A Mind Blowing Episode of the Insurance Market and a National Problem

(00:06):
Good morning, my beautiful, fun family. My name is Ariel Rivera and I am your host of Fun Insurance Solutions. Today we have an amazing episode. Actually, today's episode, it's an episode from the Fun Seat. I don't know if you remember, but a couple of months ago, we were able to celebrate the Fun Seat and we had hundreds of insurance professionals from carrier reps, we had independent insurance agents, we had adjusters as well. I mean, it was an amazing and very humbling event. In the event we went down the rabbit hole about the problems a lot of our insurance companies are having across the nation where they're being litigated to death. So I mean, it's mind blowing the amount of information they were able to share with us. And today, I want to share it with you through this episode. But before we get there, I want to thank our sponsors.

(00:55):
Covered Desk, your solution for virtual assistance and Imperial P F S Finance, your solution for premium financing. Also, we're getting a lot of emails and questions about the services that we provide at Fun Insurance Solutions, and this is what we can do for you. If you're an independent agency owner and you're looking to grow and I mean really grow, take it to the next level. Through our merger and acquisition advisory service, we are able to pair you and match you with one of the large mega agencies where you can become a partner, an equity partner in one of those agencies. And also one of our other services is listen to me. If you're an insurance company or a wholesaler and you sell Bobs right business owner policies or you are a monoline workers' compensation carrier, you need to reach out to us. We can help you with the integration of a cyber program that not only will help you make a lot of more revenue, but there is little to no risk for you at all. Again, if you're an insurance company and you sell Bobs and you're not offering cyber coverage in your policies, reach out to us. We got a great program for you. We can help you with the integration and trust me, you won't regret it. Now, let's go have some fun.

(02:08):
All right, good morning everyone. Welcome to the Fun Seat. This is a very special event. I'm like a kid in kindergarten, Disney World Toy, wherever you want to call it. I've been looking forward for this event where Mr. Joe Petrelli, and I'm going to do a quick introduction of our panelists very soon. Him and I planned this maybe two months ago, and it's been one of those things that I keep going. Is it tomorrow? Is it tomorrow? Is it tomorrow? The reason being is as much as I love the insurance industry and as passionate as I am for it, sometimes you would see you would read a lot of information, especially with what's going on now in Florida, that's not always a hundred percent accurate. So I wanted to give each and every one of my colleagues, whether in the state of Florida or around the country, the opportunity of actually asking questions and hearing from Joe, I call him the man himself to learn about it.

(03:02):
So before we begin, let's go through a couple of housekeeping items real quick. On today's agenda, we got a busy two hours. I'm going to do a quick introduction of the panelists. We're going to talk about Joe Petrelli and DemoTech. We're also going to talk about Todd Kozikowski. And then right at the end of it, after the first 45 minutes to an hour, we're going to have an open q and a, right? The way the fun seat works is everybody can ask questions. You can go ahead. You're going to open on your Zoom control panel below. You're going to open the question and answer, right? You can also use the chat box, but I recommend say a little bit away from the chat box just because on the Q and A we're going to be able to ask the questions, keep track of it, and then just eliminate and keep moving forward.

(03:43):
So when the time comes, feel free to ask as many questions as you can. As I told our panelists earlier, we received over a hundred questions. So what I did is I narrow it down to the most common ones and you're going to see them later on the presentation. And when we get there, we're going to ask somewhere around 15 to 20, 25 questions, but then we're also going to ask your questions. This is an open conversation and honest conversation. This is not, there's no script. If you saw every promotion that we sent out, there's no script, no anything has been agreed on. We're just going to talk like insurance professionals and we're going to get to know each other, we're going to understand the insurance market, and more importantly with Todd, we're going to learn what's going on with fraud and everything else. If you have ever taken any class CE course, ever heard me speak or do a keynote across the country, I'd love to start with a positive thought, right?

(04:39):
And for today's positive thought, one of the things I want to share with you is from William James, act as if what you do makes a difference because it does. So sometimes we go through life going on cruise control and doing things automatically and not realizing that everything we do has an impact on someone. And again, insurance is part of it, but there's many other things we do and we can do a whole nother fun seat about that. But yeah, take this with you because when you're done here, this is how I want you to feel about the Florida market and the information you got from us, right? Alright, this event is brought to you by Fun Insurance Solutions. Also, we receive huge collaboration from the Latin American Association of Insurance Agencies and Professional Insurance Agents of Florida. So I want to give a huge thank you to both of them.

(05:31):
I'm a true believer in organizations. I belong to both organizations. I'm going to get to lead PIA on the national level, which I'm very proud of it and I'm a true believer that when you work as a team and you join organizations, we're all get better. So one of the main reasons, and I say this all the time, our doors are still open, is because organizations like that that help us stay open, they fight for us, they advocate for us, they lobby us. So if you're not there yet, make sure you reach out to both of them or one of them and join. Alright, our guest, we have Mr. Joseph Petrelli, right? Some of you know Joe, know him as Joe, others know him. And Mr. Petrelli from DemoTech, he's going to be right there on your screen. Joe is the co-founder and president of DemoTech Inc.

(06:17):
Before founding DemoTech, Joe worked at the insurance services office, by the way, before it was I s o, but I'm not saying you're old, Joe, I appreciate you. He also work at Agway Insurance and Nationwide, the member in good standing of the Casualty Actuarial Society and the American Academy of Actuaries. He served the insurance industry by providing accurate and proven financial stability ratings, FSRs for property and casualty insurance companies, life and health companies, public entities and title underwriters. Joe is married to the beautiful Sharon Romano Petrelli, which by the way, I had the honor of meeting and breaking bread with her, and he loved spending time with his family and especially his grandchildren. I'm going to give you guys a quick history, short, short history about DemoTech for those of you that are new in the industry. Joe Petrelli found the DemoTech in 1985, right?

