(Thomas M. Troy, CEO, CSAA Insurance Group. Photo courtesy of CSAA.)
In April 2019, Tom Troy took on the role of CEO at Walnut Creek, Calif.-based AAA carrier CSAA Insurance Group. Troy succeeded Paula F. Downey, whose work including core systems consolidation was credited as transforming the company by the insurer’s Chairman of the Board Jack Brown. Troy was seen as the ideal candidate to guide the company through its next chapter because of his extensive experience in both personal and commercial lines and his understanding of the role of technology at a time of industry transformation. Perhaps that preparation also made him an ideal candidate to face the rigors of the COVID-19 pandemic. In a conversation with Insurance Innovation Reporter this week, Troy talks about his work during his first year, how CSAA Insurance Group has reacted to the pandemic, and what the event may mean for how insurance companies will operate and innovate.
Troy began his insurance career as a commercial underwriter at Kemper Insurance. He spent about 15 years acquiring vital experience at Safeco, ending up in a Senior Vice President role. After Liberty Mutual acquired the company, Troy went on to two Executive Vice President roles, respectively as chief operating officer and head of field operations. Subsequently he held EVP roles at Allstate, in charge of Brand Operations; then of Allstate Business Insurance, Encompass Insurance, Ivantage Select Agency, which he continued to oversee as EVP of Allstate’s Property-Casualty Alternative Segments.
Insurance Innovation Reporter: When you were appointed CSAA chairman Jack Brown said that you were “ideally suited to chart a course for how property/casualty insurance products and services will be used, experienced and delivered to AAA Members, now and in the future.” How would you describe how you were fulfilling that promise during the first year of your tenure, and what were some of the major innovation initiatives you pursued as you hit the ground?
Thomas M. Troy, CEO, CSAA Insurance Group: During the interview process for the role I think the board reacted positively to a few things in my background. One is that I have a unique blend of commercial and personal lines expertise. CSAA Insurance Group is primarily a personal lines organization and we sell all our business under the brand license agreement we have with AAA. As a $4 billion-plus company operating in 23 states, I believe there begins to emerge the reality that diversification is important. Diversification can be approached through a number of different vehicles, one being product diversification. It may have been the case that the board is addressing the fact that, were we ever to diversify into other products, my background in both personal and commercial was well suited to that leadership challenge.
The other opportunity for diversification is geographic in nature. We operate in 23 states, but our largest state by far is California. We’ve been here over 100 years, and California itself is obviously an extremely large state, so it stands to reason that after that amount of time we’d have a fair amount of business here. But we operate in many other large states as well. There is a need that was underscored by the 2017 and 2018 wildfires in Northern California to accelerate our progress in terms of diversifying the portfolio of personal lines insurance into other states. The fact that throughout my career I’ve worked for large national companies and my jobs in fact have been national in nature was probably another reason Jack made that comment.
The last thing I would say that carriers often do from a diversification standpoint is related to distribution. We have been solely distributing our products through the AAA clubs and they continue to be a very successful distribution vehicle for insurance products. Of course, because we have such a close relationship with the clubs and we’re aligned with the membership philosophy of AAA, that’s likely to remain our most important source of distribution. But in the end, customers decide how they want to buy insurance—we can’t force them to buy through the Auto Club. So, we and the Clubs have realized that we need to make sure our products are available in other places. We’ve partnered with a number of our Clubs outside California in an effort to diversify outside of the state, to open up direct access capabilities for members who would prefer not to go to a club office or branch. That doesn’t mean that we’re not still partnering with the Club on that business—because we are—but we are opening up those direct capabilities for customers who would like to purchase that way.
Those are three distinct areas of diversification—product, geography and distribution—and areas that are ripe for innovation that we have been pursuing in the first year of my tenure here, which is to say prior to the arrival of the COVID-19 virus and all the challenges that has brought to the industry and society in general.
