been known for in the insurance industry. What does that process been like for you guys?

David Nelson: Yeah, I think you're absolutely right on that. I wouldn't say we were on the cutting edge of technology, but I do think, with what we've as an industry experienced and with a lot of the, let's call it reduced travel, that's going on in the conversations that are being had with our partners, they're happening in a different form and fashion.

And I think we have more time since we're not on the road to spend time having deeper conversations around data, data sharing, data availability, and how that makes its way into kind of ultimately underwriting decisions. What I've seen, though, you know, in these conversations with a number of our partners is is there's a tremendous willingness for folks to not only gather up the data that they have, but to share it and understand the performance of their portfolio or their business.

And the nice thing about how we operate or how we like to engage with our partners is really be very transparent in not only the performance that we're seeing of their portfolio, but how that stacks up relative to their peer group, and really try to help inform our partners where it's greater opportunity or where there might be things to avoid. And so the nice thing about what we're doing is is we're having those conversations.

We're trying to get into a cadence of sharing information more freely and really trying to understand what our partners are seeing as well, because they have access to information that we don't have. And so it's been a really good, what I'll call learning for us, and it really has pushed our business forward when it comes to the conversations that we're having with our partners and how to do more together.

Joey Giangola: It's definitely interesting. Everybody's kind of had to make some type of dramatic shifts. I guess I was kind of interested to know is, much like traditional ways of doing business might've happened on that golf course that you mentioned. Is there something that we've sort of picked up now that you think is here to stay, and maybe on the other side of that, what's something that you think we really need to get back to sooner rather than later?

David Nelson: I'm going to start with the latter. You know, I don't know that we'll ever get back to the full travel regimen that we had in the past, but I do value, and I think some of our partners do as well, those more face-to-face interactions where you're having time to spend thinking more strategically about the business. It's very difficult to do it video teleconference with 15 to 20 people participating. That's a little bit easier done in person, so I do hope for the day that we can get back to some of those face-to-face meetings, but I also understand that that might not look like it once did. Could I have you repeat the first part of that question?

Joey Giangola: I just mean, much like we've all adjusted to working, you know, at a distance, at afar, you said, it opened up a room to sort of have those conversations in a different way because you weren't traveling. Is there something around that new structure that you think we might hold on to maybe for the longterm?

David Nelson: I will tell you this. I think the face-to-face interactions via video, I wouldn't say we were huge users of it, and I don't know that the industry was that much as well. I think a lot was done in person. I think we'll hold onto that quite a bit. I see it happening not only at the executive level, but at our regional leaders, our territory managers, and even at the underwriter desk level. I think it's just a great way to keep that connection and that relationship going. So I certainly wouldn't be surprised if you continue to see that being held on to, and in some way, shape or form replacing a little bit of the travel that was happening previously.

Joey Giangola: So, so basically David, what you're saying is, is, one, you've got a nice corner of your house cleaned out that's always sort of ready to be on camera and then, two, you're going to have to have maybe some matching face masks that go with the tie and the suit at some point, right?

David Nelson: Yeah. I think you're absolutely right. I think for the near term here for certain, you're going to have to continue to keep those rooms clean and the house clean so that you can show them on video.

Joey Giangola: Yeah. I mean, kind of taking it more over to the lines of, again, like you said, the agent side of things, if you had to really kind of put yourself in their position right now, what's something that you think, with all the market conditions, that they should really be paying attention to? Is there a specific line of business that you would like to see maybe get some more of that adoption that maybe hasn't really fully hit critical mass at this point?

David Nelson: Well, I think, just from our rate environment, I think we've seen a lot over the last 12 to 24 months happening in property. Obviously commercial auto is a fairly sizable product line for us, and it is for the industry as well. I do see the rate environment continuing on that product line, particularly with what we've seen from social inflation, jury verdicts and things like that. GL, not that it's lagging tremendously, but it seems to have lagged just a little bit from the rate environment. But I do think that we are starting to see a little bit of momentum there.

To me, I guess what I'd be looking for as we go forward is how are these things performing, particularly when you bring the external environment into play? I think just the topic that I brought up around social inflation, the verdicts are getting larger and larger and that I don't think is good for the industry overall, but it's something that I don't see going away anytime soon. It's something I think we all need to pay attention to, particularly when it comes to how we're writing the business and the limits and the terms and conditions that are put out on the business.

Joey Giangola: How much do you think, again, back to that awareness where that's actually trickling down to the end client that is aware of these sort of things? Do you think we have maybe good enough process in place for that communication to take place, to truly inform what's happening with rates? Because I do think there's a lot of the kind of how the sausage is made, that, I don't know, always, maybe makes it where it needs to go. And maybe it doesn't, but what, how would you maybe balance that scale in terms of informing, having an agent kind of communicate what's necessary and maybe leaving out some of the parts that might not be as useful?

