Why James River Insurance Dumped Uber Account

Interesting article published today out of the Insurance Journal by Suzanne Barlyn about insuring Uber.  Not surprisingly, carriers continue to be perplexed with gig-economy exposures.

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A Bermuda-based insurer that recently severed ties with an Uber Technologies Inc. affiliate said on Thursday the risk of providing driver ride-hailing coverage had become too great and that it had mispriced policies during its initial years on the account.

James River Group Holdings Ltd said on Oct. 8 it would cut ties with a unit of Uber, its largest client, and cancel all related policies as of Dec. 31 this year.

Florida was an “outsized contributor” to the insurer’s Uber problems, especially in 2016, given a large number of uninsured and underinsured motorists, said James River Chief Financial Officer Sarah Doran in a call on Thursday with analysts to discuss its third-quarter financial results.

The insurer cut back on its exposure to Uber’s Florida market in 2017, Doran said.

James River boosted its cash reserves by a total of $57 million during the 2019 third quarter. Of that, $50 million was for 2016 and 2017 losses stemming from its Uber account, the insurer said.

James River late Wednesday said it withdrew $1.2 billion in funds held as collateral in a trust created by an Uber affiliate to cover current and future claims.

Insurance is one of the largest expenses for ride-share companies, an issue that many analysts cite as a risk for the ride-share industry’s profitability.

“In Uber, we wrote a new type of risk that originally seemed to be highly profitable,” J. Adam Abram, James River executive chairman and chief executive officer, said in the Thursday call.

But the nature of that risk changed as Uber rapidly expanded into new regions, added tens of thousands of drivers, and moved into other business lines, Abram said. Uber’s businesses now include food delivery and freight.

“Candidly, in some years, we mispriced the risk,” Abram said.

James River’s poor results for its Uber account in 2016 and 2017 spurred it to negotiate a “substantial pricing increase” for 2018 and charge similar rates for 2019, Abram said.

James River bought reinsurance for a third of the Uber account in 2019, but does not expect profits on the account for 2018 and 2019 to offset earlier losses, Abram said.

A new California law designed to limit the use of “gig” workers ultimately swayed James River to cancel the Uber account, despite coverage now being “well-priced,” Abram said.

The law, which goes into effect on Jan. 1, 2020, spells out when companies must treat “gig economy” contract workers, such as ride-hailing drivers, as employees. “We believe (it) will adversely alter the claims profile for ride-share companies,” Abram said.

James River expects to process about 18,500 Uber-related claims while winding down the account, Abram said.

DOL Issues New Salary Limits for Overtime Exemptions

OVERVIEW

On Sept. 24, 2019, the U.S. Department of Labor (DOL) announced a new final rule that updates the salary thresholds that some individuals must meet in order to qualify for a
minimum wage and overtime exemption under the federal Fair Labor Standards Act (FLSA). The final rule becomes effective on Jan. 1, 2020. The final rule affects the exemptions for executive, administrative and professional (EAP) employees, highly
compensated employees (HCEs), employees in the motion picture industry and individuals who work in various U.S. territories.

ACTION STEPS

The final rule’s Jan. 1, 2020 effective date leaves little time for employers to prepare for the changes. Employers should:

  • Determine which currently exempt employees have
    salaries below the new threshold; and
  • Decide whether to increase salaries for these
    individuals or reclassify them as non-exempt
    employees.

The 2019 Overtime Final Rule

As expected, this final rule includes updates to the standard salary level for the EAP and HCE exemptions and allows employers to count up to 10 percent of an employee’s nondiscretionary bonuses and incentive payments (including commissions) as part of the employee’s standard salary level. The rule also creates special standard salary levels for the exemption that applies to employees in the motion picture production industry and some U.S. territories. The table below shows the salary levels for the EAP and HCE exemptions that will apply on Jan. 1, 2020. The final rule’s salary levels are different from the 2016 rule and the 2019 proposed rule.

Nondiscretionary Bonuses

The final overtime rule will allow employers to use up to 10 percent of an employee’s bonuses to satisfy salary level requirements if:

  • The bonus, commission or other incentive pay is nondiscretionary; and
  • The employee receives this incentive pay at least annually (during any given year or 52-week period).

