How to extract data to price better, expand markets and improve underwriting | PropertyCasualty360

The real challenge begins when companies begin extracting meaningful insights from this explosion of data. Determining how to take advantage of all this data to price better, expand markets and improve underwriting risk and handing claims. Fortunately, the science of extracting insight from data is constantly evolving. Regardless of how much data you have, one of the best ways to discern important relationships is through data visualization.


Illinois Governor Looks to Reduce Worker’s Comp Costs

High on the list of Illinois Gov. Bruce Rauner’s legislative priorities is reducing the amount employers pay for workers’ compensation insurance.

Illinois currently ranks 7th nationwide for the highest cost per $100 of salary, according to the Oregon Department of Consumer and Business Services, according to Rauner.

He said one of the reasons for high costs is that Illinois compensates workers for injuries that are related in any way to their job. Rauner wants to raise that standard so workers only would be compensated if an on-the-job accident is more than 50 percent responsible for the injury.

Workers comp sector improves on higher pricing and improved underwriting | Business Insurance

Higher pricing and improved underwriting are credited for workers compensation insurers’ better financial performance in 2014, after years of struggle.

The industry’s financial turn-around from the lean years of 2010 and 2011 has translated into declining workers comp advisory rates in many states throughout the country.

New North Carolina Medical Fees Expected to Save on Work Comp

New North Carolina Medical Fees Expected to Save on Work Comp.

Revised medical fees approved in February by the North Carolina Industrial Commission and planned to take effect this year are expected to save the state’s workers compensation system $27 million annually, as well as encourage increased access to medical care, according to a statement put out by the Commission.

“The new Medical Fee Schedule replaces an out-of-date fee schedule and was developed in response to legislation requiring the Industrial Commission to revise its medical fee schedule to use current Medicare reimbursement rates and payment methodologies,” the Commission statement said.

Work Comp for PEOs and Their Client/Employers – Insurance Journal

Insurance Journal’s Christopher Bogg’s recent article on PEO and the provision of workers’ compensation to their client companies.  It is very informative with one of my highlights and the link below.  There is tremendous misunderstanding and this article provides good factual perspective.  Kudos!

“PEO contracts are co-employment arrangements whereby the professional employer organization and the client with which it contracts both retain some right of control over the individual worker or workers collectively. Such relationship is wholly different than a leased employee or the use of a borrowed. Leased employees and borrowed servants are under the absolute control of the special employer. Co-employment vests responsibility and control with both parties to the contract.”


Pennsylvania workers comp rates to go down nearly 6% | Business Insurance

Workers compensation advisory rates will decrease 5.99% for Pennsylvania employers on Wednesday, according to Pennsylvania Gov. Tom Wolf.

The decrease is based on a rate filing submitted in December by the Pennsylvania Compensation Rating Bureau, which said Pennsylvania workers comp claim frequency has declined during the last several years.


WCIRB Submits Lower Mid-year Filing to California Department of Insurance

WCIRB Submits Lower Mid-year Filing to California Department of Insurance.

The California Workers’ Compensation Insurance Rating Bureau on Monday submitted a July 1 pure premium rate filing to the California Department of Insurance proposing advisory rates that average $2.46 per $100 of payroll.

The average proposed advisory pure premium rate is 5.0 percent lower than the corresponding industry average filed pure premium rate of $2.59 as of Jan. 1 and 10.2 perpcent less than the approved average January 1 advisory pure premium rate of $2.74.

What Really Took Down Lumbermen’s Underwriting Alliance

“History doesn’t repeat itself, but it does rhyme.”
— Mark Twain

Our firm, Risk Transfer, has done over $2 billion of Professional Employer Organization, and Staffing Services business over the course of the last fifteen years.  We are very proud of our client’s ethical fabric, sophistication and professionalism.  We consider them family.

