AMERIND Risk expands to meet the needs of Indian Country
By Kevin Gale
This isn’t your father’s AMERIND Risk. AMERIND and CEO Derek Valdo (Acoma Pueblo) have been celebrating a 30-year anniversary with services that go far beyond insuring residences.
Tribal leaders are turning to AMERIND for tribal insurance, workers compensation, employee benefits and deployment of broadband systems. Valdo expects new lines of coverage to continue emerging to meet the needs of Indian Country.
Valdo has nearly 17 years of experience at AMERIND and was director of safety services before his elevation to CEO. He helped reduce preventable claims, such as kitchen fires, by 15 percent with educational campaigns.
Before joining AMERIND, Valdo worked with the Pueblo of Acoma Housing Authority for five years performing grant writing, procurement and design of housing development.
Valdo has been highly involved in Indian Country on a local and national basis.
He has served as a councilman for Acoma Pueblo for 12 years and as a board member of the National Indian Child Welfare Association for five years. He has served as southwest regional vice president for the National Congress of American Indians for six years.
Valdo started his studies at Stanford University, but a family illness led him to move to New Mexico, where he earned a bachelor’s degree in economics with a minor in management at the University of New Mexico.
Valdo was recently interviewed by TBJ. The following transcript has been edited for brevity and clarity.
Tell TBJ how AMERIND was launched.
AMERIND was created in 1986. Commercial America looked at rural Indian Country and said it was too risky. The premiums they charge were pretty exorbitant.
Every federally recognized tribe that was receiving Housing and Urban Development assistance became a member of AMERIND from day 1. The National American Indian Housing Council worked with HUD to create AMERIND. We really think of them as a sister organization versus a partner.
We were capitalized by HUD and we have been rock and rolling ever since.
How many properties do you cover now?
We insure a little more than $11 billion in properties nationwide—65,000 single-family dwelling units, a little over 4,000 multifamily and commercial units.
Even today, we don’t run into any competition for the residential, homeowners or renters insurance policies in rural America. The farther away you get from a major urban center, the fewer insurers there are that want to insure on tribal land.
We insure traditional stick frame homes, adobe homes and have a unique product for Seminole Tribe chickee huts. They are of cultural significance and they asked us to insure them.
I don’t know if there are a lot of insurers out there that would look at a traditional building like a chickee, a log house or an earth mound home, and some of the other traditional buildings that exist in tribal communities, and want to insure them. We try to be as flexible and culturally sensitive as possible for our tribes and insure what’s important to them.
I’ve read that AMERIND is incredibly responsive when disaster strikes. How do you accomplish this?
AMERIND is basically a mutually self-insured, government risk pool. Our members are our owners and we know that many of the tribes don’t have a lot of financial resources at their disposal, so it’s very important for us to be responsive.
If you read about our experience in the Southern California wildfires, which destroyed over 120 homes on a few reservations, we were the first insurer to rebuild all of our houses. We did that within a year and closer to nine months from the date of loss.
With the housing shortage in tribal communities, they don’t have very many places to go. Our board is very sensitive to customer service and timely claims payments.
When you really think about participating in a government risk pool, the incentive is different. The incentive is to make sure members are made whole first. I would say that in a stock insurance company the emphasis is to maximize dividends and stock appreciation for shareholders.
What are other areas of coverage that AMERIND has become engaged in beyond housing?
While we started in residential, we figured out after 15 years that property is property in Indian Country. There is really little difference between adjusting a residential loss and a commercial loss for a tribal government, convenience store, library, a hospital or any other property and equipment that a tribe may own and AMERIND can insure.
We extended our insurance to tribal governments and tribal businesses. This also allowed us to expand into workers’ compensation. We provide an alternative to state programs and some of the commercial products that are out there.
We also acquired a retail benefits agency for employee benefits, so we provide core benefits as well as supplementary and voluntary benefits for tribal employees.
Many of our members have an open door with us. I have friends in Alaska, California, Florida and Maine. It’s more than just policy numbers and accounts. You can put faces to the policyholders and names to commercial accounts. We go to tribal ceremonies.
We have expanded operations because tribes are becoming more sophisticated and larger economic players.
We have created a reinsurance company because with some tribes the bigger they are, the more efficient it is to self-insure and just buy catastrophic insurance for the top layers.
Some of the large tribes have a self-insured retention of $250,000 on any one loss and $1 million on any one occurrence. They are taking 95 percent of the risk in that kind of arrangement and really just looking for support across the top.
