CSAA CEO Tom Troy talks tech, culture, DEI, ESG

October 27, 2022 6:29 AM

AAA Station Landing building in California.

Digital Insurance spoke with Tom Troy, CEO of CSAA, about how his role at the insurer has changed since he started at the company; how technology and insurtechs are impacting the industry; and the company's goal to be carbon neutral by 2025.

When you started this job, what was the most pressing concern for CSAA?

I started in 2019 and that was after the company had experienced two years, back to back in 2017 and 2018, of some pretty significant wildfire losses. Those were some pretty tough years from a wildfire standpoint in California. One of the things that we worked on in 2019 – just before the pandemic – was reassessing our homeowners book. We did some fine-tuning on the way that we underwrite new business. We did look at some policies that we just felt we could no longer stay on, but we really worked to minimize that so we could lessen the impact on our customers and just really tried to get focused on rate adequacy and solid integrity in our underwriting to ensure that we could have a sustainable approach to what is becoming a very severe catastrophic exposure here in California.

I live [in California] and can attest to the fact that it's very dry and we are having water shortages and other issues. I think it's got the attention of everyone here in the state and between residents and businesses and government officials, everyone is searching for answers and working hard to try to address it. But as an insurance company, it's an exposure that we just have to manage very, very carefully.

But from there, the pandemic era dawned. How did you have to adapt?

In 2020, of course, like a lot of insurance companies, we went to work from home. That process actually went fairly smoothly and our employees responded very well. I think they really rose to the occasion. People gathered together and did some great work during the pandemic. I think the result is that many companies have seen that employees, in some cases, are more satisfied working from home, they enjoy it and they're doing high-quality work there.

And so like a lot of insurance companies, we are finding ways for more and more of our employees to work from home permanently. That's our future now: coming out of the pandemic.

What about coming out of the pandemic – what risk trends have you noticed?

Now, as we're coming out of the pandemic, some driving behaviors have changed a lot. There is more aggressive driving, a lot more accidents we're witnessing where people are driving at excessive speeds. We're seeing more severe bodily injury type claims and a lot more severe physical damage claims because of what's happening on the inflation side, used car prices going up, parts prices going up, labor rates going up, et cetera.

So like the rest of the industry we're working to achieve rate adequacy while also being solid underwriters.

How does company culture influence strategy at CSAA?

Culture is a very important cornerstone of our identity. We like to think that employees who stay here really identify with the culture and we've had some success recruiting employees who identify with the culture that we've created here. We actually believe this is the way a company should work and that a company that is really focused on serving its members, and taking care of their needs, should have a strong culture behind them to support those efforts.

We broke out our culture in a number of different ways through a strategy and culture framework that we launched in late 2019 after I arrived. And it's really kind of shaped by a set of core beliefs: unwavering integrity; personal and mutual accountability; the power of inclusion; a passion for service excellence; thinking big and moving fast and investing in ourselves from an educational standpoint.

We think a commitment to those types of core beliefs ends up resulting in a high performance culture when it comes to serving customers. In our case, most of our customers are AAA members, so in that sense, serving members. And we believe that great service and a caring and inclusive approach to serving our members is really the way to be successful in the business. Our culture is a really important part of who we are.

Any concerns about hiring and recruitment?

It's a challenging hiring environment right now and employee retention is challenged as well. People have made decisions in their personal life about how they want to work, where they want to work and how much they want to work. During the pandemic people relocated. They, I think, thought more about their own personal values and what really was important to them and in some cases made career change decisions.

We've seen a lot of movement in the workforce. We always want our employees to be happy so if they did some deep thinking and realized that they really had a lifetime goal of pursuing something else, then I'm happy for them.

At the same time, there are other people out there who thought about their situation and decided to come work for us, and we're happy that they've found a place here where they're welcome and can grow and learn and attain their professional goals. As much as you don't like to see good friends and great employees leave, we're happy for them. If they need to go do that to pursue a lifetime goal. On the other hand, we're also happy to see some new, fresh faces here who are really excited about working for our company. The recruiting environment is difficult, but we're still finding new employees who want to come work for us.

How do you center diversity, equity and inclusion in recruitment and hiring practices?

It's critically important. Inclusiveness and a sense of belonging are bedrock cornerstones of our culture. You heard me talk about our core beliefs. One of them is the power of inclusion.

