Insurance & Captive News by DeAnna E. Slater

Greenwich Associates Names Top Insurance Brokers

2010-04-15T08:18:00.000-07:00

Greenwich Associates Names Top Insurance Brokers
by Emily Holbrook on April 8, 2010
Greenwich Associates, an international research-based consulting firm, has named the winners of its 2009 Greenwich Excellence Awards for Middle Market Insurance Brokerage. More than 9,000 companies with annual sales between $10 and $500 million were asked to name the insurance brokers and carrier they use and to rate their levels of satisfaction with their providers. The results are as follows:
National Winners
1. Arthur J. Gallagher & Co.
2. BB&T Insurance Services
3. USI Holdings Corp.
4. Wells Fargo
5. Willis Group
Regional Winners

Northeast
1. Aon Corporation
2. Brown & Brown Inc.
3. First Niagra
4. Marsh & McLennan
5. USI Holdings Corp.
6. Wells Fargo
7. Willis Group
South
1. Aon Corporation
2. Arthur J. Gallagher & Co.
3. BB&T Insurance Services
4. Brown & Brown Inc.
5. J. Smith Lanier & Co.
6. Marsh & McLennan
7. Wells Fargo
8. Willis Group
Midwest
1. Arthur J. Gallagher & Co.
2. Wells Fargo
3. Willis Group
West
1. Arthur J. Gallagher & Co.
2. Lockton Companies Inc.
3. Marsh & McLennan
4. USI Holdings Corp.
5. Wells Fargo
6. Willis Group
The full list includes honorable mentions and carriers cited for broker-type servicing efforts. David Fox, a Greenwich Associates consultant, says that the award-winning brokers “have been cited by their corporate clients for their superior service in helping companies identify risks, create solutions for managing these risks and implement cost-effective coverage.”

Leasehold Interest Protection

2010-01-28T13:25:00.000-08:00

With all of the vacant commercial office buildings out in the marketplace right now, many tenants are finding it's perfect timing to renegotiate their lease and/or move to a new lease at cheap price per sqf!

Landlords who were previously asking high price per sqf are now accepting offers they never imagined just to fill the vacancy and accept some revenue.

However, as the market changes for real estate over the next few years probably after 2011, many Landlords will be seeing that they can get more revenue on those previously negotiated low leases the tenants contracted for. Landlords will be looking to those same lease agreements for the clause they are putting in now to allow them to get out of their contract later. Such as if there is "property damage" they can cancel the lease.

How does this pertain to insurance? Well, Leasehold Interest protection is an optional coverage just like business income and extra expense. If you don't own your building but have a low lease and then for some reason you lose that lease, you are forced to move and pay a much higher price per sqt. This can be very costly to the operating costs of any business.

Three conditions apply to this coverage:
1. There must be a direct property damage
2. The property damage must be from a covered loss under the policy
3. The property damage directly leads to the cancellation of a favorable lease.

The policy responds only if all three requirements are met.

Something to remembers as you renegotiate your lease and review your insurance policies it might be time to request coverage for your favorable lease.

ProfitSURE Presentation

2010-01-27T16:35:00.000-08:00

I participated in a conference call/webinar for ProfitSure today. While this alternative way to fund the expected losses of your workers' compensation program is not for everyone, it can benefit those companies who expect $300k-700MM in claims that are $0-$100,000 in value.

By using the laws that the IRS provided in 2001 and 2002 outlining Safeharbor guidelines and what is defined as risk transfer and risk sharing; ProfitSure has created a way to create a captive for your expected losses and then utilize a trust arrangment to partner with other businesses to pay out those claims.

There are a lot of options available from single parent captives, rent-a-captives, group captives, 831b captives and other arrangments like ProfitSure I think it's important to make sure your using the right option for yoru company to accomplish your future goals. If you would like additional information please contact me at deanna_slater@ajg.com

Webinar Series

2010-01-07T10:28:00.000-08:00

Does your broker offer additional resources to keep you updated with news and trends? I think it's one of the most important aspects of my job. Arthur J. Gallagher has put together a current listing of upcoming webinar's that we will be offering our clients and prospects. Check out the below list and let me know if you would like additional information and register.
1. January 27th 11a.m. CST "OSHA's Recordkeeping National Emphasis Program"
2. February 25th 11a.m. CST "Cost Drivers for Commercial P&C Insurance 2010 and Beyond"
3. March 31st 11a.m. CST "Business Challenges for a Connected World"
4. April 7th 11a.m. CST "Environmental Insurance 101"

Impact of New Experience Modification Formula

2010-01-06T16:27:00.000-08:00

Did you know that effective 1/1/2010 that the WCIRB changed the formula for how experience modifications are calculated?