(07:09):
In 1993, it was the first financial rating to have property and casualty insurance company rating process formally reviewed and accepted by hub. So that's one of their big accomplishments that happened. They have many accomplishments throughout the year, but I would say probably one of the most recently won was in 2022 when Deek was registered with the United States Securities and Exchange Commission, the SEC as a nationally recognized statistical rating organization in the class of ratings for insurance company. And that was huge, right? Whenever you register in the SEC as an n r Ss r o, that means you're doing something right. So this is why we're super honored to have you with us, Joe. And last but not least, we have with us Todd Kozikowski. He's the co-founder and president of forewarn, a data analytics and risk assessment firm that serve the insurance industry as well as other industries.

(08:04):
He's a hands-on software executive leading growth from startup to post i p o, initial public offerings, including Sonet, which was acquired for 4.2 billion by Cana Unica, which was acquired for 480 million by I B M A new format, which was acquired by Battery Ventures. He's also, which is impressive thought by the way, he's also an Ironman tri-athlete and competes in multiple long distance running events. I have a lot of Ironman friends and I have nothing but respect for you guys. It is amazing. Not to say a little bit crazy, but it's all good. More importantly, he's a family man who loves spending time with his family and his two daughters. Welcome Todd. And Joe, thank you so much for being here. Thank you. Thank you, Ariel. We appreciate it. All right, guys, this is what we're going to do. We're going to start with Todd. Todd is going to give us a presentation about what's going on regarding fraud and different things across the country. I'm going to seed you to your presentation now, Todd. So,

(09:03):
And actually I'll probably have Joe kind kick us off just because it's a related, it's where we start. Perfect. We'll get it started that way. So perfect. I got

(09:13):
Your presentation up going. The floor is yours, gentlemen.

(09:17):
Well, thank you. And Ariel, so we don't forget. We appreciate what you're doing on behalf of producers and companies and your commitment to the PIA. I mean, it's the best distribution system going, and we get that. So thank you. Thank you for what you do. The way this got started, just to give a little history, DemoTech got involved in Florida back in 1996. We were asked by the state of Florida then Commissioner Tom Gallagher, we got the JUA (joint underwriting association). We want to take out companies, we need somebody to rate these new companies. The other rating agencies were unwilling to do it. We stepped up. And so we were involved in Florida since about 1996. And then more recently, when you look at say 2016, 2017, there started to be articles about the residential property insurance market in Florida and the level of litigation.

(10:19):
And I think one of the statistics that dominates the period prior to the most recent legislative reforms, that period from 2016 to 2022, the state of Florida represented about 8% of the homeowner's claims in the country, but yet it was probably 75% of the homeowner's insurance litigation in the country. So it was disproportionate. They were 8% of the claims, but 75% of the litigation. And that was documented by the Florida Office of Insurance Regulation through NAIC data. And so when companies began in Florida, they knew there was going to be disproportionate levels of litigation. They built themselves that way. They had aggressive claims department, aggressive in the sense of making sure that they could get to the consumer as quickly as possible, but if there was litigation, they wanted to have a team in place. And despite the fact these companies were built, knowing the litigation was coming, there was a series of insolvencies in 2021, and the names of those companies are up there on this screen.

(11:38):
And the St. John's information that we present here is an example of what happened to each of those companies. St. John's commenced business in 2004. DemoTech had rated them from 2004 to their demise, and every year we're looking at their reinsurance programs. We were looking at their litigation response, we were looking at their claims practices, and you can see that in 2016, and you can see that at the bottom of the screen. We did a post-mortem after the company went under and we looked at new litigation. By year 2016 was 180. 2017 was 5 69, 20, 18,058, all the way up to over 3,500 new litigations. Those are new, not cumulative. And so even though the state of Florida was relatively stable in the level of disproportionality, 8% of claims, but 75% of litigation, these six companies had an incredible increase in the number of new litigation.

(12:49):
And every one of these companies looked like this. When we did our post-mortem, we knew this had to be more than just billboards, radio and tv. And we knew that there had to be something going on that was beyond the obvious. And so this claim frequency and the litigated claim frequency was just taking off like a rocket. Todd and I had met each other 10 or 12 years earlier. He's got a good background, not only he's got exceptional background in technology and analytics and artificial intelligence, machine learning, but he's also done a lot of projects in the insurance industry. And that's how we met. And so I sent Todd an email and I'm like, Todd, these companies went under, they were litigated to death, yet they were built to withstand litigation. I mean, it's beyond billboards. Can you give me a hand and do some research?

(13:47):
And that's how we began the project in March of 2022. So Todd, if you want to, thanks a lot, Joe. And again, thank you very much, Ariel. Thank you everybody for joining in on this first part of the session, and we're looking forward to answering questions along the way. So feel free to ask away as we get through this. What I'm about to show you are going to be three sections. The first section is around the forensics of Florida, and then the kind of widespread opportunism across the country across all lines. The second part, we're going to highlight a couple of key national publicly traded insurance companies and some of the more recent attacks that they're under. And then the third part is what can we do about it and how do we help ourselves? How do we help insurance organizations? How do we help insurance agencies and agents in the process of dealing with what we would consider as a new cyber threat?