If you think of the AMERIND model, we do the same for small and medium size tribes. They don’t have the buying power to take risk head on. Our average deductible is $500. All of our competitors start at $5,000 and go all the way up to $250,000. Even at a $10,000 deductible you are probably paying 70 percent of each and every loss if you are self-insuring.
What are the biggest
challenges for AMERIND?
Tribes are growing and the emphasis on federal legislation and cost control and reducing discretionary spending is going to impact Indian Country in every facet. Some of the proposals that are out there to decrease discretionary funding by 20 percent are going to devastate Indian Country.
We are the major player in Indian housing—we retain 95 percent of that market—but we’ve only tapped about 8 to 10 percent of the tribal government space. As for workers’ compensation, we hold only 15 percent of the market.
What we see as an issue for tribes, in terms of having to tighten the belt and control expenses, is they are looking at alternatives to higher-priced items like insurance. If you look at any tribal or any company budget, after salaries and benefits, insurance is probably in the top five of overall expenses.
We’ve actually had a large increase in requests for proposals. In the past, we would have to fight and really work hard at convincing a tribal government or business that they should trust the small Indian insurance company. We all have been conditioned to buy from the big companies.
In insurance, they want you to buy the umbrella, the hands—those people who spend million of dollars on advertising and have more surplus than many countries. But you pay for that, right? You pay a premium for those coverages.
I think tribes are slowly learning how to keep tribal dollars circulating within Indian Country and AMERIND is a great example of that.
Insurance is a financial services industry and governmental risk pools have been in existence since 1986—the same year AMERIND was created. Most states, counties and city governments don’t buy insurance; they join their public entity risk pools and they keep the money within their control. That’s really kind of the power of AMERIND.
We are 100 percent owned by 420-plus tribes. Any surpluses or positive net income we generate benefits our owners.
We have been able to grow and build our financial strength, while at the same time in the past five years, we have refunded a little over $12 million back to our owners.
Unless you are a stockholder of a company, you normally don’t get premiums back from the insurance company.
Our product on average is priced 25 percent less than all of our competitors.
Our board of directors is all from Indian Country. They intentionally limit our profit and surplus to 5 percent.
We operate very similarly to the Progressive model where they limit operating expenses to less than 35 percent. AMERIND operates at 30 percent, meaning 65 percent goes back to claims and loss adjustments, then that 5 percent is our surplus.
When I took over the company, we had $31 million in annual revenue. Last year, we closed at $49.5 million of revenue. We have been able to grow the company by almost 70 percent in the last five years.
What do you want to accomplish next for AMERIND?
We have been expanding and growing in areas where tribes need the expertise. We have been approached for property mortgage insurance. There’s recent legislation or action in the federal government where it is saying, “Tribes you have to waive your sovereignty. We’re not going to agree to tribal jurisdiction.” That’s sort of cutting off access to private mortgage insurance.
Ever since I’ve been at AMERIND, there has been a call for performance bonds. That’s a whole different type of insurance. As we continue to grow and expand, I think some day AMERIND will be a player in that kind of product.
The next big thing I think for AMERIND is our ability to really unite tribes to see that there is power in numbers. I’m actually pretty excited we are having some discussions with some other tribal CEOs and some councils saying, “Hey, what if we put all our money together and create a financial banking institution that is 100 percent owned by tribes?” Right now, they are discussing over coffee and writing things down on napkins and really trying to get these newer generations of tribal leaders and tribal business executives to strategize about how we take those next steps and really maximize our financial prowess. ♦
Tips on Buying Insurance
Valdo offered these tips to consider when buying and reviewing policies.
Read the fine print and not just the declarations page. For example, a policy may tell tribes they have $20 million of flood insurance, but the fine print says it just covers property in flood zones C, D and F. Another policy might have a declarations page that talks about a billion dollars of property coverage, but the fine print says payment is only based on the schedule in the policy.
Don’t overpay for an unnecessary higher limit. “I might buy a policy for $1 million, but my house is only worth $100,000. At the end of day, if I ever have a loss, the most I’m ever going to get is $100,000. You are paying for that higher limit when you will never actually use it,” Valdo says.
Conduct an audit to inventory what’s covered. “A lot of time we go through an audit of a tribal policy and they will be insuring things they haven’t owned for three or four years,” Valdo says.