“Marketing Tips”
from Workers Compensation and Employers Liability Insurance
by AICPCU/IIA
Marketing Tip
In states with inadequate rates, high residual market
charges, and adverse loss experience, workers compensation insurance can be the
hardest line of insurance to place. Insureds in such states are very concerned
about the soaring costs of their workers compensation insurance and are willing
to listen to producers who can help them solve their problems. The ability to
discuss workers compensation knowledgeably can be an entry to write an entire
account. p. 2
Marketing Tip
You should obtain a full copy of the workers compensation
law for your state and all states in which you regularly write business. The
law is usually available from each state's workers compensation commission. In
addition, a good summary of the law in each state is provided by the Analysis
of Workers' Compensation Laws, 2 published annually by the U.S. Chamber of
Commerce, Washington, DC. Not only will this give you a quick overview of the
law in your state, but it will also help you answer questions from clients who
are starting operations in states with whose laws you are unfamiliar. p. 6
Marketing Tip
The self-insurance market is huge. Self-insured firms spend
approximately $9 billion annually on claims, claims handling, and
administrative expense. Producers have a role in working with self-insureds.
All but the very largest firms need excess workers compensation insurance (to
be discussed in a later section of this material) to protect them against
unexpectedly severe or frequent claims. In addition, producers can provide or
act as intermediaries for firms that are purchasing loss control, claims
handling, and other administrative services. p. 20
Marketing Tip
Verifying the accuracy of all of the items shown on the
information page offers alert producers the opportunity to demonstrate the
value of their services to a client. For example, insurance producer Sally
Adams, while reviewing a prospect's insurance, found that a state in which the
insured had a sales office had been omitted from the list of states included in
Item 3A. By correcting this error, Sally protected the insured from a possibly
serious uninsured loss. She also minimized her exposure to an errors and
omissions claim by properly identifying and insuring her client's exposures. p.
21
Marketing Tip
Competent representation at administrative hearings is vital
to avoid excessive workers compensation claim payments. Since claim payments
affect experience rating modifications, lower claim payments mean lower
premiums for the insured. The quality of the claims handling provided by an
insurer is a key selling point for workers compensation coverage. Producers
should therefore evaluate this area of insurer service before recommending an
insurer to a client or prospect. p. 23
Marketing Tip
When an insurer is licensed in all states, a producer can
offer the broadest protection by indicating that Item 3C includes all states
except the monopolistic states and the states named in Item 3A. This approach
offers the producer the chance to demonstrate the superiority of his or her
insurer over some of the specialty insurers that are admitted in only one
state.
E&O Alert!
If a producer places coverage with an insurer that cannot provide
coverage in all states, the insured should be notified of the potential
coverage gap. The producer should explore possible solutions. Sometimes an
insurer writing the other lines of coverage for the insured is willing to write
a workers compensation policy to provide coverage in the other states even
though the insurer is not providing the workers compensation insurance in the
state in which the insured conducts most of its operations. In other cases, the
insured may want to obtain a minimum premium policy through another state's
assigned risk plan or competitive state fund. p. 27
Marketing Tip
Stop loss insurance should be offered to all self-insured
clients. It is an essential coverage for most mid-sized insureds that
self-insure workers compensation exposures; an unexpected increase in loss
frequency or severity could wreak havoc with the finances of a self-insured.
Analyzing past experience, comparing various quotations, and working with
knowledgeable underwriters help the producer and the client decide on the most
suitable retention limit and maximum coverage. Two decisions must be made. The
first is the amount of loss that the insured is prepared to retain, and the
second is how high to set the maximum limit. p. 34
Marketing Tip
The interchange of labor rule change offers producers an
excellent opportunity to improve relations with current insureds and solicit
new clients. Many firms have employees whose payrolls are eligible for division
between two classifications under this new rule. In many cases, this may result
in a meaningful premium reduction. The producer should look for such situations
when reviewing the exposures of both prospects and clients. p. 44
Marketing Tip
Premium auditors are not required to search an insured's
records to find excludable items. Producers can demonstrate their value by
advising insureds and prospects to maintain their records in a manner that
enables the auditor to easily determine excludable items. Producers can also
review audits with the insured to be sure that excludable items have been
deducted. p. 46
Marketing Tip
Producers can use a workers compensation deductible as a
marketing tool. The immediate savings on the premium will appeal to insureds.
But there are other pricing advantages as well.
First, lowering reported losses will lower the experience
modification. Next, a sliding scale dividend plan, also based on reported
losses, will provide a higher percentage of dividend as fewer dollars are paid
out. Finally, the client will be more attentive to safety when the losses are
being paid by the client rather than the insurer—this aspect further reduces
losses and the experience modification and increases the potential dividend
percentage.
E&O Alert!
As with any retention recommendation, producers should
document deductible decisions selected by the insured. Large premium savings
are always welcome, but insureds sometimes forget that they are responsible for
deductibles. Producers should recommend large deductibles only when the client
is financially able to withstand and philosophically committed to the
consequences of large claims. p. 55
Marketing Tip
Producers should identify carriers that specialize in
workers compensation in their market area. By using specialty carriers for
workers compensation coverage, producers can eliminate conflict with their
regular insurance markets about providing workers compensation coverage and the
high loss ratios often associated with it. Specialty insurers can enable
producers to retain current clients and to write new business because those
insurers often provide less expensive coverage and, in many cases, superior
loss control and claims handling services. Some specialty insurers are admitted
in only one or two states and thus might not be suitable for insureds with multi-state
exposures. p. 58
Marketing Tip
One agency found that a seminar presented in cooperation
with an outside expert was an excellent tool for helping insureds install
programs to cope with high workers compensation premiums. The agency invited
its current insureds as well as prospects. The agency enhanced its
relationships with its present clients and gained access to new prospects aware
of the value of safe work conditions. p. 63
Marketing Tip
Producers can help their insureds, their insurance companies,
and themselves by discussing the issue of employment practices liability. This
coverage is available as a monoline, standalone policy. Even if the insured
does not purchase the coverage, increasing the insured's awareness of the issue
and having insureds examine their procedures can reduce the behaviors that lead
to claims. p. 67
Marketing Tip
Discussing optional coverage with sole proprietors,
partners, and corporate officers gives the producer a chance to explore their
medical, disability, and life insurance coverages. If they have adequate
coverage, they may not want to have coverage provided by the workers
compensation policy. If they do not have adequate coverage, and most people do
not, the producer can show them how a good medical, disability, and life
insurance program can provide the protection that they and their families need.
Besides. . .
E&O Alert!
Failure to discuss the availability of optional coverage
with sole proprietors or partners can lead to an errors and omissions claim.