(14:39):
So with this, the research started, as I said, back in early 2022, and the investigation started by looking at a public adjuster. And what I want to point out right away is we recognize that there are good actors and bad actors in all fields. And so this one public adjuster, this was an individual, wasn't a team or a group, but this was an individual who was leveraging SEO search engine optimization. Some of you may be familiar with SEO, it's just nothing more than the process of improving the quantity and quality of web traffic to your site from a search engine. So that usually takes the form of using keywords, blog articles, content, very much to help drive your brand. But you can also buy it. You can use pay per click advertising, web advertising, web, all to divert that traffic and what it might be intended for might be able to be redirected in a different way.

(15:33):
And that's what we're going to talk about in terms of what the opportunists were doing. So in this particular case, we have a public adjuster who was well versed in the use of pay-per-click advertising. He was paying for over 1200, bidding for over 1200 keywords. You can kind of see this gentleman's activity from May of 21 through March, and then March it starts to escalate. What you begin to see is that this individual is spending well over $50,000 per month on pay-per-click advertising. I said differently five to 600,000 per year. And I turned to Joe and I said, Joe, one, an individual public adjuster genome has a budget of over a half a million dollars on pay-per-click advertising unless there's a huge pot of gold at the end of the rainbow. And there's got to be an ROI here. And as I started to further investigate, what you see is the use of organic keywords, 2,500 keywords.

(16:23):
So this person understands SEO, a person though has to build content, but in the middle is the traffic. And 29% of that traffic is organic. Meaning if I were to do a search for this public adjuster, I would find them, I would click on them and Google or binging or where have you and land on their page, but send differently. 71% of this traffic is being manufactured. It's being diverted from pay-per-click and other means as we'll talk about in a few minutes. So this is the beginnings of what caught our attention. And as I started to investigate, as we know every top of the year knowing names, the names of the storms that we're going to have for the coming season. And so what ends up happening, of course, is people begin to bid and create websites. They bid on those keywords. And so as those storms hit, would you believe, of course there's a whole bunch of pay-per-click activity that coincides with each storm.

(17:17):
So we started to measure that and we started to analyze those storms. What you begin to find is who they were directing and targeting in terms of insurance companies and others throughout the industry. This one individual was targeting Omega insurance, Westco Insurance. This person is based in Florida. They were also targeting mobile home insurance in Louisiana, mobile homeowners. Why would they be doing that? Right? So you begin to see a pattern of how and where they start targeting. And what you begin to also see is that it's not just one public adjuster, it's many, it's many firms. It's also law firms, contractors, and others that as we begin to unfold this and unpack this in Florida, one of the early investigations was to understand, well, how do they intercept policy holders? What's the means of being able to find them? And what are the tactics?

(18:07):
So we found well over a dozen different approaches, but one of the more obvious ones was to outrank for the claims department phone number of the insurance company that they're targeting. So many insurance professionals and executives that we've talked to, they'll say, well, we're totally fine. We're ranking on the first position or second position. And I'll always remind them, where are you doing that search from? Because Google is geo dependent. If you do that search from your headquarters, I'm sure you're ranking really high. But if you do that search three zip codes down the street, you might actually find that you're not even on page one because the opportunists have figured out how to outrank you in the search engine results page, which is the list of results that you get after a search. And so what you see here is multiple examples. We came across an example of an insurance company where we would find them being diverted by this tactic.

(18:55):
And so we would call them, we'd say, hi, are you the X, Y, Z insurance claims department? And they'll say, yes, we're the claims department. And we'll say, yes, but are you company X, Y, Z? And they'll say, we're the claims department. And then Joe and I would call again yes to Are you company X, Y, Z? And then they would click. And so we would find this dozens of times across the state of Florida, the southeast, and then now across the entire country. So it's a tactic that's being used by many to try to outrank. And it's a way to, because many of us don't have the claims department phone number of the insurance company on our phone. It's not stored as a contact. Maybe some of you do, but I certainly don't. And so the reason is then, well, if I need to find that, well, where do I go?

(19:38):
I go to Google, I do a search to try to find the claims department phone number, and that's where I end up. So as we continue forward, what we learned is that this isn't just Florida. In fact, it's actually across the entire country. And so in this example, on the left-hand side, we see where Cincinnati Insurance Company is being targeted by one law group. They're using over 90 keywords, specifically targeting Cincinnati, trying to outrank for over 10,000 searches per month. And what you see below is the activity of this law firm. As you see it grow, you see it just take off and scale in the back half of 21 and 22, certainly it skyrockets. And so what you begin to see is that this isn't just a local regional problem, this is a national problem. It affects groups like Travelers Hartford, where you have departments of lawyers set up to target.

(20:32):
They have playbooks on how to beat and win on policy language. They even have the sophistication of understanding what are the settlement amounts by certain judges, which we'll talk about in the codifying of the litigation process. So it becomes, if you will, Moneyball, in terms of the litigation process and using AI and ML to learn how to do this. From our side, we have access to literally a half a trillion data points from 2005 on, and we begin to understand the patterns that we match. We'll talk about this, but one of the areas of investigation that we've been uncovering is the use of and cloaking in the bottom right hand screen. What you see oftentimes is that people will stuff opportunists will stuff keywords on a webpage so that search engines, the box can crawl through index and rank that page. But what they'll do is hide it by putting a picture in front of those keywords.

(21:24):
And so that's called cloaking. So the web visitor will never know that there's keywords about oh, Cincinnati or Hartford or Safeco or you name the business, but the search engine does. So it can rank that page for that opportunist. So you begin to see what follows. And then what I want to point out is, and this gets interesting, we perform something called the top ballistics. And the idea behind this is to understand the gravity of the people that are the threats that are attacking an organization. And so in this case where those lags intercept, you could think of it as the insurance company, and this happens to be an insurance company in Florida, you have four law firms represented by those colored dots. And then another.is the public adjuster, a public adjusting firm. What's so fascinating is then what you see radially around is like the sun are all of the other targets of insurance companies that those five companies are targeting 167 additional targets.