David Nelson: That's a great question. I think the industry overall, not that we struggle with it because I think we do a pretty good job, but after a certain period of time, I think there becomes fatigue and the explanation or how that gets communicated out to the ultimate consumer. But I do think it's important, from a carrier standpoint, from a distribution standpoint, down to the ultimate insured for them to really understand the products and the terms and conditions of what they're buying. I think we all have a piece of that chain, and I think we need to continue to look at ways to keep everybody educated on what's what's changing and how that might impact the ultimate coverage.

Joey Giangola: Yeah, for sure. And when it comes to what's going on next in terms of the E&S margin in terms of Nationwide, what do you guys have your eyes on? We talked a little bit about it, but I mean maybe in a little more specifically, in terms of beyond just the rates and conditions. Is there is something that you are personally excited about that maybe hasn't really hit that sort of next level, that you, again, much like your sort of compulsive hobby habits. Is there something on the insurance side of things that you're really enthusiastic about?

David Nelson: There's a couple things, and one I'll share with you is the investment in technology that we're making and their ease of doing business platforms. To me, those are really just kind of the cost of doing business for the price of entry, but we continue to invest in making it easier to do business with us. It excites me that we're making tremendous progress on the rollout of our underwriting solutions across multiple product lines.

But what excites me even more than that is, really the amount of time, capacity, resources, and investment that we're making into advanced analytics. Whether that be predictive analytics, machine learning, artificial intelligence, we're really trying to pave a new path here, really around how we take all the information and data that we have, whether it's internal from the products that we write today or external third-party data and put it together to, one, enhance the performance of our overall portfolio but, two, really get back to bringing that information to life for our partners, whether again, it's by pre-filling information so that it's an easier transaction for us, or taking touches out of the transaction or to share insights into here's the business that we want to go after and here's the business that you think is out there that's the most profitable that our partners should be targeting.

Joey Giangola: You mentioned ease of doing business, again, something that, again, industry-wide, we have not ever been accused of being at the front of the lines on. Is this something that you think maybe finally we're sort of coming around to that, and do you see a faster acceleration on, we'll say maybe the back nine, of everything now that we've maybe got our feet under us?

David Nelson: I think there's a lot of organizations out there that are investing a tremendous amount in that ease of doing business in their underwriting platforms, us being one of them as well. I think we're making tremendous progress. I will say this, that I think we're still a little bit behind, but that might've been a good thing because now we can leverage all the latest and greatest technology, which seems to change on a daily basis. But the other point that I'd bring up, Joey, that I think has helped push us along is some of the insure techs that are out there.

I think they've helped us help push the E&S industry and the overall PNC industry to challenge us to innovate and think differently, so I think at the end of the day, it's been a good thing. I think we've got a ways to go, but I think folks will be proud of the progress that's being made and the time, effort, and attention that's being put into making it easier to do business or transact business, particularly on the E&S side.

Joey Giangola: David, I got three more questions for you.

David Nelson: Sure.

Joey Giangola: And first one, it's very simple, but I'm kind of curious. What's one thing that you hope you really never forget?

David Nelson: The value of the relationship. Our organization was founded on the relationship that we have with our wholesale partners, and we really strive to take everything in that they can give us, so we do voice of the customer sessions, the wholesaler being our customer. And we really try to make sure that we are aligned with our thinking and hearing what they have to say when it comes to product, when it comes to technology, when it comes to people, you know, just any of those things, just never forgetting that those relationships are paramount to our success.

Joey Giangola: All right. And now on the other side of that, what's one thing that you think you still have yet to learn?

David Nelson: I think I'm going to continue down this path of the advanced analytics and predictive analytics. I think there's so much to be uncovered there and so much value that can be created not only for the carriers, but for our partners and for retailers, that there's probably exponential learning to be laid out in front of us for us to get after. But I hope that that's something that we continue to make a tremendous amount of progress on because I do believe there's a tremendous amount of value to be created.

Joey Giangola: Or David, last question to you, sir. I'm going to hand you a magic wand of sorts to be able to really change or do whatever you want just a little bit differently across the insurance industry. It doesn't have to be in E&S? It really doesn't have to be anything. We've touched a lot about technology analytics might know where this is going, but if you did have that magic wand, what's it going? What's it doing, and what's happening?

David Nelson: I think that magic wand would get us to a point where we're operationalizing all the things or all the investments that are being made, and some of those bets that are being placed. So I think there's a lot being done behind the scenes right now, particularly in the environment that we're in. I think a lot of companies, including ourselves, have had time to look at internal processes and the operating model that's set up behind it.

To me, that magic wand is a little bit of what I would call a speed element. It gets us to where we want to be faster. And so I'd wave that wand and hopefully we get to a spot where we're creating that value that we desire to create for everybody that's involved in the transaction.

Joey Giangola: David, this has been fantastic, sir, I'm going to leave it right there.

David Nelson: All right. Hey, I appreciate the time, Joey.