Specialization Aids Broker Success
Focusing on niches and leveraging the latest technologies are two ways successful insurance agencies are boosting their bottom lines – even as organic growth across the sector has slowed a bit, according to the Independent Insurance Agents & Brokers of America (IIABA or the Big I).
A survey of 260 so-called “best-practices” agencies determined by the trade group and Reagan Consulting found that best-practices firms grew organically by an average of 6.9 percent in 2015, down from the recent high of 9 percent in 2012, according to the “2016 Best Practices Study.”
While growth has slowed, the best practices agencies found that specialization enhances growth and creates new revenue streams.
“We write this type of coverage all over the state because we get a lot of referral business through word-of-mouth.” Dennis Hilton, president and CEO, Cheney Insurance
One of the best-practices agencies in the study, Cheney Insurance in Damariscotta, Maine, developed a niche for insuring “Maine guides,” professionals who guide clients through outdoor activities such as hunting, fishing and kayaking, said Dennis Hilton, the agency’s president and chief executive officer.
“Maine guides can have basic or more unique exposures depending on their operations, in terms of their cabins, camps or lodges, as well as their boats, canoes and kayaks,” Hilton said. “Our agents are very familiar with the unique exposures associates with guiding, and the many requirements they need to be concerned with.”
For example, his staff has the expertise to help guides complete the paperwork and provide certificates of insurance required by large corporate landowners that allow guides to access their property during the various hunting seasons.
The agency handles these types of issues frequently, whereas many other agencies in the state do not have that level of expertise, Hilton said.
“We write this type of coverage all over the state because we get a lot of referral business through word-of-mouth,” he said. “As a result, we write more coverage for Maine guides than any other agency.”
Another best-practices agency, Minard-Ames Insurance Services LLC/Insurica in Phoenix, specializes in brokering insurance for the construction industry, said Blake Johnson, president.
“Fortunately for us, the construction industry relative to insurance has become very complex, requiring a high degree of technical expertise,” Johnson said. “This has provided us a tremendous advantage and increased our value proposition significantly.
“For contractors today, it’s all about staying out of trouble, and how we can help them accomplish that.”
For example, contracts are an important part of every construction project, as the construction industry tends to be fairly litigious, he said. As such, ensuring proper risk transfer within these contracts is critical, and insurance plays a major role.
“Whether that advice is to a general contractor regarding what to require of those working for them or advising a subcontractor when the requirements imposed upon them exceed that for which they are insured — or are simply unreasonable. It is all part of how we partner with our customers,” Johnson said.
Focusing on this niche also enables his firm to be able to attract new producers: “They come to us because our reputation within the construction industry provides them a leg up,” he said.
Best-practices agencies are also leveraging new technologies, according to the IIABA study, which cited data from CB Insights that showed more than $1 billion in technology investments by insurance startups during the first half of 2016.
Cheney Insurance has a mobile app that assists its customers in various scenarios, Hilton said.
Another trend noted in the IIABA study is the significant increase in the average age of employees at most agencies.
If they are involved in an auto accident, the app helps them take photos of the vehicles and the scene, which can then be sent directly to the agency. Customers with homeowner policies can use the app to create a household inventory, taking photos of big items in case they are ever stolen or damaged.
The agency provides the app through a subscription with a mobile app vendor, Insurance Agent.
“We also excel at collecting and leveraging client email addresses,” he said. “Most agencies don’t do a very good job of soliciting emails from clients, but we have acquired 85 percent of our client emails by incentivizing our staff to always ask, and then we use automated digital marketing technology to stay in close contact.”
The agency sends clients birthday or seasonal e-cards, and many people respond very favorably, “which keeps our agency in the top of their mind for the next time they may have an insurance need,” Hilton said.
Minard-Ames Insurance Services provides technology that offers a template for its construction firm customers to issue their own pre-approved certificates of insurance or endorsements, such as for additional insureds or waivers of subrogation.
