Like something out of a thriller novel the action for the last few weeks has been at State Compensation Insurance Fund. The jockeying to replace outgoing president Janet D. Frank who resigned is reaching its culmination. The competition has picked up and turned into the kind of subtle frenzy one might expect in a Boston backroom before a democratic primary. Workers’ Comp Executive handicaps the players – one of whom will be announced as interim president tomorrow. He or She will become the leader of California’s and one of the world’s largest workers’ comp insurers.

Yesterday and today the Executive Committee and other management is meeting with the Board at a retreat being held at a hotel in San Francisco. The Board is establishing priorities for the coming years and yesterday was given a course in State Fund history, along with a retinue of charts and graphs depicting its financial condition and other pertinent issues including pricing and marketing.

The four primary contenders (in no particular order) include: Carol Newman, current General Counsel; Doug Stewart, vice president; Jay Stewart, accountant; and Vincent Mudd, a Board member appointed by Governor Arnold Schwarzenegger.  (The Stewarts are not related). Two other names have also been mentioned: Tom Clark, currently President/Field Operations North & South; and Harrison Jerome, Chief Operating Officer. All but Mudd are members of the Executive Committee. Of course, the Board could surprise us all and pick someone outside of this group – not likely.

Sources say Clark and Jerome are likely eliminated. Here are the basic backgrounds of the four major contenders. Our player handicap will follow at the end.

Carol Newman:  General Counsel for State Fund since Oct. 2008, served as vice-president and associate general counsel for the Fireman’s Fund from 1998 to 2007, she has been an assistant state’s attorney in Peoria County, Illinois and has represented elderly tenants in subsidized housing disputes. She has a Bachelor’s degree in Social Work and a law degree both from the University of Illinois.

Doug Stewart:    Since Nov. 2007 he has been focusing on State Fund’s product and services distribution. He also has 35 years of experience in the insurance industry in the areas of claims, underwriting, marketing, sales, USL&H, and risk management. Has worked at Industrial Indemnity; United States Fidelity and Guaranty Company; CNA; The Hartford; Crum & Forster; and Travelers. He is both a CPCU and an AAI. He holds a Bachelors in Economics from UCSB and an MBA from Santa Clara, a Jesuit University.

Jay Stewart :  Currently serving as Chief Financial Officer, this CPA came in with the new team as well in Nov. 2007. He has 40 years of experience in the insurance industry, according to State Fund, in the areas of senior management consulting, external auditing, and corporate risk control. His accounting degree is from CSU, and he holds an MBA from California State Polytechnic College.

Vincent  Mudd:  Along with his wife Mudd owns an office interior firm in San Diego. A successful firm the company does business with large clients including government, financial services, education, manufacturing and others. Workers’ Comp Executive could find no background for Mudd in insurance other than his service to the State Fund board.

Handicapping the Odds of Who’s in and Who’s Out:  

Tom Clark and Harrision Jerome :  OUT. There are multiple likely reasons for them to be handicapped out. First this is not a permanent handicap but rather for the interim position and for the next permanent position. The most obvious reason is that State Fund is in the middle of a culture change and as long time State Fund employees who began their rise into management under the old discredited regime they were part of the old culture. In addition the next president will likely be called upon to make some difficult decisions which will affect State Fund for years to come. While both Jerome and Clark are clearly well thought of by the rank and file, management, and the Board, this is a job for an outsider.

Vincent Mudd:  OUT. It is unlikely that Mr. Mudd will receive the Board’s nod for this position. First, Mudd is a gubernatorial appointee to the Board. The Board is unlikely to create what could become a political nightmare for an organization which is supposed to be out of the political fray. This is particularly true in that the culture of corruption that was State Fund and which Jan Frank has so successfully turned around was in part based on political influence. Secondly, while the next president will have difficult decisions to make he or she will also have a major insurance company to run. That means experience in reinsurance, sales and marketing of insurance, underwriting and other insurance functions are critical. A CEO must understand what questions to ask underlings especially when those underlings are civil service. Mudd, as successful as he is, does not fit the profile of an insurance carrier president.

Carol Newman:   OUT.  Ms. Newman is not known to be among the most popular member of the executive committee. And perhaps as a lawyer she shouldn’t be. But the Board is likely to decide that Ms. Newman, while she may have the outsider cred, does not have enough practical insurance management knowledge except within a contractual viewpoint to qualify as the next –even interim - leader.  Educationally, she does not appear as qualified as other candidates, and is said by inside sources to be lacking in financial acumen.

Jay Stewart:   IN. 35-40% to win. An account holding both an MBA and CPA, his experience is in auditing and corporate risk control. His focus in things numeric is a plus at a time when State Fund is burdened with an expense ratio higher than industry averages and a large investment portfolio. Accountants are known as by-the-numbers managers but are also quite able to provide that knowledge to other executives.

Doug Stewart: IN. 60 to 65% likely winner. With experience in claims, underwriting, marketing, and sales Doug Stewart has the most varied experience of the field. Underwriting experience provides reinsurance knowledge at the levels he’s been at. While he may need support in investments the board may find that his broader experience provides him with a better vision of how to execute across multiple departments at the same time. Doug Stewart has attained a CPCU – Chartered Property and Casualty Underwriter designation which is akin to a masters degree in insurance and has also continued professional learning with an Accredited Advisor designation. This kind of commitment to insurance is likely to go a long way with the board. Stewart has the backing of influential members of current management.

So that’s it. We think it comes down to two key players: Doug Stewart and Jay Stewart. Workers Comp Executive will be present at the announcement tomorrow and will Flash the result of the final vote. Sort of feels like American Idol doesn’t it.

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