(22:23):
Some of them are repeating because they collectively target the same company, but this becomes a process for how they grow and expand. And what I want to point out is this isn't just to the insurance industry, we're seeing this in other markets and industries, a similar pattern against restaurants. So here we have a case of where Panera or Five Guys or Chipotle are being hyper targeted, hyper litigated across, in this case, this is five law firms targeting over 101 restaurants. So this is expanded in our research, which we'll certainly get into and talk through in the coming minutes. Wow.

(23:02):
So Todd, let me stop you there. One second. Two questions. Number one, and this question also goes to you, Joe, do carriers know this? Because basically what I'm seeing here, this is ambulance chasing in the worst case scenario or the most extreme scenario I have at least ever seen in my life. Do carriers know about this?

(23:25):
I'll take that first. I think the short answer is no. This is something that Todd and I discovered when he was beginning the research on those Florida companies. What we have done over the last several months is we've started to talk to insurance company organizations. We've talked to American Property Casualty Insurance Association, we've talked to MSO, we've talked to the NAIC in March of this year. We were at the Bermuda Risk Summit. We've talked to individual carriers, we've talked to the International Association of Special Investigation units to a person. No one has seen anything like this yet. What Todd, during his research, what he discovered was this internet based, it's like an iceberg, right? You got the billboards are above the water and 90% of the icebergs below the water, which is the internet that Todd did you want to supplement that?

(24:25):
Yeah, I mean we will certainly continue on this, but what we see on the internet is representative of 4% of what gets indexed by search engines like Google and Bing and so on. That ones that we're all familiar, 90% of the content that we don't see that Google doesn't see is because it's behind firewalls and firewalls are protected and so on as it should be. And then the 6% that's remaining, we're going to talk about this at the end, but this is the dark web and this is the part that truly scares me. And this is where you see the most illicit heinous crimes happening. It's where people are selling data, it's human trafficking, it's all of that. But it's also where you see ransomware, it's where you see ransom municipalities and hospitals being held hostage. We've read about that in the news, but they're also now doing this with insurance companies. They're selling their data. And Joe and I we're already analyzing this and helping companies, but the question back to the individual, do insurance companies know about this? Yes, we're working with a number of organizations now as a result of this and having some really great counter success, which we'll talk about.

(25:25):
Okay.

(25:25):
And I think also, Ariel, we'll be talking later in Todd's presentation, we'll talk a little bit about how we think this is impacting producers and independent agents as well.

(25:35):
A hundred percent. And I have one follow up question and I'll let you go through your presentation. Todd, sorry to cut you off, but yeah, no worries. This is the fun seat, right?

(25:42):
Yeah, absolutely.

(25:43):
Somebody's asking a great question. Does the legislator of Florida or the insurance commissioner know about this? At least have an idea.

(25:50):
In Florida, I would say DemoTech made some outreach to the state of Florida. We haven't got a response yet, but we would say certainly in other states, we've been directly involved with commissioners. We'll talk about it, but Okay, perfect. And so on. Yeah, we've tried. They may have heard about it through our N A I C presentation, but we have not had direct contact yet.

(26:16):
Okay, perfect. Thank you. Thank you guys.

(26:18):
So to give you a sense of scale, typically a lot of the consumer brands that we're familiar with, like McDonald's, Ford, Starbucks, they spend about $300,000 on digital SS e o pay-per-click trying to grow their brand and as many more as they possibly can. But to give you a sense of how big we're seeing in this industry of how law firms are targeting, this is one national law firm, this is what they're spending per month on digital SS e o, they're spending 10 to 12 million per year on paid per-click advertising, specifically targeting insurance companies. You're saying per month. Per month, yeah. Wow. And Ariel, here's the crazy part. This is just one of about 40 national firms that we've uncovered. We've got hundreds of others that we've analyzed through our work that we're doing at forewarn, and you begin to see the patterns of attack, and this is why the impact to claim frequency, the impact to agencies for sure, and agents and producers is very real.

(27:17):
And this is why we're here today is to get this out. What is the second part of this? And Joe, I may ask you maybe to share a little on this. The piece about this around the litigation side of this is we talked about how they're kind of codifying the process of litigation. It starts a few years back. And so Joe, I might turn it to you on this. Yeah, I mean, when we go back to that first slide, when we were documenting the public information associated with St. John's, you saw this huge escalation in the number of new litigations per year from 2016 to 2021 was what we had on our chart. And so you see what happens. Here's the companies in Florida, and if you look at the six companies that went under, here's the blue bar. That tall blue bar is the cumulative number of new litigations for those six companies.

(28:12):
It's going up from about 1100 a year to over 8,000 a year in a five-year period, a huge astronomical increase that could likely be driven by the introduction of the platforms, the litigation platforms. The other thing that's been introduced over this same period of time is litigation funding where you can actually borrow money to go litigate. And the way you borrow the money is you go to the litigation funders and you say, I just won a case against X, Y, Z insurance company. It was a strange provision in the policy, but they didn't expect this case. We want it. There's now some precedent. Give me money. I'm going to hire a litigation marketing firm. I'm going to pay them 2500, 30 $500 a lead, but I'm going to tell that litigation marketing firm go find me people that had X, Y, Z insurance company as their insurance company, and I'll be able to sue 'em because I know where the chink in the armor is.

