SHOPPING FOR COMP

Could a shifting market environment change the way you shop for workers comp?

The more familiar your partner is with the workers comp space, the quicker

and more effective they will be in getting your accounts the appropriate coverage.

By Jim Gara

For almost a decade, we’ve experienced the benefits of a soft workers compensation market. Consistent renewals. Stability. Profitability. The rate environment is going downward and incurred losses are remaining the same. However, we’re starting to see signs of duress and we’re closer to a hard market than we had been in the last few years.

Adding further uncertainty to this trend is the possibility for an economic recession. Interest rates are through the roof and the cost of living is getting exponentially more expensive—seemingly by the day. Rising wage and medical costs, in particular, will continue to threaten the steady growth our sector has experienced. Businesses are still impacted by the increased cost of raw materials and component parts, as well as the scarcity associated with supply chain issues. These elements underscore the importance of getting the best value in a workers compensation purchase. It’s ultimately the agent’s role to guide that decision and identify the best solution.

While these factors will not change the workers compensation space overnight, they could impact the way you shop for coverage gradually over time. Historically, workers comp has been a commodity in the insurance space. Those shopping for it ultimately zero in on one thing: the best price.

As we continue to monitor these macro shifts in our environment, keep these four considerations in mind when evaluating your next comp solution.

Service-oriented approach

When shopping around for coverage, consider working with a partner who really knows the space and does as much due diligence as they can upfront. Underwriting, in particular, is a huge differentiator. If you’re receiving a laundry list of questions without much proactivity, you might be better off elsewhere. Proactive underwriting executed by true experts will go a long way.

You can also quickly gauge whether your carrier partner is a long-term player with a few key signs:

• How long they’ve been in the state or jurisdiction where their client is located. Newcomers may offer a lower price, but claims costs are likely to be on the higher end due to inexperience.
• How deeply they understand their client’s industry. Be sure you’re selecting a resource that knows and understands the business and is not taking on your client to learn it.
• The average number of indemnity claims. High-performing carriers are in the 90 to 120 range, and the higher that number goes, the less time adjusters spend on each file. This will result in slower resolution, higher cost, and potentially undesirable service.

Speedy turnaround with meaningful direction

Your time is precious. That’s why your partner should quickly provide you with a quote if they can help you … and quickly let you know if they can’t. If the answer is “no,” that resource should point you in a better direction and should never stop at “no.” Your partner should get creative and offer ideas so you feel confident working with them in the future—things like helping you seek a replacement market, providing an alternative to your current risk structure where you can share the risk, or advising on additional controls that could yield dividends in the long run.

Experience, experience, experience

The more familiar your partner is with the workers comp space, the quicker and more effective they will be in getting your accounts the appropriate coverage. Experience brings not just knowledge, but resources, too. Consider a program that will go above and beyond by offering risk control and in-house claims service. Ask questions like “What aspects of pharmaceutical management do you get involved with” and “How will you support return to work programs?” These cost savings and risk management measures will have a big impact on your purchasing decision and recommendations to your clients.

Robust appetite

There’s a saying that you can’t put a price on peace of mind. This rings especially true when narrowing down your carrier options. Consider working with a partner that has a robust appetite spanning various industries and geographies. With such a great demand for comp coverage coming from various sectors, this will allow you to build your book and meet your client needs without having to hop around from market to market.

While the comp space remains stable and profitable now, things may change in the coming years due to a shifting economic environment as well as wage and medical cost inflation. Take this time to position yourself for success with the right program and carrier partner by asking the right questions up front.

The author

Jim Gara is program director at NSM Insurance Group and oversees the company’s workers compensation programs, AllComp Solutions, and Staffing Lines. For over 15 years, Jim has held management and production roles at PMA, AIG and ACE within the primary and excess casualty space. Staffing Lines, NSM’s longest-running program of over 25 years, is designed for temporary, permanent and outplacement staffing agencies. AllComp Solutions is a one-stop-shop for workers comp, offering solutions for a wide range of industries. Both programs offer coverage from a robust network of top-rated carriers. For more information, contact Jim at jagara@nsminc.com or visit allcompsolutions.com and staffinglines.com.