1. Claims that are $2,001-$7,000 are no longer discounted but go in "dollar for dollar". Check out the primary vs. actual column and compare those same claims to your 2009 exmod worksheet. Yikes!

2. On your larger claims the discount structure has changed, they are not discounted as much for the mid level claims.

3. If you have very large claims they are now maxed out at $7,000 and discounted to that level.

So....what does all of this mean? Well, depending on your claim experience some of my clients exmod's went up higher by 10-15% due to the formula change alone while only a few had a reduction in the exmod due to the formula change.

Hmmmm...so the insurance commissioner doesn't allow a rate increase but authroizes a change in the exmod that causes rates to go up to most employers...seems pretty transparent that the insurance commissioner is running for govenor and didn't want to take the heat for a rate increase but...who would really fight or publisize a change in the formula. Gotta love California Workers' Compensation!

Switching Gears

2010-01-06T15:13:00.000-08:00

It's 2010 and I can't believe it! To hit the New Year hard I'm revamping my blog and hope you will enjoy it!

To broaden the scope of information and updates I'm not only going to focus on information about captives and alternative insurance products but additional information on what the industry is doing and updates in general that my clients and future clients might find helpful.

I hope you enjoy these new changes for the year and happy to hear any feedback!

Officially "No Rate Increase" for 1/1 WC Rates

2009-11-10T08:14:00.001-08:00

Can it get any more political in California? Even though the actuaries indicate pricing needs to go up due to escalating medical costs, the Insurance Commissioner,Steve Poizner yet again announced he recommends NO pure premium rate increase for 1/1.

I continue to see the standard market be very competitive for pricing which has left some people considering only the short term "cheap rates" as a positive for this renewal period.

Only a handful of businesses qualify for a captive and by speaking with prospects who only focus on the short-term costs associated with their insurance program and not looking long-term for a way to control their costs it tells me a lot if the company is a "good" fit for a captive or not.

Companies that tend to look at today's rates with little thought to the underpricing and out of control rates that are soon to come will feel left behind when their competitors make strategic decisions today to help their bottom line tomorrow. Think Big.

Minimum Premium

2009-10-12T14:07:00.000-07:00

Minimum Premium for a construction group has dropped down to $75,000. With payrolls down and premium being down, many large contractors are finding that they don't meet the minimum premium to join a captive. Now there is an option if you are small now, but know when things pick up you will have a lot more payroll. Great time to get in a captive.

Governor Signs new WC Bills

2009-10-12T13:59:00.000-07:00

News alert came across today that the Governor has signed new WC Bills that could increase costs for the private sector(surprised?). Below is a brief recap.

AB 483: Requires Department of Insurance and WCIRB to create a website where viewers can find out if an employer has workers' comp insurance.

SB 186: Allows employees to continue pre-designating their own physicals by deleting the provisions December 31, 09 sunset date.

AB 361: Prevents employers from refusing to pay for medical treatment to injured workers if the employer had approved those services prior to the time of treatment.

AB 1093: Prevents an Insurance Company from denying a claim for an injured worker if a 3rd party (somebody other than the employer) caused injury or death to the employee based SOLELY on an immutable characteristic (such as race).

Back on American Soil

2009-08-27T14:06:00.000-07:00

Just arrived back from Vancouver, B.C. What an amazing city to have a board meeting. I highly recommend a visit to this city and it's very family friendly. I wish I had brought my husband and daughter as Stanley Park was amazing!

Anyway...the board meeting itself was very productive. An interesting topic was this particular group captive will no longer accept BOR's in the program. I think this is a good thing as sometimes you can get a rouge agent in there trying to steal other people's clients away just because they are "closer". The last thing you want is a bunch of agents fighting so I thought it was a great move.