(29:19):
On the next slide, you'll see something that's even more disturbing as we talk about litigation funding and the profitability associated with litigation. Arizona, Utah, and the District of Columbia right now today, and several other large states are considering it, you can now have non-attorneys, non-lawyers own a law firm. And the reason they want to buy it is because the investment opportunities from litigation funding and litigation create tremendous profits, and that profitability was documented. On the next slide, this is published earlier this year based on 2022 analysis by Bloomberg. They looked at the five most outperformers, the top five performers of investments and litigation funding outperforms private equity, outperformed real estate, outperformed credit, outperformed hedge funds. Litigation funding as an industry is now an investment category. In December of 2022, the US General Accounting Office put out a study paper that they created on litigation funding, and they basically said, it's taking off like a rocket, but nobody regulates it. So you now have the opportunity where this entire process of litigation, it's no longer about the insured and the insurer having a dispute. It's now about, it's created an entire industry.

(31:02):
So Joe, let me cut you there for a second. And we have a great question here. So they're using technology to advance themselves and all that stuff. The question is, have they done anything illegal? And of course, you're not an attorney or a judge to determine whether they have or not, but to the best of your knowledge as what they're asking is basically they have outsmarted their opponent, have they actually done anything legal?

(31:28):
Well, I think that's a great question. And I will say this, in October of last year, Todd and I made a presentation at the Southeastern Regulators Association, and there was about 15 state departments represented from the southeast of the US and they generally believe that there's nothing illegal. It's opportunism. It's not necessarily illegal. And the comment that came out was, but if they crossed the line to illegal, we're going to get 'em. And what you see here on this slide is in February of this year, commissioner Donlin in Louisiana went after the McClenney Mosley Associates firm because they did cross from opportunism to antagonism, and they evidently had some fraudulent activities. What we see and why this began, this process of tech enabled claims claim instigation began in the southeastern states. It's where you have hurricanes and floods. And so the catastrophe serves as a smokescreen and camouflage for the effort because the effort's ongoing everywhere nationally. And they want you to read billboards. They want you to think hurricanes because it's misdirection. It's like a magician, right? They have a trick. But the trick depends on misdirection and the misdirection here, what Todd discovered in March of last year, the misdirection is the billboards and the door knocking. That's nothing compared to the technology that's being leveraged. And so yes, it's opportunism, but it's only opportunism until a line is crossed.

(33:07):
Yep. I agree with

(33:08):
Joe Todd. No, that's a great point, Joe. And yeah, I know there was some additional questions and follow up what we're seeing, what happened in Florida, what's happened in Louisiana, they are not just two respective areas. We're seeing this truly across the entire country. This isn't to scare everybody and say the sky's on fire, but the problem is there's pockets of opportunism and there's pockets of where, and it's around specific insurance lines. We're going to show some additional data on that nationally beyond just say Florida and Louisiana and cat storms. So yeah, great questions though. Thanks so much for asking them. Lemme give you a sense of the opportunism. Okay. And again, we're going to use an example of the opportunism. It relates to Florida. It's September 23rd, 4, 5, 6 days. I guess the 23rd would be five days before Hurricane Ian strikes Florida. It's still out in the Gulf.

(34:03):
I called and texted Todd because we had the research going. We knew that a hurricane will give cover to this effort to do the tech enabled claims instigation. So I'm texting Todd and I'm like, Todd, are you looking at the Gulf? Ian is the size of Texas that's going to whack the west side of Florida. And Todd says, yeah, I'm kind of watching that, but I'm actually watching some better stuff. What I'm seeing is actually activity by public adjusters, law firms, and of course I'm watching the weather channels just because I'm naturally curious and I'm somewhat of a nerd, I admit it, but I'm also fascinated by looking at what's happening online. And five days before you see websites being stood up, keywords being bid on. In fact, the keywords for Hurricane Ian reached anywhere between 75 and a hundred dollars per click. And the language around it was get in line, file your claim now. So you're first in line, so you can get paid first as well. There's not any wind in Florida to fly a kite, but they're telling you to file your claim five days before the storm actually has even hit. So clearly there's something wrong with that model.

(35:10):
Just a comment right there that somebody wrote on the question box, and I'll let you go with your presentation. I know you have a hard stuff. Somebody writes, I wonder if there is an ethical issue here for lawyers, even though there's nothing legal, right? Because then that might be the way to tackle this, saying there's a lot of ethical regulations and things like that that they are extending or stretching, which might not be illegal, but there's a lot of unethical activity.

(35:36):
So yeah, much. And what you find Joe and I presented to the N I C, we actually presented to committee D, which is the market conduct committee. We presented to some of the, in fact, the other committees joined the session. I think their jaws were on the ground with this. And what we're seeing is there's clearly a misconduct. And so we've been working with the commissioners across the country. We were talking to regulators as well yesterday. We were on with over a hundred different regulators in this. So yes, there's absolutely action that can come from this. I think there's legislative action too, in terms of law firms and lawyers should not be an asset class for finance and venture capital and investment work. It should absolutely be separated, and I think there's rules around that that should be looked at and reviewed. I think that there's also some movement and with apologies to the states that have stepped up, that's also some movement to disclose, to have to disclose if the litigation is being funded so that you would have to disclose that.

