Regional workers comp provider Omaha National is also an InsurTech of sorts.
The startup, launched two years ago, relies on proprietary InsurTech software to function, combined with hands-on underwriting and claims management. Omaha National credits this combination with helping to achieve an “exceptionally low loss ratio” in 2018 as it does well at controlling claims cost without sacrificing support and service for injured workers.
Omaha National President and CEO Reagan Pufall, a veteran of Berkshire Hathaway and Applied Underwriters (acquired by Bershire Hathaway and now for sale), is helping to grow Omaha rapidly, most recently into Illinois and Pennsylvania over the summer. He recently answered a series of questions from Carrier Management Editor Mark Hollmer via email about Omaha National, its plans and where it fits in the InsurTech spectrum.
Q: How many people work for Omaha National?
Pufall: Omaha National has grown from 6 employees in August 2016 to 82 as of August 2019.
Q: How much venture capital have you raised to date and who are your investors?
Pufall: Omaha National is funded by a $40 million commitment from Agman.
Agman is a family owned, multi-strategy investment firm that traces its roots to western Iowa in 1923. Agman leverages its permanent capital base to partner with exceptional entrepreneurs building enduring businesses. We are fortunate to have Agman as our investor: they are valued business partners and we have an excellent working relationship with them.
Q: Can you describe your company in a sentence or two?
Pufall: Omaha National provides workers compensation insurance and payroll services to small and midsize employers. We are exceptionally good at managing claims: we take great care of injured workers, we guide claims to successful resolutions much more quickly than usual, and our claim costs are quite a bit lower. Because of this, we can help companies whose premiums have escalated due to experiencing some recent employee injuries. This also contributes to our outstanding financial success.
Q: Why did you choose to focus on the workers compensation market?
Pufall: We love workers compensation. In this business, we get to help injured workers in their hour of need. Those with serious injuries are hurting, scared, and confused by a complex system. We answer their questions, calm their fears, get them to the right doctor for prompt, effective care, work with them and their employer for a safe return to work, and help them get back to full wages and a healthy productive life. That feels wonderful.
It is also our honor and privilege to work with law enforcement to fight crime. Some claimants, employers, and medical providers unfortunately choose to pursue illegal actions. We investigate them, shut down their fraudulent schemes, and turn the evidence over to prosecutors for criminal proceedings.
Another great aspect of the workers compensation business is that is quite complex and challenging. That means we are more profitable and successful if we hire smarter people, continually innovate better systems and strategies, and design superior software. In other words, we have a business motive to surround ourselves with excellent people and spend our days thinking in depth about interesting challenges and opportunities.
Q: What makes your company an InsurTech?
Pufall: We’ve been InsurTech since before the word “InsurTech” was invented. A lot of what is currently being labeled InsurTech is stuff like direct-to-consumer marketing or algorithm-driven underwriting. There is nothing new about that. The real key is using artificial intelligence and superior software design on the internal operating systems that have the greatest strategic impact. That is where we have unique expertise and that is what leads to better results for our employers and substantial competitive advantage for us.
Everyone says the insurance industry has been too slow to adopt technology. It’s true that insurance is a rather hidebound business. But if you look closely, you will see that at least as big a problem is the premature adoption of computer technology that isn’t really up to the task. There are areas in which we win because our tech beats the other companies’ people, but there are at least as many areas in which our very smart people beat the other companies’ tech. There are many ways to get tech wrong; you really have to know what you’re doing.
Q: You describe yourself as an insurance “provider” – Are you a carrier, MGA, broker, other?
Pufall: Omaha National Group owns Omaha National Underwriters, which operates as an MGA. It also owns Omaha National Insurance Company, which is a carrier through which we reinsure a substantial portion of the risk we write. We want to be on the risk because we believe in our strategic model. Considering that our 2018 loss ratio is below 50 – one of the lowest in the industry – it is clear that we will generate an exceptional combined ratio. We currently issue policies through our fronting partner, but once we have established a rating from AM Best we will write direct coverage.
Q: In what states do you operate presently and what are your long-term plans in terms of market reach?
Pufall: Omaha National currently offers full coverage in California, Illinois, and Pennsylvania and incidental exposure coverage in Arizona and Nevada. We will be offering coverage in more than 10 additional states by the end of 2020 and will be a national carrier within the next few years.
Q: Are you profitable yet? If not, when do you expect to be in the black?
Pufall: Omaha National Group will become profitable during 2020, less than four years after our launch.
Q: Are you pursuing new financing? If so, how much do you seek to raise?
Pufall: We are fully funded with the $40 million commitment from Agman; we are well ahead of our original plan for growth and profitability and could continue on our current path. We may choose to raise additional funding that could accelerate gaining a rating from AM Best and issuing policies through Omaha National Insurance Company.
Q: Do you plan to keep the company independent, seek to be acquired, or pursue acquisitions/mergers as part of your growth strategy?
Pufall: We are building Omaha National for long-term, independent financial success through our own organic growth. Mergers and acquisitions are not part of our business plan.