Dear assembled guests: I have happily looked forward to today, March 1, 2025, when Liberty Mutual sells to the Society for the Preservation of New England Antiquities its corporate quarters on Berkeley Street in Boston. The token price of one bitcoin, valued at $10,000, reflects the transformation of our great company into a truly 21st Century enterprise.
How quickly we changed! Hedge funds, who before shunned property and casualty insurance, started to take control of many insurers and installed leaders more adept seizing the opportunities created by digitization. State regulators, who raise risk aversion to the level of a religion, were pre-empted by the ERISA Reform Act of 2000. It happened so quickly. America has become inured to, and ultimately content with, disruptive change, such as the deep penetration of robotics into manufacturing and surgery and the rapid acceptance of autonomous cars.
Today, auto insurance is as digitized as parcel transport, and workers' compensation is close behind.
Liberty Mutual has rediscovered its roots as a mutual insurer. This insurance design came into the 19th Century, imbued with a culture of mutual engagement, limiting moral hazard. We are witnessing a rebirth of this model.
How, you might ask? I believe that three events stand out to show what transformed property/casualty insurance. Each removed one of the three legs of the traditional stool.
One was Facebook's bold entry into personal auto insurance with a business model that slashed costs and improved underwriting. It drew on its prowess in personal analytics. As we know, this ultimately led to Facebook acquiring Allstate and other auto insurers to re-invent themselves. Facebook showed the industry how vulnerable old insurers were in the Millennial marketplace. Today, accessibility on the internet trumps brand name. And artificial intelligence does most of the work of brokers, with fewer errors.
The second event was the surprising decline of Uber in the face of peer-to-peer ride hailing networks. Peer-to-peer ride hailing began interestingly as an Uber experiment. That sprung the genie out of the box. Uber was vulnerable. In its greed, it extracted a huge share of patron fees out of the pockets of drivers. Also, Uber never really resolved the tension between itself and its gig drivers over benefits and work rules.
So technology platforms were created to enable communities, not just companies, to launch their ride hailing systems that featured worker collectives and community control. It was just a matter of time before peer-to-peer commercial insurance emerged.
The third event was the entry of the blockchain as the default method of executing insurance agreements. This story remains still a mystery to the person on the street, many of whom when polled say that the blockchain is a defensive tactic in football! What it does, in essence, is create through the participation of any number of parties a thoroughly verifiable, virtually inalterable, record of near instant transactions and control over real things. It is as if a ship's log, previously tightly controlled by the ship captain, is now being created by a host of inputs from cargo on board, crew, and weather stations.
The insurer used to be looked up to as the trusted shepherd of insurance activity. But its role has been taken over, and done far more cheaply and transparently by the blockchain.
So, these three events – digital marketing and underwriting, peer-to-peer communities, and a revolution in recording of transactions and control, created an environment ripe for change. We at Liberty Mutual, ahead of our competitors, seized the chance. We fostered the creation of more than 3,000 “virtual mutuals” in workers' compensation. We figured out how to create them at an astonishing speed. We steadily reduced corporate overhead.
Administrative expenses declined by half. Thanks to the ERISA Reform Act, many of our virtual mutuals have integrated occ and non-occ benefit packages, which we've found reduces workers' comp claims. And, of course, the underlying frequency of injury has continued to decline. In 2016 the typical American employer paid $1.84 per hundred dollars of payroll. In 2024, the typical policyholder in our book of virtual mutuals was $1.13.
In sum, this is why we have moved our corporate headquarters to Boca Raton and handed over our mother building to historic preservationists. I personally look forward to returning from time to time, to ride what I believe is the only functioning escalator in an office building in America, an artifact of when an army of young women came and went according to the ringing of bells. How 1950s that sounds!
Salil Singh, Chief Executive Officer
About the Author
Peter Rousmaniere is widely known throughout the workers' compensation industry, both for his writing and consulting experience. Based in the picture perfect New England town of Woodstock, VT, he is a regular on the conference circuit, and is deeply in tune with trends and developments within the industry. His passion is writing and presenting on issues largely related to immigration, and he maintains a blog on the subject at www.workingimmigrants.com.