The final rule also contains a “catch-up” provision that enables employees to remain exempt when their nondiscretionary bonuses aren’t enough to meet the salary level required by an FLSA exemption. Under this new rule, employers must make a “catch-up payment” within one pay period at the end of the 52-week period before losing that employee’s exempt status. The DOL has warned that any catch-up payment “will
count only toward the prior year’s salary amount and not toward the salary amount in the year in which it is paid.”

Additional Updates

The final rule sets a special salary level of $380 per week for American Samoa, and sets a special salary level of $455 per week for employees in Puerto Rico, the U.S. Virgin Islands, Guam, and the Northern Mariana Islands. The rule also establishes a base rate threshold for employees in the motion picture producing industry of $1,043 per week. This new threshold can be prorated based on the number of days the employee has worked. The DOL intends to update the standard salary and HCEs total annual compensation levels more regularly in the future through notice-and-comment rulemaking.

DOL Issues New Salary Limits for Overtime Exemptions

Latest NAPEO White Paper Shows ROI Of Using a PEO is 27 Percent

See below from our friends at NAPEO.  Solid results!!

AUSTIN, TexasSept. 17, 2019 /PRNewswire/ — The average client of a professional employer organization (PEO) can expect a return on investment – based on cost savings alone – of 27.2 percent, according to a new study released today by the National Association of Professional Employer Organizations (NAPEO) at its annual conference in Austin.

Conducted by noted economists Laurie Bassi and Dan McMurrer of McBassi and Associates, the study is the seventh in a series. Previous research by Bassi and McMurrer examined the benefits of using a PEO, finding increased profitability and growth, higher employee satisfaction, and lower employee turnover for companies that use a PEO.

The new report focused solely on costs and calculated savings for PEO clients in five HR-related areas:

  • HR personnel costs
  • Health benefits
  • Workers’ compensation
  • Unemployment insurance (UI)
  • Other external expenditures in areas related directly to HR services (payroll, benefits, etc.)

The average cost savings from using a PEO is $1,775 per year per employee, according to the study, which also reinforced the findings of earlier research, again showing notably lower employee turnover, higher rates of both employee and revenue growth, and enhanced employee benefit offerings.

“We have known for some time now that using a PEO is good for a company in a variety of ways, and we now have a compelling and impressive number on the actual ROI of using a PEO,” said NAPEO President & CEO Pat Cleary. “When you put this new data on costs savings and ROI together with the data we already had on business growth, turnover, survival and employee satisfaction, it’s clear that there really is no better value proposition than PEOs in the HR space.”

PEOs provide HR, payroll, benefits, workers’ comp, and regulatory compliance assistance to small and mid-sized companies. By providing these services, PEOs help businesses improve productivity, increase profitability, and focus on their core mission. Through PEOs, the employees of small businesses gain access to employee benefits such as 401(k) plans; health, dental, life, and other insurance; dependent care; and other benefits typically provided by large companies. A copy of the full study is available here.

About NAPEO
The National Association of Professional Employer Organizations (NAPEO) is The Voice of the PEO IndustryTM. NAPEO has some 250 PEO members that provide payroll, benefits, and other HR services to between 175,000 businesses employing 3.7 million people. An additional 200 companies that provide services to PEOs are associate members of NAPEO. For more information, please visit www.napeo.org 

SOURCE National Association of Professional Employer Organizations (NAPEO)

Big Data – AI/ML Predictive Analytics and the Potential for PEO

We hear it all over the news “BIG DATA”, “MACHINE LEARNING”, “ARTIFICIAL INTELLIGENCE”, but what does it really mean and more importantly, what does it mean for your PEO?

Big data is a phrase used to describe an extremely large data set. Take NCCI for example, they are what we would consider “big data” for the PEO industry due to sheer amount of claims and exposure data they posses for the states they administer.

But what does big data mean to you? Find out more at the NAPEO breakout session on Tuesday from 3:45-4:45!