Many of my clients won safety awards. The commitment to safety was obvious when discussion on attending risk control workshop and upcoming topics was discussed. In these times the smart business owners continue to invest in safety and aren't willing to peel this layer away from their organization.

Other than that is was small topics here and there, reinsurance rates seem to be increasing a little but due to shrinking premium size (payrolls are way down) it's to be expected.

Board Meeting

2009-08-21T09:56:00.000-07:00

I'm preparing to fly out for a captive board meeting this Sunday to be held in Vancouver, B.C. Canada

The meetings are always a great opportunity to network with members and share ideas. In particular this meeting is made up of Artisan Contractors in California. I hope to hear that business is picking up for them. This group is also trying to grow outside of California which would be a great opportunity.

At the meeting we are discussing the upcoming renewal and voting on the approving the renewal numbers which are effective 10/1/09. No dividend distribution expected although we will be analyzing the IBNR. Should be a great meeting!

WCIRB filed another Rate Increase

2009-08-20T10:33:00.000-07:00

WCIRB filed another recommended rate increase of 22.8% effective 1/1/2010.

With the July 09 rate increase rejected by the insurance commissioner, it's doubtful this one will be allowed to pass through as well. However evidence continues to show that medical costs are escalating and the loss ratios of carriers continues to increase.

Even if premiums stay low, it's now the time to start considering other options to give your insurance program stability and control. A Captive allows you to fund your own losses and experience the underwriting profit and investment income that insurance companies typically take for themselves.

Workers Comp Kit Benefits Captive

2009-08-03T17:04:00.000-07:00

A captive manager with 50 electrical contractors invited Workers Comp Kit® to give a presentation about assessing workers comp post-loss claims management best practices by employers at their annual meeting. As pre-work for the conference, each of the 50 captive members took the assessment on Workers Comp Kit®, and received a National Workers' Compensation Management Score and List of Recommendations for improving best practices in their workplace. This took each member approximately 30 minutes to answer a series of on-line questions.

As members of the same captive, their scores and recommendations were compiled so we could evaluate how well the group as a whole had performed. Scores ranged from 58-92. The Gap Analysis indicated that none of the captive members currently had an employee brochure, a communication piece that helps educate employees about workers' compensation procedures and a key to keeping employees in the loop if they are injured.

This gap was used as an opportunity for improvement in a group training exercise that worked as follows. The captive members were broken down into small groups of 8 members. The group as a whole was given a template for an employee brochure from Workers Comp Kit®. Each small group was assigned the task of customizing one section (2-3 paragraphs) of the brochure for their industry, then the captive manager had their art department design professional artwork for the cover and the distribute the enhanced, customized industry-specific brochure to each member of the captive for their own use. On the cover of the brochure space was denoted for each company to insert their name and logo. On the rear of the brochure, workers' compensation coordinator contact information was included.

In the past, it would not have been possible to determine gaps for a group this size; however, with the automated tool kit, this was all done within a couple hours.

Thus, within a few days each captive member knew what best practices they were missing and had begun to make changes -- starting with the design and development of a customized employee brochure.

Author: Rebecca Shafer, J.D. Rebecca designs and develops workers' compensation cost containment programs, and is the developer or Workers' Comp Kit, an on-line automated tool kit with an assessment, benchmarking and improvement plan. Rebecca can be contacted at: 860-786-8286 and email: RShafer@ReduceYourWorkersComp.com www.ReduceYourWorkersComp.com

Rebecca ShaferRisk Consultant/AttorneyAmaxx Risk Solutions, Inc. 1-860-786-8286 (office)1-860-456-5540 (home office)1-860-456-5541 (fax)1-860-280-6141 (cell)www.ReduceYourWorkersComp.com http://blog.ReduceYourWorkersComp.com Follow on: www.Twitter.com/WorkersCompKit.com
For more information about my workers' compensation cost containment program, read the feature article in Risk Management Magazine, "Treating the Whole Elephant" by Rebecca Shafer, Esq

Deal or No Deal? Sale of State Fund to generate $1B in Revenue

2009-07-16T08:05:00.000-07:00

Rumors have been swirling for the past few months that the sale of "part of" State Fund's assets could potentially generate over $1B in revenue for the State of California.

The rumors continued today, as it was disclosed by the Workers' Comp Executive News Desk that "as part of the ongoing California state budget negotiations the 'Big 5' agreed over the weekend that the bill directing the Department of Finance to sell parts of State Compensation Insurance Fund is - repeat - is going into the budget. Highly placed sources near the budget negotiations told Workers Comp Executive that the sale provision allows the legislature and governor to use the prospective $1B in revenue as income to balance the budget. It is as if the funds were real. But the funds are not real.

Beyond the insurance ramifications, as a citizen of California I'm wondering..."if we are relying on $1B that we know is not going to be there int he budget, what kind of budget is that"?

Only in CA.

Eight Reasons To Consider a Captive to Reduce Workers Compensation Costs

2009-07-16T07:34:00.000-07:00

A Captive is an insurance company providing insurance to and controlled by its owner(s).
Workers’ Compensation is the line of coverage making the most sense to participate in a captive since there is long lag time when the claim is actually paid out and closed.

There are Eight Top Reasons to Consider a Captive

Returns underwriting profits and investment income
Reduces costs
Improved risk management
Control over insurance destiny
Multi-state capabilities
Addresses coverage or administration issues
Improves cash flow
Tax efficient vehicle with offshore and onshore domicile options

Let’s consider Reason #1
Return of underwriting profits and investment income is often the number one reason companies consider a captive as an alternative for their workers’ compensation insurance. After paying their premium and final audit billing they count the dollars spent and scratch their heads when they look at the dollars they had in claims for the year and ask this question:

Why would they pay say $300,000 in premium to an insurance company when they only experienced $50,000 in claims?

An all to frequent scenario leaves a company feeling they are leaving money on the table. The underwriting profit is historically what the insurance company expects to earn on an account after they pay out losses and spend their operating costs. If they can’t make an underwriting profit . . . how do they stay in business? Investment Income is the reason insurance carriers stay in business! However with the market having a bit of a tough time and insurance carriers unable to make a profit on their underwriting or their investment income, they are left with only 2 options:
1. Keep rates low and go out of business (some are making this choice).
2. Increase rates to start making an underwriting profit.

In a captive, a company pulls out of this insanity and pays premiums based on your OWN history not the industry performance.

You stop subsidizing your competitors and fund your own claims and in a Group Captive arrangement might risk share with other quality companies not Joe Somebody down the street.
You earn investment income on YOUR dollars sitting in your fund to pay out your claims and don’t let the insurance company take away the earning potential of your dollars.

Typically 3 to 4 years after the policy term ends, you reap the rewards as a business owner of the performance of your company’s performance and receive a dividend. A pretty good reason, wouldn’t you think!

Captive Options

2009-07-09T10:38:00.000-07:00

In speaking with employers who are familiar with captives, I find it fascinating the various structures of different captive programs that are out in the marketplace. How a captive is structured will dictate the risk to the employer and operating costs.

As a consultant, I relish the opportunity to compare captive programs and delve into them in more detail. Often when I talk to an employer they will say..."yeah I looked at a captive last year and it didn't make sense for us", upon further review what they looked at was not a captive at all but some other alternative.

When in doubt of what is a captive and the different types of captives and how they are structured, always delve into the details and find out as much as possible. I always tell my clients the worst aspects first and the risk that they are exposed to rather than "all of the money they can save".

Poizner Rejects Rate Increase

2009-06-23T14:36:00.000-07:00

News came out yesterday that CA Insurance Steve Poizner has rejected any type of proposed rate increase recommended by the WCIRB.

Seems to be a day late dollar short considering July 1st renewals all reflected rate increases from insurance carriers. The position of the insurance commissioner is that carriers are not doing enough for cost containment and can find more efficiencies in their operations.

Apparently, the skyrocketing medical costs, lack of investment income and underwriting losses mean nothing to the insurance commissioner.

This recommendation from my perspective seems to be purely political considering we all believe Mr. Poizner will be running for Governor in CA and does not want to have a rate increase on his hands.

15% Rate Increase for State Fund

2009-06-01T14:29:00.001-07:00

It was announced today that State Fund is filing for a 15% rate increase effective 7/1/09.

This rate increase by State Fund was lower than the recommended 24% rate increase by WCIRB however exceeded my personal expectations.

Other carriers have been ranging 4-10% and ICW really surprised us on Friday by letting us know that they will not be have any rate increase on July.

It seems the market is still very competitive in the standard market even though they continue to experience underwriting and investment losses.

Visited a prospective captive client today and they see that rates are going up and looking to join a captive to get more control over their insurance program.

It's always fun to speak with employers about options especially as we see rates trending upwards.

WC rates in the Standard Market Increase as Carriers file for 7/1

2009-05-21T08:10:00.000-07:00

In the Alternative Insurance Market, pricing is primarily determined by the companies own performance. Some of the operating costs might increase as reinsurance rates increase but for the most part, the employer has control over their own costs by controlling their own claims.

Untrue in the standard market. It was announced today that Workers' Compensation Carriers in CA are not waiting for the Insurance Commissioner to decide if the WCIRB recommended 23.7% rate increase in appropriate.

With 7/1 quickly approaching, here is the most current filings and what to expect in the standard market for rate increases:

Zenith: 4% rate increase
Berkshire Hathaway (Oak River/Cypress)10.3%

As various insurance carriers come through the office to talk, it's clear that most everyone is taking rate increases it's just a matter of "how much?"

In fact, Employers Direct who has been a direct writer with employers and not partnering with agents is discussing the possibility of much larger increases due to their poor combined ratio. In addition, they are expected to revisit their distribution model and might start partnering with the brokerage community.

Top 8 reasons a company should consider a captive?

2009-05-20T11:24:00.000-07:00

1. Returns underwriting profits and investment income
2. Reduces costs
3. Improved risk management
4. Control over insurance destiny
5. Multi-state capabilities
6. Addresses coverage or administration issues
7. Improves cash flow
8. Tax efficient vehicle with offshore and onshore domicile options

Workers' Compensation Rates...Still no news

2009-05-18T17:02:00.000-07:00

As I speak with employers everyday they are in a wait and hold position. While they like the idea of doing something "different" to fund their insurance program, there is still too much uncertainty.

Employers often say, "Were happy, our rates are cheaper than they have been, but we hear they might be increasing".

Yes, its true that rates are expected to increase come 7/1. In the meantime I continue to plant the seeds that there are viable options out there for companies who are sick of subsidizing their competitors and ready to plan for the future.

There are lots of options out in the marketplace however, the captive vehicle provides an excellent way to fund your insurance program in a tax efficient way.

More Turmoil in the Standard Market

2009-05-15T08:48:00.000-07:00

Today, it was announced that Governor Schwarzenegger is proposing to sell the State Fund Book for over $1 billion dollars to help eliminate California's budget shortfall. Wow! This uncertainty along with the news of State Fund's combined ratio is 164% and suffering a $199 million

The California State Fund is considered a Standard Market. The term "Standard Market" is tossed around but often one is left wondering..."what is the standard market?"
Standard Insurance Companies are “mainstream” insurers and usually have lower premiums and regulated by state laws that restrict the amount they can charge for insurance policies. State California Insurance Fund (SCIF) is one example of a standard market. Right now the standard market is where roughly 49% of all insurance premium dollars are spent and that slice is getting smaller. Why wouldn't it.

The solvency of insurance carrier's is important and privatizing State Fund which is the insurer of last resort offered by California leaves little room for comfort in these uncertain times.
While some question the viability of Alternative Insurance Products, Standard programs aren't performing nearly as well and seem to be the underperformers in comparison. Alternative Insurance Products are for the best companies looking to gain control, not companies that have combined ratios of 164%

Offshore Tax Changes Remain Intact for Captives

2009-05-14T13:34:00.000-07:00

The recent Obama tax proposals were outlined earlier this week that clarified how it would not impact foreign insurance companies. The plan outlined by President Obama reaffirmed "that the proposals don't include a plan to limit foreign insurer's ability to re-insure their own policies...This is a victory for foreign insurers" WSJ.

