Exclusive: CEO shares how they engineered the turnaround
After drastically turning around its parent company’s business in two years, EmPRO is expanding into a regional insurance carrier.
The New York-based company is a wholly owned subsidiary of Physicians’ Reciprocal Insurers (PRI). It is the third largest admitted medical professional liability insurer in the state.
PRI capitalized it in 2020 with a surplus of $100 million, assuming all of PRI’s active business in New York.
EmPRO recorded a net income of $12.1 million for the fiscal year ended December 31, 2022, with a gross written premium of $178.4 million. The combined ratio was 82.7%.
Restructuring amid COVID-19
According to Bruce Shulan (pictured), president and CEO of EmPRO, the financial results are the consequence of a “very productive” few years.
“EmPRO was, in a lot of ways, a start-up beginning in 2020,” he told Insurance Business.
Shulan, who was brought in to spearhead the reorganization of PRI, said the journey to transferring the business to growth had been long and gratifying.
“We came in as a turnaround management team and assumed control of PRI in July of 2017, and we set about the process of re-engineering its processes in all departments, from top to bottom,” he explained.
According to the CEO, PRI had a 23% market share in medical malpractice insurance in New York at the time. At the end of 2016, the company was “about a half-billion dollars insolvent, give or take.”
PRI purchased EmPRO in September 2020, during the COVID-19 epidemic, and began issuing new policies from the company. EmPRO will begin renewing PRI’s existing business in October 2020. Shulan and his staff were able to keep 90% of their clientele after the transition.
“The goal was to position the enterprise so that we could sell policies out of a solvent insurance company, protect the business’s value, and grow the business,” he explained.
EmPRO received over $25 million in written premium at the end of its first quarter.
EmPRO’s four keys to success
How did PRI and EmPRO turn around their fortunes so quickly?
“The simple answer to state, but not so simple in execution, is that as a senior management team, we worked very hard to do the best job possible running the company,” Shulan responded.
Their strategy began with strict underwriting.
“When we took over PRI, its loss ratio was in the mid-80s. “We’re now consistently writing in the low to mid-60s,” the CEO added.
“We saw dramatic decreases in loss ratio from year to year as we completely reengineered the underwriting process and restructured the underwriting department.”
Improved claims processing is also critical to EmPRO’s success. According to Shulan, PRI’s claims department was also subjected to harsher management.
“That doesn’t mean we don’t pay claims,” he insisted. “That means we work extremely hard to achieve the best possible resolution in any given claim.” During the process, we test more instances than many of our competitors, with a 95% success rate.”
EmPRO also formed an in-house law office that serves its insureds and is dedicated to trying disputes, resulting in cost savings for the company.
“If we can underwrite and handle claims more effectively, it lowers our operating costs, improves our underwriting results, and results in lower premiums for our clients,” Shulan explained. “As a result, it’s a win-win situation for everyone.”
Finally, the EmPRO team needed to improve its relationships with brokers and become more responsive to their needs.
“I think it’s fair to say that when we first took over the company, we were not among the most well-liked [by brokers] in the state of New York,” Shulan admitted. “PRI was bankrupt and unresponsive to the needs of the broker community.”
“What we’ve done over the last five years is recognize that brokers are a constituency that we need to serve.”
What’s next for EmPRO?
EmPRO intends to accelerate its growth as a regional carrier in the Northeast during the next two years. After establishing itself in Pennsylvania and Connecticut this year, the corporation is “on the verge” of writing business in New Jersey.
“We will initially move in slowly,” Shulan stated of their expansion strategy, “but as we develop a better understanding of the market conditions, this will give us the ability to expand the company to a regional writer of medical professional liability.”
However, the CEO was also aware of how the medical malpractice insurance sector is changing.
“The practice of medicine has changed dramatically in New York State and many other parts of the country,” he said. “Physicians are joining larger organizations or working for facilities and hospitals.” As a result, the independent physician market in which we previously competed is contracting.
“In New York, competition is also expanding. In addition to the three major admitted insurers, various risk retention groups compete for business. They are less regulated and hence have greater rate flexibility than admitted carriers.
“As we expand, we must look across state lines, to contiguous states where we can service physician groups that practice across multiple states.”
“We’ll enter those states with the same calculated strategy that we used to turn around PRI.” That is, we will not strive to write a large quantity of business right away, but will instead seek to completely understand the industry and what the pricing should be.”
What are your thoughts on EmPRO’s turnaround and expansion plans? Let us know in the comments.
