Mulryan: Working to improve Calif. State Fund’s value, transparency

California’s State Compensation Insurance Fund suffered setbacks recently over unethical practices in its group programs, and an order by California Insurance Commissioner Steve Poizner forced the organization to address structural and operational changes.

Yet newly appointed SCIF Interim President Lawrence Mulryan hopes to turn that around — even as he regrettably comes out of retirement.

Appointed to lead SCIF after the March firings of former president James Tudor and Renee Koren, vice president in charge of group programs, Mulryan addressed “what’s going on” with SCIF at a recent Insurance Brokers and Agents of the West Blue Ribbon Conference in Hawaii.

It was only a couple of years ago that things were “kind of trending OK,” Mulryan noted. “We had gotten past the big bubble, the big crisis, and things were pretty much under control. I was looking toward retirement. I had already told my board [at the California Insurance Guarantee Fund] that I had decided that I would retire.”

Clearly, that did not work out very well, Mulryan joked.

Mulryan served as an executive consultant within the insurance community since 2006. From 1992 to 2006, he was executive director of the California Insurance Guarantee Association. Prior to that, Mulryan worked in the insurance industry as a legal counsel and senior executive, which included trade association representation, drafting legislation and managing and lobbying on legislative matters. Additionally, Mulryan spent more than 20 years on the San Rafael City Council, serving three terms as mayor. He retired in 2006.

As the new head of SCIF, however, he said he aims to reevaluate the value of the California workers’ compensation organization and its transparency.

“What we’re undertaking, inside the company, is looking at the value, reapplying the governance,” Mulryan said. “For example, for the first time having an actual CFO position that would bring in all the financial controls, all the authority levels at any level, anything having to do with finances, totally under one person,” he said.

Mulryan noted that he was responsible for bringing Stephen C. Kolakowski as interim CFO and Marjorie Berte as a management consultant to the organization.

The problem with the organization before he joined was not criminal — despite reports by mainstream media, Mulryan explained.

“The figure you have probably read, $560 million … is not missing,” he emphasized. “The question is not, ‘Is it missing?’ but rather, ‘Was that a good way to spend money?'” he asked. “In keeping the percentages and the ratios in the older contracts through the period when the fund was writing all the business it wrote, and the premium increases were so great, was it proper business etiquette to keep putting that much money into fees for the associations, or should it have been spent differently?” he asked. “We see no evidence of anybody pocketing funds, as we all wonder about that. We’re still looking, but there’s nothing yet.”

As further proof that the state workers’ compensation insurer was not that bad, he said the organization’s ratios are favorable, and it has a “very significant surplus.” If the organization were rated, he believes it would receive a very strong rating, he noted.

Nevertheless, in accepting his role as the head of the insurer, Mulryan recognizes that there are improvements to be made. “Overall, in the broad governance of it, it seemed like [there were] a lot of improvements we could make, to make things a lot more transparent, a lot clearer as to levels of responsibility,” he said.

As part of taking responsibility, Mulryan said his leadership team is hoping to get a better understanding of the group association program, the primary cause of ethical concerns.

SCIF continues to conduct an internal investigation focusing on the organization’s administrative fee program that provides discounts to group programs. The administrative fee program began in 1993 to provide group members discounts to reflect lower risk due to workplace safety programs run by the groups.

“It’s a significant part of State Fund’s business. Our plans are to keep that program in place, but also I want to know in particular, and so does the board, just where have all the fees gone on an ongoing basis,” Mulryan said. As part of that examination, State Fund hopes to have a better understanding of group program relationships and contracts.

“We want to be sure that we know what we’re bargaining for, and that we have auditable contracts that in the end, when we pay the fees on those, they’ll be services rendered and value received. That’s not always been clear enough in the past,” Mulryan said. “I think that’s one of the things that caused the board to be somewhat uncomfortable. There’s not necessarily anything wrong, other than management just hasn’t been as clear as they can be,” he added.

Ultimately, Mulryan indicated he hopes to turn the criticism of State Fund around, eventually creating a better market for consumers.

“If I accomplish anything with my team … we will make a company that will be a lot clearer as to what our objectives are. … I like to think that we’re making some progress already in that respect,” he concluded.