(36:42):
So people are becoming aware of it. I don't know if that's an ethical issue or not. We're in a transparent industry. The insurance companies have to disclose everything. I mean, we're very transparent. So the disclosure that, yeah, this case is being funded because of litigation funding, it was solicited on the internet, those might be reasonable disclosures. Yeah, and just to give you a sense, this is actually, we often talk with many insurance companies and carriers regionally, and to give you a sense of what they're facing, because a regional carrier in Florida with 300 keywords trying to promote their brand and their growth and top line growth compared to a national law firm with a well backed, well financed organized structure, the marketing is just different economies of scale. But what we often do, and we'll talk about this, many of these organizations including yourselves, you own your own brand, you own your own domain.

(37:40):
You have the ability to outrank many of these opportunists if deploying the right kind of technical approaches as well. And sadly, as we know, Google and other search engines changed the algorithm, the formula for how webpages get ranked and so on. And so it keeps a constant vigilance to stay afloat of the activity to get ahead of the opportunities. The opportunities are so sophisticated in some cases that they are looking for those weaknesses. We're going to talk about a few more of them in a few minutes. But all to the point that with everything that's going on, the big winner here is the search engine, right? Google is making money on the selling of the advertising and the selling of the keywords. The opportunists can buy that, we can buy it, we can analyze it, we can review it to look at the digital breadcrumbs of behavior.

(38:33):
But at the same time, again, this is where you call into question, is there certain data that shouldn't be allowed for opportunism? So it's first of many steps. Again, this is just one of several things that we're seeing in the market. We're going to talk a bit on a few more activities. What I want to do, that kind of completes the first part of the forensics. The second part is really around discussions of the impact to a nationally publicly traded carrier. And we just want to show just again, some of the economies of scale and what we're seeing. So if many of you are producers for some of the big nationals, this is one of them. And this is this case where you have a law group that is using over 200 keywords to target that insurance company. They in turn also use over 114,000 keywords to target 90 carriers and to intercept over 12 million searches per month.

(39:29):
And so just again, to see the volume of activity that this one law group is generating, questions that we often get are, well, are they successful? Does it matriculate? Does it turn into something? Sadly, the answer is yes, because if you're getting over a hundred thousand clicks per month, that's 1.2 million clicks. Now, we know that not every one of those clicks turns into a claim. Not everyone turns into a litigation, but my goodness, even if it's 0.1% of it's the law of the numbers. Yes, it's the law, the numbers, it's very much basic math. And if we can just digress for a minute here, I'm sorry, Todd, but there's 12 million searches in one month. One law firm that converted into 104,000 clicks, which is 1,000,002 clicks a year that law firms only pays for the clicks. So to your extent, it's a law of large numbers, but that 1.2 million clicks, it converts into a number of claims.

(40:26):
That's why they're doing it. And those claims hurt the profitability, not just of the company. They hurt the profitability of the producer's contingent commission. They hurt if it's a small company. It could hurt the solvency of the companies, which is how they drove those six companies in Florida under. But the whole idea here is by increasing that claim frequency, the consumer pays it. And even if your market stays healthy and you get your contingent commission, the consumers paying more and the producers are the first ones to hear about that. And if those clicks convert into enough claims, then you get situations where the markets pull out of states or they pull out of a line of business because the claim frequency's gone through the roof. And it's not consistent with the claim frequency assumptions that the actuaries have in the rates. So this is 1.2 million attempts where the opportunist, one opportunist in one month got 104,000 chances to come up with a claim when that might not have been the intent of the insured.

(41:38):
And like you said, it's only one of them, which it's scary. And for us, and I encourage every producer, an agency here, an agent here to reach out to the clients, whether it's on the onboarding process or after that, let them know how claims should be processed, right? Because what happens is, remember, we all live in a neighborhood where the neighbor got a new roof, then the other one got a new roof, then the other one got a new roof. But it's up to us to actually talk to those clients and inform them that they're going to get targeted. It's going to happen. We just have to do a better job as well, because it's not only on carriers, like you mentioned, Joe is going to come down on our profit sharing on our contingent commissions. So we're going to keep suffering.

(42:19):
Yeah, there's a question around how can this be fixed? And we're going to talk about that. It's a great question, Jerry, that you brought up. I'll highlight one other aspect, and we're going to just show a few more examples and then we'll turn around. The real question is, well, what do we do about this? And so in the investigation in Florida, and again, looking at one of our clients, five law firms represented by the five big bubbles, the college bubbles, and this gives us a sense of scale to be able to compare apples to apples, apples to oranges, what are we dealing with in terms of their respective size, but also within their own bubble, who are they targeting the most? And so you begin to see patterns of, in the pink one, the most obvious State Farm, FedEx, Geico, citizens, interesting. But then you begin to see patterns like in the yellow, Walmart, Allstate, people's Trust.

(43:10):
Why is people's trust, which is 100th the size of a Walmart or an Allstate being targeted by this group. Joe, what would you say? The answer to that disproportionality is a law firm wins a case against the company, and it was an odd outcome because the company expected thought its policy provisions worked and they didn't work the way they expected. But then that law firm, instead of just winning that one case and going away, that law firm contacts a litigation marketing company and says, I want the names of every people's trust insurance insured, because I know the bad policy provision. I just want a case I know the judge to bring it in front of, and I'm going to go after. So the internet provides them with the opportunity to get these litigation marketing firms to go find me potential claimants. I mean, it really is a perversion of the technology that we've tried to harness, but basically you now have the ability, you don't, don't have to put an ad in the paper anymore. You hire a litigation marketing firm to go out and find whoever you need.