Another exercise we went through in the first 11 months or so that I was here, in recognition of the fact that these diversification initiatives were necessary, we took a step back and looked at our strategy and cultural framework because culture is so important to our ability to be successful, whether in the current way of doing business or any future way we might do business. So, we took a hard look at how we were positioned from a strategy and a culture standpoint and decided to enhance that. We came out with a new set of core beliefs. It leveraged the core beliefs that we had prior to that, but there were some new things there as well that you might find interesting.
The six core beliefs we arrived at were as follows:
- Unwavering Integrity—that wasn’t different than what we had before but important to emphasize it.
- Personal and Mutual Accountability is a new one that we wanted to be more overt about. Again, it’s not one that anyone would have said didn’t exist before, but we felt it was really important to underscore that in writing and have it up front and center for all employees.
- The Power of Inclusion is something that CSAA Insurance Group has had a long-standing desire to excel in. There are tons of programs that underscore that CSAA is very good at that.
- Then there’s a Passion for Service Excellence. In the insurance business, our time to shine is when there’s a claim; however, only about 10 percent of policyholders actually have a claim in a given year, so we have to do an excellent job of serving our customers in the interim.
- A newer one is Thinking Big and Moving Fast, and that’s going to point the conversation right to innovation. It’s about emphasizing what we know about innovation and seeing an opportunity there to imagine a new, more effective world and to really lean into that. That’s the “thinking big” portion of it. And, given how fast the world is moving today, we need to figure out a way to move faster and we really wanted to emphasize that by making it one of our core believes.
- The last one is Investing in Ourselves, which is all about being a continuous learning organization, helping to support the individual growth of our employees, the growth of the organization as a whole, and the growth of distributions partners, the Auto Clubs that we do business with day in and day out.
It was with that revised strategy and cultural framework that we went after our plan for 2020. A plan that we had to quickly make changes to as the pandemic began to expand. But it’s one that we haven’t let go of because it’s so important to our longer-term strategy and success, to be an organization that can serve more AAA members, write more insurance, be more diversified by product and geography and distribution channel—and to create more value for people who purchase our products by providing great service, speed and innovative products that best suit their needs.
IIR: How did the pandemic affect ongoing work and plans for the future, particularly from the standpoint of progress and innovation?
TT: In the early days of the pandemic, as we started to learn more about what was occurring globally and started to process what was happening domestically, we had already implemented our emergency response team and were active in the crisis management process to make sure we were on top of things. We were experimenting with broader groups of employees working from home. Like many companies, one of the major changes that we had to go through was to send all of our workers home. We did that on March 16.
We went from being an organization that didn’t utilize much work from home—of course we had people in the field doing claims and inspections, etc.—but the vast majority of our employees reported to an office every day. So, this was a big adjustment for us. But we moved quickly, as a lot of companies did—I feel that the insurance industry, in general, did this quite well and very quickly.
What that has changed for us is, one, we had to adapt to a new way of working. However, we didn’t stop working; we were working on day one when we shifted to work-from-home. And whereas we previously had a growth plan that we thought would be powered by a certain set of initiatives, we asked how we might have a plan powered by a different set of initiatives—if the pandemic made that necessary. We started to take advantage of different tools. We traveled extensively prior to the pandemic to our offices and our distribution partners. Now we needed to do that virtually. We’re using Microsoft Teams today and other tools such as Zoom that people have been using quite effectively.
It helped that everyone had to use the tools. If we were in the previous world where everyone was still traveling and we were the only ones trying to force all of our meetings to a digital environment, that might not have been met with the same reception. But we in the industry and our distribution partners adapted to that very quickly.
Interestingly, we already had been using digital and virtual claims processing and tools prior to the pandemic. But, of course, with the pandemic we couldn’t go and inspect the vehicle in person, and customers and employees didn’t want to go and inspect the vehicle and meet in person. We’re thankful that we had already started using a virtual claims process sending photos back and forth, and even video. The fact that we were already using these tools allowed us to snap to 100 percent virtual claims handling. The interesting thing is that I don’t think we’re going to go back to the old way of doing business. I’m guessing a lot of our competitors will feel the same way—because it works. It’s more convenient for the customers, and they seem to be more satisfied because they get their issues resolved more quickly.
