Hard hats and steel-toed shoes don’t usually lead to thoughts of custom boutiques. Yet for many higher-exposure and hard-to-place workers’ compensation accounts, a specialty-niche approach to managing risk is a natural evolution.
Much of the insurance industry has taken a “big-box” approach to products—and, more importantly, services—to contain costs and homogenize distribution. This one-size-fits-all delivery of policies and risk- management solutions, however, is not the best approach to customers in industries where workers’ comp premium is a major budget component.
In these industries, which include waste reduction and recycling, contracting operations involving excavation and heavy equipment, as well as select types of transportation fleets, “severity potential” naturally attracts higher rates.
Insurance buyers in these industries are faced with workers’ comp premiums that are near the top of their annual expenses, sitting just below costs of materials and labor on their financial statements.
While a new specialty-niche approach for handling workers’ comp risk makes sense for these types of insureds, from an insurance-carrier perspective the idea of launching a startup workers’ comp insurance operation in the current market—at a time when the line is producing combining ratios in excess of 115 against a shrinking exposure base—would seem counterintuitive.
Yet in spite of these tough economic conditions and a soft-market environment, we took the plunge in June 2010, when Accident Fund Holdings Inc. created Third Coast Underwriters (3CU).
At 3CU, we have assembled an experienced specialty team to provide technology, underwriting, claims and loss-control services that will proactively address the needs of our unique customer base—underserved markets with complex risks.
Our service model, distinguished by proactive workers’ comp risk management and seamless communication, is critical to long-term relationships with these insureds—helping them recognize the overall cost of risk rather than the line-item of workers’ comp premium.
While it is vital for carriers to leverage all of the expense savings that technology has brought to the industry over the last decade, we are reintroducing old-school relationships with field staff.
SERVICE ON THE JOB SITE
Each 3CU partnership begins with the loss-control visit. Team members step out of the traditional role of inspector and into the position of consultant, focused on a company’s culture and the efficacy of its controls.
The partnership continues as a joint venture with the insured’s management, addressing the ever-changing exposures of risks not generally contained by four walls. Whether they operate scrap-metal yards or make deliveries to industrial work sites, our target customers are impacted by exposures outside of their direct control—but that does not prevent them from being managed.
Most contractors’ job sites, for example, change daily as their own work progresses, and as the subcontractors around them change, creating potentially new hazards every day. Using tools such as on-site hazard analysis forms, which require review of the physical surroundings every morning via formal checklists, employees can recognize changing environments.
Issues like new holes in the floor, mud puddles and the presence of other employers working overhead are directly reviewed, and fresh plans are made daily to mitigate risks before they become causes of loss. We worked with a large drywall contractor that was able to reduce its frequency of losses by more than 50 percent using this process.
Currently, all successful insurance carriers are addressing the issues of claims management and control of medical costs. In addition to reacting to our spiraling expenses, a specialty carrier like 3CU can take the time to be proactive. Using specific experience in the insured’s industry, we can review issues such as work rules, reporting protocols and hiring practices to both prevent and mitigate losses.
For example, we have helped many of our customers develop daily sign-out procedures for their employees that confirm they have worked a safe day. This positive assertion documents safety across diverse job sites and allows for the earliest possible adjuster notice of a potential loss.
3CU adjusters also take recorded statements of most claims, even many that are notice-only—but present the potential for lost time in the future. They secure the facts as soon as possible, preserve evidence for potential subrogation, and gather witness statements by phone and in person.
This consistent investigation creates cross-functional relationships intended to limit potential for fraud and to create a no-tolerance culture in the insured’s operation. Injured employees come to recognize that they are paid fairly and quickly after their injuries are fully documented, and they know steps have been taken to prevent further such occurrences.
Strong communication between 3CU and its insureds begins at policy inception and is ongoing regardless of the size or frequency of losses. A state-of-the-art Risk Management Information System plays a key role in sharing real-time information and management tools. Cutting-edge technology allows the use of cloud computing and graphic data-sharing to meet the needs of a specialty buyer. With the ability to review treatment, litigation and return-to-work status on a single customized screen, an employer can immediately manage the return of any injured employee to productivity.
In summary, we offer an alternative for businesses that don’t need a full-time risk management professional, but whose productivity and financial health are directly impacted by workers’ comp results. Working with our agents and insureds, 3CU moves from administering a contract mandated by law to proactively improving financial results and maintaining human capital.
In an era of Internet quotes and predictive modeling, we believe there is still a place for a relationship-driven carrier.
For more on the Workers’ Compensation Market Update: