Tackling the tough risks

Amerisafe specializes in underwriting high hazard comp

By Dennis H. Pillsbury

If you’re looking for a company to handle a small to mid-sized high hazard workers comp account, you should consider Amerisafe, a DeRidder, Louisiana-based company that has successfully written high hazard accounts for 22 years. It currently offers workers comp to target industries in 30 states, the District of Columbia and the U. S. Virgin Islands.

The company cut its teeth on one of the most difficult risks for workers comp—logging. After spending several years learning how to underwrite and manage risk for such a high hazard industry, the company branched out into other high hazard areas, including specialized construction businesses such as highway and bridge construction, building and maintenance of pipeline and powerline networks, excavation, commercial construction, roofing, and iron and steel erection; trucking; agriculture; oil and gas; maritime; and sawmills.

Today, Amerisafe, Inc., is a publicly traded holding company with more than $241 million in policyholder surplus at the end of 2007, up from $196 million at year-end 2006. This strong growth in surplus continues a trend that started in November 2005 when the company’s initial public offering resulted in a capital infusion of $45 million. Last year, net income was $50.2 million on gross premiums written of $327.8 million, compared with net income of $37.4 million on gross writings of $332.5 million in 2006.

The company is the parent of American Interstate Insurance Co. and its wholly owned subsidiaries, Silver Oak Casualty and American Interstate Insurance Co. of Texas. Business is produced through some 2,400 independent agencies and a wholly owned subsidiary, Amerisafe General Agency. It specializes in writing small to mid-sized accounts with $40,000 or less in annual premium, although it does write larger accounts.

“We like agencies with just a few accounts or ones with a focus that matches ours,” says C. Allen Bradley Jr., chairman, president and chief executive officer of Amerisafe Insurance Group. “And we offer an incentive to those agencies that submit business for our consideration in the form of higher commission rates based on the volume of business submitted. We don’t penalize agencies if we are unable to write the business. We want agencies to consider us first when they have a workers comp need in a high hazard industry.”

Responding to agents

“We also have implemented a number of initiatives designed to facilitate ease of doing business,” Allen continues. “This followed focus groups with agencies in 30 states to find out what they like about us, as well as areas where we could improve.”

One of the efforts designed to make it easier for both clients and agents to do business with Amerisafe is the monthly payment option that allows clients to self-report their payroll for the month and pay based on that amount. “This has proven to be very important in some states,” Allen says. “For example, employees of construction companies in Alaska often are unable to work in some months, and this option lets them maintain better control of their workers comp costs under these circumstances.

“We also provide direct bill as a means for agents to keep expenses down,” he says, adding that both of these initiatives were undertaken in response to agency requests.

The company also is launching some technological advances that will provide for better communication with agents, including download capability. In addition, the company provides field premium auditors, field safety professionals and field case managers with computer and communication equipment to more promptly and efficiently complete the underwriting process, as well as to facilitate communication and to report and monitor claims.

“We were also pleased to hear that our agents really appreciated the expertise we have in our targeted markets,” Allen says. “Our underwriters understand the exposures so that, even though we underwrite every risk individually, we still are able to provide an answer to a submission very quickly.”

Individual underwriting

He points out that Amerisafe’s success is based on careful underwriting. “We look at each account before we quote,” Allen notes. “Once we agree to write an account, we make a long-term commitment to that business. We don’t cancel because of a shock loss. We realize that can happen and that it normally is out of the control of the insured.” He points out that one client recently had a $1.4 million loss and is still insured by Amerisafe.

“What we expect from our clients is a commitment to safety and loss control, and we work closely with them on improving their total risk management,” Allen adds. “We have an intensive safety service that we provide to all our clients as part of our moral commitment to this marketplace. It is how we started in business with the lumber industry, and we have continued this tradition because it is both the right thing to do and because it results in better results for us and for our clients.”

Effective claims management also is another key to Amerisafe’s success. “Claims are not like wine,” Allen quips. “They don’t get better with time. Our claims adjusters have an average caseload of 53 claims, much lower than the industry average. And they are expected to resolve claims quickly and fairly.” Bradley points out he was a plaintiff’s lawyer for 18 years prior to joining Amerisafe and notes: “As a plaintiff’s lawyer I never had a case against Amerisafe largely due to the manner in which they treated their claimants.”

The company’s commitment to a long-term relationship with insureds has been rewarded by an equal commitment from the insureds as Amerisafe boasts an annual retention rate in excess of 90% in each of the last three years. The company enjoyed a 90.6% retention rate on voluntary business in 2005, 91.1% in 2006, and 90.8% in 2007. “We recognize that strong retention is not just based on our services,” Allen notes. “While our insureds appreciate our safety and risk management, they also are concerned about the price of coverage, and we are committed to maintaining competitive pricing that is commensurate with the underlying risk.”

He continues by pointing out that the company is continuing to refine its underwriting processes and claims paying procedures, especially in the medical area where double-digit growth has had a serious impact on workers comp. “Industry data does show that fee schedules work,” he comments, “but that over-utilization remains a critical factor in rising costs in the workers comp arena. We are looking at such areas as evidence-based medicine, pay for performance, and pay per episode. It is clear that no single solution is going to solve this growing problem. And, in many cases, it will have to be an industry-wide effort.”

Allen concludes by inviting agencies to find out about his company. “We’re located in a small town in Louisiana and have a laid-back attitude that makes us easy to do business with. It’s a relaxed approach that produces excellent results for us and our agency partners.” *

For more information
Amerisafe
Web site: www.amerisafe.com