Some believed that the tax advantage of a foreign domiciles captive would be eliminated with the new focus of eliminating the loop holes in the Offshore Tax System by the President and Congress.

Price vs. Cost

2009-04-20T13:58:00.000-07:00

As a Business Owner...you can ALWAYS find a lower price, but at what COST?

Is the money you pay for your insurance policy really the total "cost" you pay to manage your risk? The simply fact is "NO". The below link is a great article outlining what the total cost is. However, for synopsis, when looking at your insurance program you should take into consideration these other factors beyond price to compute your "Total Cost of Risk"

http://www.mynewmarkets.com/article_view.php?id=99743

1. Deductibles/Retentions
2. The cost of the loss that is uninsured or basically "self-insured"
3. Legal Costs
4. Loss Control/Safety Costs
5. Claim Management
6. Opportunity Costs

Show Me The Money!!!

2009-04-17T16:57:00.000-07:00

Dustin & Tina Graham with Graham Concrete Construction, Inc. were happy to show off the dividend check they just received! As owners of their own insurance company they reaped the profits that otherwise would have stayed with an insurance carrier.

After being in the program for over 5 years they look forward to what the next 5 years will hold for them! Congratulations Graham Concrete on all of your hard work in preventing those WC Claims!

Checking the Mailbox

2009-04-08T14:42:00.000-07:00

The Dividend Checks have been sent out for another one of our captive programs and they couldn't arrive soon enough!So rewarding to receive your own premiums back after all of the hard work many companies put into their safety program!

Captive Member Talks about Their Experience

2009-03-31T13:56:00.000-07:00

One of the amazing attributes about a group captive is how the members are the biggest advocates to grow their own insurance program.

By growing their insurance company with other really proactive and safety conscious companies they help drive down their own expenses as well as attend board meetings with some of their best friends.

In a recent visit with a client, Scott Barnett, the CFO with Advance Beverage, Inc a large Beer Distributor in Bakersfield, CA spoke about his experience working with me and the captive. Enjoy!

Good Bye Soft Market?

2009-03-30T08:00:00.000-07:00

For the last two years, I've watched my construction client's payrolls dwindle to about 1/3 of what they use to be. It's insane to watch what this economy is doing to employers who are hard working and wanting to take care of their employees. Another blow was announced to many of my clients last week when the WCIRB announed a rate increase of 24.4% for workers' compensation rates on 7/1/09! This is the worst time possible for employers to absorb these additional costs.

It got me thinking...my clients who participate in captive programs where they become an owner of an insurance company are immune to these crazy market fluctuations. At the board meeting in Mexico last week, the captive voted to declare over 5 MILLION in dividends to the owner members! That is better than the projected rate increase that other employers will be receiving if they stay in the fully insured market. Dividends like these for my clients make insurance exciting and a huge opportunity for employers to control their costs! I can't wait until the dividends start to arrive in about 2 weeks!

register

2009-03-29T14:58:00.001-07:00

Trying Something New for Different Results

2009-03-29T13:47:00.000-07:00

Okay...So I'm not your typical insurance agent who wants to quote and beg to bid on your insurance. There are plenty of agents out there willing to waste their time and your time to do that. I want to blog about a solution that has aided over 30 of our clients to build over 25 MILLION in equity over the last five years and last year alone receive over 4 Million in dividends.

I've chosen a different path for my career. One in which I help my clients succeed in their business's by giving them a alternative way to fund their insurance program through a captive.

I know...I know...what in the world is a Captive?

Simply...A Captive is an Insurance Company that provides insurance to its owner members.

This blog is dedicated to my pursuit of finding and connecting with employers who are...

Sick and tired of having no control over their insurance costs.
Fed up with getting their renewal pricing at the last minute and feeling like they have no options.
Ready to keep the profit that insurance companies have been making off of them and to earn investment income off of their own dollars.

How do I find these employers? Well, beyond cold calling which I can say is not the most effective way and member referrals, I figured I would try something new...Blog!

My goal is to blog about what I'm seeing in the market and what my captive clients are experiencing. Giving employers a new insight into the insurance world so they feel empowered to make decision.

I hope over time that if you are interested in learning about a captive or other alternative for your company you will shoot me an email. I'm here to help!