Logic would suggest statute, insurance departments and credit rating organizations each play a vital role in how my profession as an insurance agent is governed as well as the insurance carrier community of any given state.  The process of formal governance for insurance carriers involves the issuance, and ongoing management of “Certificates of Authority”.  This process ensures that only good people with enough money and who have proved to have the management team and platform to operate an insurer are allowed to What types of products are allowed in the given state for any specific carrier fall on statute; which is then administered through the authorities granted that carrier.  Unfortunately, I know of no state where a different size or solvency level needs to be in place to have the authority to offer a large deductible.

Just three years ago, author Jon Coppelman was kind enough to allow me a rebuttal to an article inferring that it was the PEO community that rendered another insurance carrier insolvent.

The full story here… my piece below:

I am still very appreciative for him allowing me to present a different perspective; which is the same problem today nearly 3 years later.  This is a product not an industry issue.

Follow Up – June 7, 2012

After posting, I received a call from Paul Hughes, CEO of Risk Transfer in Florida, who is quoted above. While not contesting the premise that large deductibles are poorly managed in Florida (and elsewhere), he believes that I unfairly singled out PEOs in the blog. The fundamental issue is the failure of the state to adequately regulate and oversee large deductible programs. I agree.

Please take a few moments to read Paul’s response, which employs the useful metaphor of a casino for the risk transfer industry:

“The core issue to me is the role of the regulator versus the business owner in the management of the “casino” (insurance marketplace). That is one of the parts of Jon’s article in Workers Comp Insider that blurs the line a bit on what the PEO’s role is within the casino and whose job it is to set the rules. The casino is the State as they certify the dealers to play workers’ compensation (Carriers, MGU’s, MGA’s, Agents and Brokers) and the State also certifies that the players are credible (not convicted of insurance fraud) and can pay/play by the rules of the house. The rules are set by the house and the games all require public filings – ability to write workers’ compensation (certificate of authority), ability to offer a large deductible plan (large deductible filings), agent license, agency license, adjusters license and any other deviation from usual business practices (like the allegations that one now defunct insurance carrier illegally charged surplus notes to desperate PEO’s in the hardest market the industry has ever seen). The “three-card monte” that Jon alludes to in this article is managed not by the dealers (carriers), but by the house (state). Would a real life casino consider it prudent to allow one of their dealers to expose 20% of their $5m in surplus through high deductibles sold to PEO’s with minimal financial underwriting and inadequate collateralization? Would any casino write harder to place (severity-driven) clients to include USL&H, roofers etc with the minimum amount of surplus needed to even operate a carrier…? Of course not. These “big boy” bets would never be allowed in Vegas without the pockets being deep enough to cover the losses.”

Unfortunately, it is 2015 and no states that I know of have large deductible language that addresses the inherent credit risk of the product.  A few more carriers have gone insolvent as a result of this specific issue, many policyholders with lost collateral and deposit instruments and and the claims continue to pile up on the guaranty funds.  The easy scapegoat is the PEO or Staffing Services policyholder, yet in these cases they were the consumer of a very highly sophisticated financial services product.  Taking a $1m position on your workers’ compensation program is taking a bet on 90% of your expected losses.  This is an extreme shift that deserves more attention by the regulators that manage the product.  The carrier then takes the additional bet that the losses are going to be what is expected and that the entity buying the policy will be an “ongoing concern” for the 7-10 year payout pattern associated with the payment of workers’ compensation claims.  AM Best does not factor credit risk on earned premiums so that $50m of manual premiums becomes $10-15m after the application of the deductible credit.  If the expected losses under the deductible are not properly collateralized,  “A” and “B” companies on paper one day are in run off the next.

Logic would tell us that taxpayers should not have to bail out states that create law and the insurance companies that profit under it.   Rules around credit risk for loss sensitive workers’ compensation plans must be addressed or logic will tell us the same scapegoats will keep being the target with the same issues not prevented in the future -

I will be spending some more time on this topic in the days to come — This has been an issue for far too long and deserves some additional insight.