(44:28):
So the last piece of this is we were asked to do what we call a black box study for this national public insurance company. And part of the black box study is we know nothing about how they're being attacked, where they're being attacked by whom they had some serious concerns and issues across the country where pockets of activity were beyond just the more obvious areas that they thought. And so we investigated 36 law firms, 110 locations and found three pockets in three metropolitan areas that you begin to see law firms who they're targeting, how they're targeting, what words they're using, but what insurance lines they're focused. Some cases it's personal liability, other cases it's comp, some cases it's Toman Auto. So you begin to see these patterns emerge. And in some cases where Joe and I, we have to be careful because we don't want to use the word collusion, but you begin to see a pattern of two or three firms that all seem to work around each other and follow the same pattern of outreach and the same almost level of historical activity.

(45:28):
Let's target this area. Here's where we go, then let's move to this city. Let's try it here, and then let's try it over here. And you begin to see this kind of repeating pattern that we've been watching for a period of time. And so this is something, again, going back to regulation and working with regulators and the F B I as well where you can begin to pull out behavior from this data. So over the past 12 to 18 months, Joe and I have had the opportunity to meet with a number of organizations across the country. We continue to keep meeting with dozens of organizations each week, frankly. And it's been, we're really grateful for the opportunity to spread the word, what we're trying to do. And so as part of all of this, and as you can see, some of these organizations are outside of insurance, but they have direct impact to litigation and claims.

(46:15):
What we have commonly got is, well, what can we do about this? Because this is before we enact legislation, individuals and companies have to take a more direct response behind this and get ahead of this. And so this isn't meant to be a full advertisement, but it's just to explain the response because we wanted to share what we're doing at forewarn. So forewarn was created to provide this data driven analytical understanding of the activity by these opportunists. And by investigating literally almost a half a trillion data points of activity from oh five and on, we're able to begin to retrace and understand the patterns of behavior of where this is taking place, and then how to help organizations build a better digital moat around their business. And so the response is certainly a surveillance plan by understanding who is attacking you, how big are they attacking you, who are they working with?

(47:06):
What geographic areas are they coming from? What patterns of behavior are they using to intercept with your policy holders and your clients? Are they trying something that they've tried in another part of the country now in this neck of the woods? And oftentimes we see these kind of patterns form also what's the projected risk of this? So as they start launching a campaign, we can begin look at time to impact to where this risk begins to form and what we see in the claims department for many of our insurance clients, we were able to see the activity digitally and then begin to predict when it hits the claims department. And that has an impact too, being able to get the house in order, not just for claims, but for the rest of the team. And then what can we do to counteract these threats? And so we have some very specific technologies around that too.

(47:56):
We're using a lot of different data. I'll just say that highly, lots of different individual data points that we're pulling into this to build up a picture in an understanding of where these threats are taking place. And ultimately it's to put together this visualized understanding of where these attacks are coming and the behavior behind it, but also to help organizations, their general counsel to be able to document the behavior to be able to use this in litigation and negotiations. But also we're finding organizations using it to evaluate regions. Are there areas they should be writing or not writing? In some cases there's high risk and there's low risk. So this is a new threat that people are trying to understand what that means for the business, and are there areas that they can protect? On the marketing side, one of the common questions we get is, well, what can we do about this?

(48:44):
How do we protect ourselves? The running story is in the world of search, if you want to hide a dead body, you put it on page two or three of Google, right? Yeah. So it's the same thing. How do we help organizations put the opportunists that are attacking and targeting these organizations on page 2, 3, 4 or further? We've had really great success in using that because it's not just about using SS e o to grow the top line, although that is really important in this day as we know. But it's also using SS e o and pay-per-click and a defensive pattern too, in terms of building a better digital moat around the business and protecting you and your policy holders as a result of that. So with all of this work going on, we're working with clearly with a number of carriers. We're also finding this with agents and agencies.

(49:32):
They have their websites. They're concerned, they don't want to be linked to this. They want to feel like they've got protections in place as well. And so Joe and I have been having discussions. This is one of the reasons we're here today, is to be able to share what we're seeing and doing, but also ways to be able to help producers out there as well. Because this is a new service. We've been in stealth mode. We're actually in the process of unveiling. We encourage all of you to certainly visit our site in the coming month. We're going to be unveiling, but please feel free to keep track of us. I would love for you to interact, and if there's areas where we can help engage and also provide some awareness or some additional information, by all means, we'd love to hear from you. Joe, I think one of the things that we found that has been fascinating to the extent of the problem, we've actually uncovered at least one law firm and at least one public adjusting firm that is offering franchises to people.

(50:29):
They're basically saying, basically, you could have a franchise and we'll do all the work and we'll pay you up something. But the point of it is these are playbooks that are on the internet that Todd's research has unearthed, and our DemoTech research through Todd as an earth. And it's been fascinating to see law firms can now be an investment asset. Law firms offering franchises to people that bring them claimants, public adjusters, offering franchises to people that bring them claimants. This isn't going away. Companies are being attacked and the producers are caught in the middle. If you have codified the playbook on how to litigate a case and how to look at the settlement amounts coming from judges and using that to figure out how to negotiate better, that is exactly what's happening. And so it is the modern day Moneyball of using AI and ML technology for handling a lawsuit.

(51:27):
Young attorneys are using these platforms to learn the process, if you will, from the law firm on how to handle a case and how to handle a claim. And that mixed in with litigation funding with the ability to market and pay for leads and opportunities. We're at a tipping point that I think all of us recognize isn't sustainable, we hope, but it's also could potentially get worse across not just insurance, but other industries. And we see it there. I mean, I think all of us recognize there are ambulance chasers in the analog world for many, many years before all of this. The difference now is this has moved to digital. And so now we're using the tools to be able to understand the interactions that are taking place. We talk about, for example, ChatGPT, ChatGPT is a great tool.