If we had not had the pandemic to force us to use those tools, there’s probably a certain percentage of customers that would have declined to use them. But once they were forced to do it, they realized it was pretty easy and even enjoyed the process. I think both customers and companies alike are going to find themselves using this as the default and in-person inspection as the exception. It would surprise me if everyone wasn’t thinking that way.
Home inspection is another. We’re a big writer of homeowners’ insurance. That’s something that has in the past has required a physical inspection where we would send an inspector out to survey homes over a certain value. Again, fortunately we’ve been experimenting with virtual inspections using video—and there are tools out there that work very well. Of course, during the pandemic we’re forced to use those tools even more. We’re satisfied, our customers seem to be more satisfied, the tools work amazingly well, and I think they’re only getting better now that they’re being tested at such a significant scale. I think that bodes well for our ability to use that kind of technology in the future.
Those are just a few examples of how we’ve adapted to using tools—not giving up on our goal of being able to write auto insurance, settle a claim, write a new homeowner’s policy, or settle a home claim. We have just worked around what the issue was which was the inability to meet with customers face-to-face. We feel fortunate that we had already made significant process in using the kinds of tools that I described—and the tools have worked.
IIR: Beyond the purely technical dimension, what has the pandemic meant for workforce management and teamwork at CSAA Insurance Group? How do you foster high performance and morale remotely?
TT: I feel that morale has gone through a number of phases of employee morale through the pandemic. Early on there was a lot of fear across the nation not knowing what the virus was, how dangerous it might be. We were seeing scary images on the news. So, our first reaction to send people at home was met with a great sense of relief on the part of our employees. It was also met with enthusiasm, the sense that, “wow, our company is doing something major here, sending us to work from home because they care about us—I’m proud to work for a company that would think that way.”
Once you get past that phase, I think employees were then getting used to working from home and so, we were all teaching each other how to use these virtual tools. There was a phase of learning and adapting to be effective at working from home. There were all kinds of challenges. Some people’s internet strength wasn’t as good as it needed to be to use these video tools, for example. Some didn’t have the right setup in terms of monitors and keyboards, a nice ergonomic place to sit in their home, apartment or condo.
I think there’s a phase now, as we’re getting five or six months into this where people are also realizing that, for all the advantages—for example, I don’t have to commute and have safe surroundings, etc. Many people do miss the camaraderie that they had in the office, the ability to see people, be social, to learn from people side by side, even the personal time like going to lunch with friends. Those things are being missed in this phase. We have tried to accommodate that as the leadership team, using these virtual tools to set up a virtual lunch or a social happy hour virtually after work to try to catch up. It’s not a direct replacement for some of those interpersonal relationships in the office, such as seeing people every day. Maybe we’ll get better at it over time, but I think that some people continue to miss that personal interaction.
What is underscored for us, though, is the importance of communication. Not just the one-on-one communication, but especially as a leadership team, the velocity of communications and the nature of communications that employees need in this kind of work environment is different than what they might have needed before. We’ve attempted to be very thoughtful about not being overwhelming with communication but at the same time not being silent either. Neither are productive. We tried to be thoughtful about communications that might focus on health—including mental health, which we think is very important right now. Also, the right communication about work and when we might return to the office—which is a frequent question among employees. But we want to be deliberate about how we communicate about that so that employees are not in the dark but they’re also not getting peppered with irrelevant communications every day. I think we’ve learned some things along the way. We’ve done a good job of signaling and providing communications at the right time with the right level of detail. But I’m guessing the longer this goes on, the more attention we’re going to have to pay to effective communication across our employee base which numbers about 3500.
IIR: You talked about customers getting used to virtual processes. Since they’re also getting used to remote work, have you thought of changing company policy to allow more to work from home more often?
