Here’s how to find the right workers comp carrier [Central Penn Business Journal (PA)]

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No matter how big company gets, cost remains driving force, broker says

Like just about all facets of business, several factors should be considered when choosing or retaining a workers compensation carrier, insurance professionals say.

As an insurance broker, Robert Thomas needs to know the best places in the market - in terms of price and service - to fit his clients' individual needs.

Thomas is a Cumberland County broker for Baltimore-based RCM&D. He works primarily with health care companies as they renew their workers compensation policies or head out into the market to potentially find a new carrier.

During a time when health care costs are driving up insurance premiums, a carrier's claims service and loss-control department are among the most important elements to consider when evaluating or re-evaluating that part of a company's expenses, Thomas said.

"The bigger you get operationally, the more claims you are going to have," he said. "You want a carrier that is pushing for claims resolution."

Having loss-control resources available through the carrier to help curb the number of workplace incidents - maybe they provide on-site safety training, for example - is equally important as companies look for ways to save money and maintain current staffing levels, he said.

"If you are delivering good services, people generally will pay a little extra to keep you," Thomas said. "If you're not delivering, you could be going out the door for a dollar."

The bottom line when it comes to workers compensation insurance and insurance in general: It's still a costdriven decision.

"(Companies) want to make sure they are getting good service," he said. "In the current economic environment, a lot of times it comes down to cost. People are trying to cut where they can. And for some clients, who rarely have a claim, it's basically a commodity."

The commodity shoppers generally are the smaller accounts with less than $10,000 to $15,000 in workers compensation coverage, he said. They typically have limited claims and very few employees.

Companies shopping for new carriers every year also fall in that commodity buyer category, Thomas said, which can lead to more conservative underwriting.

"I don't like shuffling insurance companies just for the sake of change," he said. "There is some value in a relationship and stability. If you are being treated fairly, maybe shop it every three to five years just to benchmark. There is value in continuity."

Carriers weigh in

Controlling workers compensation costs through effective claims management was among the top points made by HM Insurance Group, a member company of Pittsburgh-based Highmark Inc., and Lancaster-based Eastern Insurance Holdings Inc.

"Your carrier should be committed to working with you on prevention and an aggressive claims management strategy," said Matt Piroch, senior vice president of workers compensation for HM Insurance.

An integral part of that is to have tested and sophisticated loss control capabilities, which allows the carrier to be in the field at employer locations, he said.

"You need to be thinking about every opportunity out there," Piroch said. "You have to be committed to the outcome."

It's important to be meeting with the carrier on a quarterly basis to evaluate whether the outcomes are appropriate, he said.

HM Insurance has been averaging 7 percent to 8 percent decreases in claims costs for three years, Piroch said.

"You should be looking to your carrier to provide detailed reports of outcomes of physician care taking place," he said. "Who are (employees) seeing, what are the outcomes, are physicians in or out of the network and what are the discounts? And how do those outcomes compare against industry average?"

Long-term retention is crucial, Piroch said.

"If you are doing appropriate prevention and risk mitigation, the seeds you sow today will start to (produce) results over months and years," he said.

Shopping on price alone is a risk and could mean reduced services, he added, which could lead to higher claims.

Workers compensation insurance is an art, said Kevin Shook, Eastern's executive vice president, treasurer and CFO. It has a lag to it unlike property or auto insurance, where a number can be put on a claim within a short period of time.

By specializing in this field, Shook said, he believes Eastern produces better results for its customers. Eastern Alliance Insurance Group is the company's subsidiary that specializes in workers compensation.

"Eastern always has taken a slightly different approach," he said. "We're looking at the financial statements of our large customers, what are their revenue trends, are they growing, what industry are they in and other factors."

Before writing a policy, a risk management professional is sent out to evaluate the business, said Bob Gilpin, Eastern's senior vice president of field operations and marketing.

"If we are successful in writing it, we put in a business plan to manage safety and help with needs they have. We take a consultative approach and try to understand the needs and their budget. It's not just a checklist approach."

For seasonal businesses and to help others with cash flow issues, Eastern offers a pay-asyou- go premium plan called ParallelPay. Since Eastern started it in 2009, ParallelPay has exceeded $30 million in direct written premium, Gilpin said.

The company has about $160 million in active premium, he said. HM Insurance provided a figure of $80 million.

"We can actually set it up so they are paying for their workers compensation premium as they are paying employees," Gilpin said. "We take the actual amount they are paying and do a calculation, calculate the premium and extract from their account."

Like HM Insurance, Eastern's products are distributed through independent agents.

Eastern's shares are traded on the Nasdaq under the ticker symbol EIHI.

"If you are delivering good services, people generally will pay a little extra to keep you. If you're not delivering, you could be going out the door for a dollar."

Robert Thomas, RCM&D

What to look for

Here are some factors to consider when selecting a carrier for workers compensation:

* Is the carrier a single-state or multistate carrier?

* Is it a specialist in workers compensation or can it also write property, liability and auto insurance? Specialists tend to be more aggressive on price, Thomas said. As accounts get bigger, the approach to packaging polices tends to go away.

* Are there specific jobs or industries it tends to avoid?

* For large deductible policies, what are the charges for claims administration and excess insurance as well as the collateral requirements?

* What is the carrier's financial rating?

Source: Robert Thomas, RCM&D broker

BY JASON SCOTT

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