Several years ago, we reached racial parity when it came to our entire employee universe – our employee base and the representation of diverse employees, mirrored the markets that we were working in. We only sell our business in 23 states. We still have a lot of goals though, to continue to improve in our ability to promote diverse employees so that we have that same kind of parity at all management levels in the organization.

In that regard, for more senior positions, we're requiring a diverse slate of employees or candidates. I should say before we make the employment decision, we're setting goals, you know, we're really working hard to continue to make progress there. So we're proud of the progress we've made and proud of the commitments that we've made.

We know that our work isn't done and we have other goals we want to achieve.

What are your digital transformation priorities?

Technology is critical to our business. There are no insurance products that we sell today that in some way, shape or form is not dependent on technology. We're trying to automate as much as we can, the purpose is not to avoid customer interaction, but to create opportunities for high value customer interactions. So, the more we can automate the mundane stuff then, to the degree that customers want to engage in a dialogue on a service issue, then we can really focus the employee's time on meeting the customer's needs.

Of course now, increasingly, customers demand digital interactions. In a lot of cases, they don't want to talk to a person about buying a product or making a payment, et cetera. And so we're working hard to make sure that we have state of the art approaches that our customers really demand when it comes to getting a quote. Learning more about a product self-serving if they want to do things like add a vehicle after they've recently purchased a new car, that sort of thing again, all while creating flexibility, such that if the customer does want to pick up the phone and talk to someone and be assured that what they're doing is in fact, what they're intending that's, that's sort of the goal. We're selling a promise, a promise that we will be there. If something goes wrong with their car or some tragedy occurs at their home. So, while we want to automate and make the process as efficient as possible, we also need to be there with a caring attitude and a service mentality if something bad happens.

So really our automation is aimed at creating space by automating all the mundane work so that our employees can be there to serve the customer when that service is really needed.

How do you look at change management when it comes to trying to stay true to your culture while modernizing?

We're over a hundred years old and certainly for decades there was a lot of intense manual work in our business, but I think it's an organization that has an eye to the future and has for a long time.

There had been investment in technology even before I arrived, they had moved to a modern policy administration system, a modern claims administration system. Shortly before I arrived, we've been fine tuning that and investing further in making sure that it's state of the art and then we've been building on top of it.

The customer interfaces that are needed to create self-service opportunities. The agent interfaces that are required for agents to be able to interact with us quickly and efficiently so they can serve their customers. I wouldn't say that it was hard. I would say, technology is a thing that employees here at CSAA really embrace and we've invested heavily in the utilization of technology and will continue to do so.

How has CSAA worked with insurtech?

I think insurtechs have really helped to accelerate the industry's thinking. A lot of the insurtechs have been focused on distribution, not all but many, and making that distribution process more efficient for agents. Making it more efficient for customers to get quotes rapidly and understand what their options are. I think the industry needed that kind of pressure.

Now, you've got a lot of your mainstream carriers, including CSAA, working to create that same kind of speed and flexibility to interact with a number of these insurtechs. We're doing business with quite a few of them, actually, the quoting platforms in particular.

Other insurtechs have been focused on smart underwriting and I think, again, bringing innovation to the industry in my mind can only help the industry continue to modernize and push the industry in different ways. So, the insurtechs, I think, have a place. We are and have been, and we will continue to be excited to work with many of them.

We're hoping for their success. In some cases, I think insurtechs are being purchased by insurance companies – while we haven't done that, you know, we'll continue to keep an eye out for opportunities and should the right opportunity arise, we might consider it.

What sustainability practices is CSAA implementing?

We published our second annual ESG report. I think it speaks pretty clearly to our commitment to sustainability. We are working hard to become net carbon neutral and we've set a very aggressive goal to do that by 2025.

The report details the areas where we made very significant progress already by investing in buildings that are LEED-certified gold and silver; by investing in hybrid vehicles for our fleet and now we're starting to transition to electric vehicles over the next several years.

Because we are here in California and we're a big underwriter of homeowners business, climate issues are front and center for us. We see a direct connection between what's happening to our forests and those fires, and what's happening with the environment. We're keen to continue to work with federal and state local officials within the industry and with like-minded people who care about the environment to continue to improve the health of the forest here in California, to improve the quality of, and availability of water here in the state of California.

But really, in all the regions where we write business, we want to make sure that we can have healthy places to live and preserve some of the beauty that's already there. While, at the same time, balancing the need for housing. So it's a complex issue, obviously that we all need to work on together and we look forward to being part of the solution, part of the conversation. We think it's our responsibility as a corporation of some significance to lend a hand and support the process.