TT: Yes, absolutely. Originally, a couple of months into the pandemic, we were wanting to plan for how we would come back into the office. We thought that perhaps after the Fourth of July, if things were starting to calm down, we might start a back-to-the-office plan. That would have involved, first, bringing back about 10 percent of the workforce, and then up to perhaps 40 percent. But then we planned to finish the year with 60 percent of our employees working from home, and 40 percent working at the office. We were going to use that as the basis of a detailed analytics-driven study of what jobs could be worked from home on a permanent basis and the tools necessary for those same employees to effectively work from home.
We’ve since shifted our view. We obviously didn’t start to come back to the office after July 4, because in June we were seeing that things were not calming down, but in fact getting a bit worse. We haven’t decided when we’ll start to bring people back into the office. But it’s very likely that as we get to the end of year and get to the beginning of 2021, we will have decided that certain jobs can be worked from home on a permanent basis, and that a certain percentage of employees will continue to work from home. I don’t know what that number is, but I think it will be a substantial number. It’s not going to be a couple percent. It’s not for everyone but there is a certain percentage of employees who actually enjoy working from home and are very effective working from home
IIR: What other ways do you anticipate COVID-19 resulting in a kind of “new normal”? What aspects of that do you think might be more or less permanent?
TT: Well, as we’ve been discussing, I think the last thing there will be some permanency in the number of jobs that are worked from home. I think there may be some permanency in the utilization of virtual tools, and therefore a reduction in business travel. I think that business travel will come back, but not to the same level as prior to the pandemic because these tools are actually quite effective, and business travel has some inefficiencies associated with it—long flights across the country, lost hours between time zones, etc. I think some types of business trips might be permanently affected by our experience these past five months and however long it goes. And also by the significant investment that companies have made in making these virtual experiences pretty darn good.
What’s the new normal? When the pandemic is behind us, the world will get back to innovating and changing, as it always has. So, I don’t know if I want to pick a spot and say, “it’s always going to be like that in the future.” Perhaps we’ve learned that even though we thought we could change really fast before, this year has taught us that we can actually handle even more change and at a higher velocity than had ever imagined. So it could be that the “new normal” is not a static thing we’ll point to and say, “that’s how the world will be.” But it could very well be that the new normal is that we as an insurance industry or as a society, are going to embrace the reality that we can change and we can change very quickly if necessary, and that that might lead to some great things.
IIR: It has struck me how little this has affected commercial activity in insurance technology. If anything, it has just accelerated innovation. Would you agree?
TT: Absolutely. I think people are digging deeper on the innovation frontier as a result of being challenged in this way. I have found an enormous amount of positivity in the way people are approaching it. No one is cowering and saying, “I can’t do business.” Everybody’s saying, “we need to find a way to adapt.” Those kinds of challenges, in many cases, can bring about positive outcomes, where customers are served more effectively, efficiently, faster and better with products that are smarter. The next generation of products may come out of this wave of innovation.
IIR: What’s on CSAA Insurance Group’s innovation agenda for the next year or two?
TT: I think we’re going to keep pushing on automation. What I mean by that is not just automation that is necessary to engage with customers at the point of sale, but also the automation necessary to service customers in a fast and seamless manner. Engaging at point of sale is often where people’s minds wander when you say, “I want to use technology to engage with my customers.” But we think it’s very important to have smart, successful technology in the process of servicing customers. Of course, for us that falls into two big buckets: one is claims. We’ve already talked about virtual claims, and we want to keep investing there. The other is service. People will get back to buying cars, and when they do that’s one of our most significant areas of transactional activity for auto insurance: the add/drop vehicle activity. You’re dropping the old vehicle that they sold and adding the new vehicle. That could be more automated, more seamless for customers. That’s just one example of a service transaction that we think could be better. There are all kinds of tools that we’re already using, including chat bots and virtual assistants, that are powered by AI. I think that this next wave of innovation will really begin to capitalize on the capabilities of these tools over the next couple of years.
