Like most industries in today’s economic climate, the insurance industry is facing a challenging time, but in Juneau, Alaska, a unique set of circumstances makes doing business all the more difficult. As executive director of Alaska Public Entity Insurance (APEI), Jeff Bush must navigate around the extreme distance and isolation that makes normal loss control in the state quite unique. “We insure people from all over Alaska. There are municipalities of 5 or 10 employees, villages of 200 people, school districts with 20 schools that all have to be reached by plane, and 200 communities in a pool, where maybe 15 are reachable by car,” Bush (top left) explains. “These conditions make risk very hard to underwrite.” Despite these challenges and the fact that APEI was on the verge of bankruptcy when Bush took over in 2003, APEI is thriving. Bush and deputy director Laurel Eriksen (bottom left) share the business strategies that have made the company so successful.
1. Operate as a Nonprofit
In many ways, APEI is unconventional. It operates as a nonprofit set up solely to benefit its members, and one of the pool’s main strategies is ensuring that price matches cost, with individual loss experience acting as the main factor for each member’s rates. Obviously, this isn’t a traditional point of view in the insurance industry, but it’s in line with Bush’s vision for the pool. “I’m not in business to make a profit,” Bush says. “We allow our members to maximize their funds for other projects.”
2. Encourage competition
According to Bush, fear of competition leads to price wars, financial instability, and budget issues, which is why APEI never adjusts its prices based on competition because that would be unfair to customers and is, essentially, a zero-sum game. APEI actually encourages competition, telling its members to investigate what else is available to them. According to Eriksen, this strategy builds credibility and ensures that clients are getting the best product for the best price. “If we fail, it means members are meeting their needs for less with someone else,” Bush said. “We’re here for our members; we’re not here to make money off of them. We’ve grown every year since I’ve been here because of this strategy, and we’re gaining more than we’re losing as a result of it.”
3. Invest in staff
Keeping with the trend of being unconventional, Bush believes that it’s better to pay more to hire and retain a qualified staff, which sometimes means he’s not always going to hire the person with the most experience. Bush’s background was in law and when he joined APEI he had no experience in the insurance industry, so he understands that the person who makes the best fit may not be the person with the most industry experience. “You can train a bright, capable, dedicated individual, but a person who has experience isn’t necessarily bright, capable, or dedicated—and those aren’t the type of things you can teach a person,” Bush says.
4. Weigh risks wisely
According to Eriksen, public entities invest almost exclusively in fixed income and insurance firms aren’t much different. APEI, however, takes its cue from corporate America, finding the equities side more lucrative. “As a result, we’ve done very well,” Eriksen says. “We’d rather take small risks for a large investment return than a large risk for a small investment return, but some risk is good. Our portfolio is a conservative mix, but it works for us.”