Big Data – AI/ML Predictive Analytics and the Potential for PEO
Sheldon Brechtel, Jr., Executive Vice President – CIO, CCMSI
John Harman, SVP PEO Solutions Group, Aon
Paul Hughes, CEO, Libertate Insurance, LLC
Chase Pettus, Predictive Analytics, Gradient A.I.

 

If you’d like to know more about what is going on at NAPEO, see the schedule here!

NAPEO19 Annual Conference & Marketplace

September 16-18, 2019

The conference planning committee continually strives to improve the content of the conference and this year will be better than ever!

From an educational point of view, there will be three tracks:

  • PEO Operations: This is new for 2019. Thanks to NAPEO’s Conference Chair Norman Paul, we have designed a new and ongoing focus to help PEOs improve operationally with instructional guidance in the areas of payroll, workflows, and overall efficiency.
  • Compliance: This topic is not only important to PEO customers, but to the liability of PEOs. The landscape and requirements are ever-changing and NAPEO’s staff and committees are staying on top of this to make your lives easier and reduce liability. This track will keep you abreast of the latest changes in the law and how best to navigate them.
  • Growth: Now is a great time to be in the PEO industry. The industry is growing and the market is embracing PEOs and outsourcing HR functions. NAPEO has been hard at work creating tools for our members to increase awareness and drive home the value of PEOs. In addition, your industry colleagues will be sharing their best practices about what works for them to grow their PEO’s.

Look forward to seeing everyone there! Check out the below link for more details on this years Conference.

https://www.napeo.org/annual-conference-2019

California Rating Beaurau looks to Lower Rating Thresholds, Classification Changes & More

Please see the attached article about the proposed workers compensation rule changes in California.

https://www.wcexec.com/flash-report/compline-to-provide-2020-x-mods-daily-plus-lower-rating-thresholds-classification-changes-more/

Since 1982 Compline has proven to be a reliable, responsible and reasonable resource in California.  Their ongoing responsiveness to legislative changes in the state speaks to their continuing value.  Libertate is a proud subscriber to Compline.  We access and utilize their portal for a number of great resources, such as Modwatch, Lead Generation, Pure Premium Behavior Metrics, Strategic Rate Comparisons, Carrier XMOD Comparisons , Carrier Territory Rate Mapper and much more.

We will continue to keep our eye on the changes occurring in this state and are committed to keep you informed.

If you feel your PEO could benefit from an analytical analysis, in CA or elsewhere, please don’t hesitate to reach me at 321-436-8214.

Report: California Workers’ Comp Medical Payment Trends Fell in 2018

NAPEO is right around the corner!  While in Austin, there’s certain to be quite a bit of discussion around claims trends throughout the country.  That said, I found the some interesting news out of California from the Insurance Journal regarding the continued decline of medical payments, number of claims and paid medical transactions.

See you in Austin!

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Medical payments in California’s workers’ compensation system continued to decline in 2018 as the medical payments per claim decreased, according to a report from the Workers’ Compensation Insurance Rating Bureau of California.

The WCIRB released its California Workers’ Compensation Aggregate Medical Payment Trends report comparing medical payment information from 2016 to 2018.

The report also includes an analysis on utilization and cost of opioid prescriptions over time and by region.

Other findings in the report include:

  • The medical payments for pharmaceuticals and to pharmaceutical providers declined sharply.
  • Physical therapy services experienced the largest increase in the share of medical payments driven by increases in both service utilization and paid per service.
  • Physical medicine and rehabilitation procedures continued to grow the fastest within all physician services and use of anticonvulsants increased more significantly than any other therapeutic groups.
  • Opioid prescriptions and costs declined significantly, mostly driven by fewer claims involving opioid prescriptions. In addition, average doses of opioids prescribed dropped sharply as did the concurrent use of opioids and sedatives.
  • Fresno, Bakersfield and Tulare areas had the highest share of claims involving opioid prescriptions, while the Silicon Valley area and the Los Angeles Basin had the lowest share.

Another WCIRB report issued this week showed a new drug formulary put into effect by the California Division of Workers’ Compensation over a year ago may be working as intended.