As I mentioned early in the conversation, we are looking to diversify from a commercial product standpoint. We’ll be looking to roll out commercial products in the years ahead. For example, fleet auto. We’re targeting the shared economy because we think that there are some unique opportunities there. These will be products powered by cloud-based technologies and developed with a mobile first, 100 percent digital mentality.
We are one of the larger homeowners’ insurers in Northern California, and this is a part of the world that is very susceptible to wildfire, so it’s important to think about that space. I would expand our thinking about innovation to include technologies that might help Northern Californians and others exposed to wildfire to learn about wildfires faster. There are sensor technologies that can help with that, visual technologies to spot smoke and to help people prevent fires. There’s a lot of customer education and information we could provide about wildfire defenses that a homeowner can utilize, such as clearing brush on the property, etc. So, there’s a lot of work we want to do in what I would call the risk management or risk mitigation area.
IIR: One of the next frontiers in insurance is the departure from the strict indemnification value proposition into something more like loss control for personal lines, which assumes a more interactive engagement with the customer. There’s a risk management partnership emerging within the carrier/policyholder relationship. What’s your perspective on that?
TT: I absolutely agree. Personal lines is different from commercial insurance in terms of the scale of customer interactions. We have millions of policyholders generating over $4 billion of premium. If we were a large commercial underwriter we would have a smaller number of policyholders with perhaps that same level of premium. What that means for us when we want to educate or talk to our customer base about risk mitigation for wildfire is that we need to be very good at providing educational material, using a modality that allows us to get to as many customers as possible and that is also actionable. We need to provide more timely information that is digestible by the individual homeowner about how they can create open space around their home, how they could think about their landscaping, how they could think about having defensible space in the event of a wildfire in their neighborhood, using the right building materials, removing debris. This was effectively done after Hurricane Andrew. They instituted different building codes in Florida and homes built after that time have proven to perform better. It doesn’t mean they’re invincible to a hurricane loss, but they’ll perform much better in the event of the same. That is also true also with wildfire-prone areas as well—the choice of a different roofing material can make all the difference in a wildfire.
IIR: What’s your approach to fostering technological innovation at CSAA Insurance Group? How much more is that on your agenda than it might have been for a CEO 10 to 20 years ago? Such a technology-heavy conversation with a CEO was far less likely back in 2000.
TT: I could see your point. I’ve been fortunate in my career to have been involved in technology throughout. It used to be you could underwrite a piece of business and put it on the books without any technology. When I started my career at Kemper, I didn’t have a computer on my desk. I hand-wrote my underwriting recommendations. I went out in the field with the loss control engineers and surveyed Portland’s steel mills. I was there on the floor of the rolling mill prior to quoting that risk. Today we can’t underwrite or issue a product without technology. Our technology is core to our ability to do our business. So, it’s important for me for me to have a deep understanding of how it works. Before I arrived here, we had begun a modernization process to consolidate multiple policy admin systems into a single system. That allows us to focus our development dollars into a more modern infrastructure, and allows us to capitalize on it faster. Many companies are weighted down by having to manage multiple policy systems, and it slows them down considerably.
We’re moving into the cloud with claims and policy admin systems, and that allows us to take updates in real time from our vendor partners. It keeps us more current and creates a more flexible environment. That’s in process now. We are, of course, part of a world that is digitizing fast and becoming more mobile. So, to be in the technical space that we are now, on a single policy admin system, moving to the cloud positions us well positions us to make even further progress in the mobile and digital space. People talk about things like blockchain. We’ve done some experimentation in partnership with another carrier. It’s not a panacea that will solve all our problems, but there are opportunities to use that kind of modern technology and we’ll continue to explore that.
When it comes to technology, I view my role here as helping to lead the organization to be on the front edge of technology and not to be in a constant state of trying to catch up because technology is so fundamental to our ability to do business.