(52:15):
It's fun, it's interesting, it has its nuances and its challenges. We're also seeing cases where it can be abused. So you can have a ChatGTP file a claim. You can also have a system that processes it in an AI way. Nothing wrong with that. But at some point you have two AI systems communicating and working with each other. How do you know where there's a detection around where something is fraud and where there's still a human intervention still needed to see patterns of behavior and activity. And that part we're going to have to continue to keep inventing and getting ahead in terms of the technology curve of how those relationships, those autonomous relationships better work for us to scale. So

(52:54):
Wow. Todd, thank you. Thank you so much. I only have one question for you before you go. I want to be respectful of your time. From the carrier standpoint, at the end of the day, this is some type of cyber attack or whatever. How would they manage this risk? Because we're risk management, we're risk managers, we manage risk, we analyze risk from the carrier standpoint. They protect themselves from cyber attacks. I dunno, with huge companies like Fort and things like that, how can they go to those companies and say, Hey, I need you to help me with this so we can uncover who's coming at us because they're coming at them no matter what. So do you see any type of risk management process that they can integrate to make this better or to start avoiding this?

(53:40):
Yeah, that's exactly at the heart of what forewarn is about. It's the detection and the mitigation of those threats. Okay, I got you. And so you're right though. We have a CIO of a company in Florida, and he's a client of ours. And his comment was, I had spent 20 years trying to build firewalls and protect the cyber threats that you traditionally seek attacking not just the company servers, the mobile devices and so on. And he said, now we have a new cyber threat. And it's essentially the irony of this is that we use all of these tools to promote our brand. We use social media to get out there to grow our content and grow our awareness. And yet those very same tools can be turned against us, against us. And so the CIO said, geez, now I feel like I'm five to 10 years behind, and now I need another way to be able to get ahead of this new cyber risk that we've never incorporated into our models.

(54:34):
And what I would also add to that is, like I said, this is just the tip of the iceberg. There are many other threats that we're seeing forming from this kind of new world of using technology to drive claims. We're seeing, of course, and you've probably read about them, fraudulent medical liability where the images of an x-ray are fake, the images of car accident are fake using AI technologies. And so we're working with S I U departments across the country. Some of them have been successful with RICO cases as well, where they'll go out on site based on data and they'll see, my gosh, that Porsche is perfectly fine, but in the picture it's missing half the hood. So it's that type of technology and activity that we've got to get ahead of

(55:17):
Once they get the auto insurance involved, which they already have. From what you're saying. And somebody just asks that question, is it going on with auto as well? But then it just, there's no limit to this. There's actually no limit.

(55:29):
No, it's everywhere. It's auto claims comp, it's products. Todd has some slides. There are law firms. One of 'em is in New York City. There are law firms that will bid up to a thousand dollars a click for keywords related to spine injuries or brain injuries. And I mean, these are sophisticated med malt cases and they're using medical terminology as their keywords. I mean, this is every line of business, every state. And it wouldn't surprise me if it was international, but it's certainly every line of business, every state, DC Puerto Rico, it's everywhere. There's no end, which is why we're trying to word out. Yeah, and I would end with one comment, which is this is also you probably saw on our slide where we're talking to reinsurers because they are looking at their portfolio and they're saying, okay, great. Now we have another risk that we've got to worry about that we haven't factored into this.

(56:31):
How do we begin to organize and understand this and where are those risks coming from and what's the degree of severity for certain members of their portfolio? That intelligence is part of what we're doing here at Fort Warren, but also again, the mitigation side of this. And lastly, like we said, this affects agencies directly, not just from commissions, but it's eating up markets. When organizations go under and they become financially insolvent, that's one less organization to be able to support and provide homeowners and policy holders with coverage. And so this is a wider issue and I'm so happy to see the feedback from many others. I'm glad that this is raising questions for everybody and that was our intention today is to get this out. So thank you.

(57:21):
But I appreciate your time. It has been our profound honor to have you with us. I'm sure everybody learned a lot. I promise everyone we were going to blow their minds away. I was not expecting this much. But yeah, thank you for your time. We appreciate that Joe and I will get into other questions now and we're going to start enjoying that. I look forward to doing this in the future again, see where we are maybe a year from now or before that because this is definitely going to change on a daily, weekly basis.

(57:51):
It has what we were three months ago and where we are today. It's remarkable the difference and obviously we're connected to a collection of groups now and the behavior's falling everywhere. So we look forward to updating along the way. I'm going to drop off here shortly for all of those attending. Thank you all so much for the opportunity. If you have more questions or would like to learn more, reach out to me, Amit, you to get ahold of. You can see my email. I look forward to it. So otherwise, enjoy the summer.

(58:23):
Perfect. Thank you. Thank you so much, Todd. You have a good one. Hey guys, this is Ariel. Thank you so much for listening to the Fun Insurance Solutions podcast. I really appreciate you. Listen, I want to give a huge shout out to back nine insurance services. You have to go to our social media platforms and sign up with back nine on the link we provided you because back nine insurance services. It's an life insurance InsureTech, where you can quote and apply for life insurance in seconds. Yes, in seconds. Even better. You can quote and apply with multiple carriers depending on your state. B nine is licensed and approved in all 50 states and Puerto Rico, and I encourage everyone to use them. What's a cool thing about B nine once you quote and apply for life insurance for your clients or even your clients will use your dedicated link and and apply for their own life insurance, your contract, your commissions and everything is directly with the carriers. I mean, it can't get any better than that. So make sure you follow our posts on social media, whether it's LinkedIn or Facebook or Instagram, and you're going to see the link right there. Sign up with back nine and trust me, you're not going to regret it.