In less than a decade, the insurance industry is set to experience a major talent gap as baby boomers head to retirement. There are estimates that up to 400,000 job positions in the U.S. insurance industry will need to be filled by as early as 2020. That’s a tall challenge for any industry—particularly one so often misunderstood by consumers.

The need for outstanding and experienced graduates in the insurance and risk management field is apparent. Attracting talent to the industry to meet the future staffing needs is being addressed, in part, by colleges and universities nationwide that have undergraduate insurance and risk management and actuarial science programs. The National Alliance Research Academy supports many of these educational institutions’ efforts to attract new people into the risk management and insurance industry through our University Associates Programs.

Recruiting undergraduate students into these programs often requires that faculty create innovative curriculum. One area of innovation, critical to insurance and risk management recruiting, is experiential education—the opportunity for students to gain hands-on experience. Students want experiences that expose them to as many career paths as possible.

Experiential education often includes internships, study-abroad programs, in-class analysis, and case studies using industry data. The faculty in the Lacy School of Business at Butler University in Indianapolis, IN, demonstrated some true innovation in the experiential education arena by creating the first-in-the-nation student-built, student-run, teaching captive insurance company.

The operation of a captive insurance company represents a significant experiential learning opportunity to train Millennials for the insurance industry. Captives represent a microcosm of the broader industry and demonstrate the entire product lifecycle for insurance and alternative risk transfer products and services.

The idea of a student-run captive was the brain child of Professor Zach Finn, MSM, ARM, AINS, Clinical Professor and Director of the Davey Risk Management and Insurance Program. Before joining the faculty at Butler, Finn was the Risk Manager for the J.M. Smucker Company. His experience as a corporate risk manager for a Fortune 500 company gave him the proper background to initiate the discussions necessary to create a student-run captive with various administrators at Butler University, including the Lacy School of Business Dean, Chief Legal Counsel, and VP of Finance and Administration, to get the idea off the ground.

Through an extensive four-month, semester-long course, a team of students and faculty, working in coordination with a small group of industry advisors, completed a comprehensive feasibility study outlining why the formation of the captive insurance company made sense for Butler University’s mission. Students were tasked with selecting a place of domicile for the captive and a captive management service organization through a request for proposals (RFP) process. The captive feasibility report included the students’ recommendation to domicile the captive in Bermuda and select Aon as the captive management service organization. MJ Insurance offered to provide funding for the project, and the MJ Insurance Student-Run Captive was launched.

The captive was granted licensing approval from the Bermuda Monetary Authority (BMA) in April 2017. The students and faculty received news of the approval directly from the BMA during a five-day visit to Bermuda that month. In a press release from the Bermuda Business Development Agency, CEO Ross Webber stated that “the students’ research and application is a wonderful endorsement of Bermuda’s strengths, responsiveness, and robust, agile regulation.”

The captive has the backing of Aon, the world’s largest insurance broker. “Aon fully embraced the opportunity to do more than just manage the student-run captive with Butler University,” said Don Ortegel, Resident Managing Director at Aon Risk Solutions Chicago and Butler’s Strategic Account Manager. “We view this as a great opportunity to demonstrate our commitment to support and educate the Butler students.”

KPMG was selected as the auditor of the captive. “I found their story very interesting and compelling,” said Eric Heinrichs, Managing Director of KPMG in Bermuda and Lead Engagement Partner.

The capital necessary to fund Butler’s captive was provided by a gift from MJ Insurance and founder, 
Michael M. Bill. MJ Insurance is one of the largest independent insurance agencies in America, with offices in Indianapolis and Phoenix.

“We’re thrilled to not only be involved from a financial perspective, but also as part of the education process,” said Colin MacNab, Executive VP of Property and Casualty at MJ Insurance. “I served as a mentor in the first captive insurance class at Butler and can attest that the experience these students gained in creating the captive is unparalleled. They are coming out of school prepared to make an immediate impact.”

One of the students, Michaela Neal, who served a key role in preparing and delivering the application to the Bermuda Authority, joined MJ as a full-time employee after she graduated in May 2018. MacNab said she will be fast-tracked due to the knowledge and experience she brings with her Butler degree.

The MJ Insurance Student-Run Captive officially began work in August 2017. Although the students run the captive, faculty members are also serving as officers, primarily for purposes of business continuity. The CEO and CFO is P. Kevin Thompson, MBA, JD—Former Director of Risk Management of Eli Lilly and Company—and the CRO and COO is Zach Finn.

The captive started writing several lines of coverage immediately after it began operations. The following are currently the most notable coverages:

• Key (Dawg) Mascot Life Insurance: Animal mortality coverage for Butler’s live bulldog mascot, Trip.

• Fine Arts Coverage: Butler’s captive insures scheduled fine art primary to the University’s property coverage, with a maximum policy limit per any one loss. This includes theater set pieces in storage, on display, and pieces currently or soon to be in transit.

• Entrepreneurship & Innovation Liability (CGL Deductible Reimbursement Policy): All students in the Lacy School of Business participate in Butler University’s Real Business Experience Program. In a one-year period, students form teams, create a business idea, apply for funding, and start and run their own business. The entrepreneurship liability is coverage that applies specifically to this program.

“I wanted to pick coverages where students would not only learn about insurance and risk management, but so they could learn about other things, too,” Finn said. “So, we’ve learned about poets, paintings, planets, and more. I am going to leverage the great liberal arts education they receive at Butler.”

To date, the captive has only provided first-party coverage to Butler. However, students in the Spring 2018 captive course wrote an RFP for a reinsurance broker. They received several proposals and invited a select group to make campus presentations. The students ranked the proposals and presentations and ultimately recommended Arthur J. Gallagher & Co.

Having access to reinsurance will allow the captive to begin writing third-party coverage. Future insurance and risk management students at Butler will continue to manage the captive and determine its appetite for both first-party and third-party coverage.

The undergraduate insurance and risk management students will soon be joined by the first cohort of graduate students from Butler’s forthcoming Master of Science in Risk and Insurance online degree program and will participate in the management of the MJ Insurance Student-Run Captive. The graduate students will have a semester-long capstone course that will require an in-residence experience in Bermuda.

In both the undergraduate and graduate programs, insurance and risk management students are gaining a multitude of skills and experiences that will be beneficial to their careers. The learning outcomes include skills in underwriting, rate making, loss control, reinsurance, insurance policy language, networking with industry professionals, and project management, to name just a few.

This experience has been noted by Crain’s, The New York Times, and Harvard Business Review as a way to excite students and entice them to join the insurance field.

“If you think insurance is boring,” the Times wrote, “you haven’t really thought it through. The industry is at least partly about the fascinating science of human behavior—from recklessness to neglect—and our collective efforts to behave responsibly that never end in total success.”

About the Author: Dr. Victor Puleo, Jr., CIC, CFP^®

Dr. Puleo is the Davey Chair of Risk Management and Insurance in the Lacy School of Business at Butler University, Indianapolis, IN. He is also a National Alliance Ed Consultant and National CIC Faculty member, as well as Chair of The National Alliance Research Academy Board of Directors.