Workers’ Compensation Solutions for the Independent Agent

May 2008

WORKERS' COMP, SPECIAL SUPPLEMENT; Service Strategies In A Soft Market; Pg. S-8

1349 words

Workers' Compensation Solutions for the Independent Agent

By Terri Stevens, Senior Vice President/Marketing, Majestic Insurance Company; Terri Stevens is senior vice president/ marketing with Majestic Insurance [email protected].

The workers' compensation market in the state of Florida remains surprisingly soft, and it appears that this trend will continue to linger for the foreseeable future. Over the past four years, rates have decreased cumulatively by over 50 percent, and the competition to attract and retain policyholders is extensive.

Presently, there are approximately 240 companies writing workers' compensation in Florida, in addition to four self-insurance funds and numerous PEO and ASO organizations vying for each and every risk.

With competition this intense, how can an agent make the best decision for the policyholder? In addition to being concerned about making the right recommendation to a client, agencies are faced with challenges of their own. Agency revenues are impacted significantly in a soft market, due to a downturn in the economy that has resulted in decreased payrolls and decreased workers' compensation rates. It becomes easy for the agent to be lured by high commission levels, incentive trips and opportunities to offer clients liberal dividend plans and low or no down payment options. These opportunities may be "quick solutions" in the short term, but if a carrier is unable to provide the disciplined services that are necessary for a policyholder to earn the promises of big dividend returns that were made at the time of the sale, the end result will be disastrous. The carrier, the agent, and the employer will need to be prepared for disappointment.

The best place for an agent to begin the workers' compensation selection process is with the beneficiary -- the employer. An agent needs to remain resilient in such a tough, soft market and make decisions that will provide long-term benefits, not only to the employer, but to the agency as well. So what does an agent need to evaluate when choosing the best option for the employer? The following are a few areas to review when making recommendations to a risk.Select a Carrier with an "A" Rating

The first step is to choose a stable workers' compensation carrier. Look for a carrier the offers an A.M. Best "A" rating. This will identify that the carrier is financially stable and has the ability to pay claims in the future.

Workers' compensation was once a tough line for most carriers, but recent trends due to the reform have returned healthy profits. In order for the carriers to remain profitable and stay committed to offering workers' compensation in the state of Florida, emphasis will need to remain on underwriting profitability.

This cannot be maintained without careful attention to the disciplines critical for workers' compensation management: pricing consistency within a prudent underwriting model, comprehensive yet compassionate claim/care management with an emphasis on returning the injured employer to work as quickly as possible, focus on fraud and reduced litigation, and of course, providing the employer with a risk management/loss control program that will reduce frequency of workplace injuries. Elevated levels of service in key areas of discipline should be the focus of a service strategy in a soft market.Evaluate Claim/Care Management Offered

There is no substitute for effective claim/care management. Recent statistics show that medical costs continue to rise, and with rates falling and the economy showing signs of increased stress, it is predicted that workers' compensation losses will be on the rise. Therefore, it is extremely critical that a carrier be carefully evaluated for the claim/care management that will be offered to an employer.

When selecting a carrier, identify several key areas of the claim/care management services that will impact the performance of a program. First, inquire about case count per adjuster. Ask about tenure as well as how an adjuster is evaluated on his/her performance.

Identify how pharmacy is administered -- reducing the prescription of narcotics and lowering pharmaceutical costs at the onset of a claim can have a powerful financial impact on the resulting cost.

Evaluate the managed care component of the program. A successful managed care network will provide a substantial decrease in the medical and overall case costs per injured employee, as well as provide a team approach to allow the injured employee to return to work as quickly as possible. Networks that are occupationally focused and committed to understanding the specific needs of the workers' compensation patient are the most effective in reaching a common goal.Emphasize Loss Control/Risk Management

Recent industry trends for "high volume, low touch" service have led to web-based alternatives for employers to provide loss control/risk management solutions. Providing a safe work environment for employees is not virtual -- it is a tangible reality and should not be overlooked for the sake of profitability. Outstanding risk management services should be able to provide an employer with "on the ground" attention to the development of safety programs, hazard communication, analysis of reported claims and oversight of risk classification, as well as recommendations for workplace safety to the employer and carrier.

Agents can provide a valuable and supportive role by being involved with the risk management services provided by the carrier. This will not only enable cost-reduction techniques to be implemented, but also provide the security that an employer needs to make certain that the work environment is protected.

By doing so, the carrier, the employer and the agent have the peace of mind that they are working in tandem to create the best possible work environment for each and every employee.Develop a Personal Relationship with Carrier

With so many carriers actively writing workers' compensation risks in the state of Florida today, it is understandable that most agents will choose the path of least resistance to place coverage. That is why it is important to develop a one-on-one relationship with your carrier partner of choice, as well as their marketing/underwriting team.

In a world of virtual consulting and increased technology, it is easy to dismiss the importance of an interpersonal business relationship. By getting back to the basics and good fashioned communication, your agency can develop strategic relationships with your carrier and their personnel to facilitate the implementation of the necessary disciplines in order to secure long-term success.

In a soft market, shortcuts to acquire and maintain policyholders will eventually result in loss of integrity and business. By maintaining high levels of service requirements, agencies will prosper in the long term by providing clients with a stable market, fair pricing, and a commitment to managing service expectations.Remain Involved with the Policyholder

It is imperative for the agent to remain involved with the employer during the term of the policy. Review loss runs on a regular basis. Identify loss trends that may impact current and future pricing. Engage in regular dialogue with the claim adjuster to help better understand the costs involved with specific exposure. Attend loss control meetings to assist the client in making their workplace a safe and productive environment for employees. Stay involved with the employer to make certain that the risk is classified properly, and that payrolls are accurate for the resulting premium calculation. Identify independent contractors and ensure that there is no exchange of labor or payments to employees under the table or to illegal workers.

An in-depth knowledge of a clients' workplace will enable an agent to engage in a long-term relationship with the policyholder, and ensure the stability of pricing with a financially secure carrier for many years to come.

The workers' compensation market may remain soft for years. But there is no substitute for the disciplines in this line of coverage that are the cornerstones for a successful and mutually profitable relationship, not matter what the state of the market or the economy.

May 7, 2008