“This saves our customers time, as they can do it 24/7 and from their mobile phones,” Johnson said.
Another trend noted in the IIABA study is the significant increase in the average age of employees at most agencies.
“Savvy firms are placing an emphasis on early succession planning for all key leadership positions,” according to the IIABA. “Best-practices agencies recognize that their future independence hinges on creating an environment that attracts and retains talented employees to successfully perpetuate their business.”
The study also noted that the pace of consolidation has steadily increased since 2009, coming off low merger and acquisition activity during the Great Recession. According to SNL Financial, 469 transactions were announced in 2015.
Every three years, the trade group collaborates with Reagan Consulting to select “best practices” firms throughout the nation for outstanding management and financial achievement in six revenue categories ranging from less than $1.25 million to more than $25 million.
Agencies are nominated by either a Big I-affiliated state association or an insurance company, and qualified based on operational excellence. Financial and benchmarking information for the participating agencies are also reviewed and updated for the following two years.
This is the 24th edition of the annual benchmarking analysis and the first year of the current three-year study cycle.
What happens when an employee starts exhibiting signs of mental illness after they’re hired? It can be difficult for organizations to balance the need to reasonably accommodate mentally ill people with productivity needs and fears of potential violence.
But the amount of resources available to help employers support such workers is rising.
“Work is such an important influence on a person’s quality of life, including their financial well-being, that giving up a job is not an option,” said Debra Lerner, director of the Program on Health, Work and Productivity at Tufts Medical Center in Boston.
For many, the onset of mental health issues can make it difficult to perform a job, even one the person did well before becoming ill, Lerner said. For example, some people dealing with depression have trouble with memory or being organized.
Others may not sleep well, which can make it difficult for them to get to work on time or to “hit the ground running” after arriving.
“Staying on task, especially when interruptions occur, can be difficult,” Lerner said. “Interpersonal issues are common and interfere with relationships with customers, supervisors or co-workers.”
Employers can get recommendations from the Equal Employment Opportunity Commission’s job accommodation network, which are tailored to the person’s illness and limitations as well as their job demands. Employers can also refer workers to resources such as Tufts’ Be Well at Work program to help people suffering from depression learn approaches to being effective on the job.
“One of the program’s benefits is a method for assessing which aspects of working are most difficult and intervening with specific suggestions for improving ability to function,” Lerner said.
Another resource is the Integrated Benefits Institute, a San Francisco-based research organization that aims to demonstrate the connection between improved health, well-being and business performance at companies, said Tom Parry, president.
“We take a very broad view of these issues, so that employers make proper investments in health and understand the much broader outcomes that are more important to their business than just health care costs,” Parry said.
Most employers have typically used medical and pharmaceutical claims data to identify key health conditions. But since behavioral issues tend to be underreported, they typically “don’t rise to the top,” Parry said.
IBI provides employers with information from third parties to find ways to identify issues and conditions, without violating privacy rules per the Health Insurance Portability and Accountability Act. Alternatives include working with their employee assistance programs and conducting well-being surveys.
“One of the real challenges to improved behavioral health management is the stigma that goes along with those conditions, which has made it hard for employees to self-identify around those issues and seek help,” Parry said. “That’s changing, but it’s still a big part of the problem.”
Need Can Be Implied
Sometimes the employer must initiate the interactive process required by the Americans with Disabilities Act, said Carla O’Sullivan, education programs manager at Disability Management Employer Coalition.
“The employer always has to take the employee’s privacy into account, and they should not request information or ask inappropriate questions,” O’Sullivan said.
“But it is absolutely in the employer’s best interests to speak to the employee … particularly if the employee had been doing great but then all of a sudden they are not. It could be that the employee needs to be referred to an employee assistance program, or maybe it’s just a matter of being supportive.”
While the onus is typically on employees to request accommodations, they don’t have to actually use the words “reasonable accommodation” if the need is obvious, said Frank C. Morris, Jr., of Epstein Becker & Green P.C.
“For example, if an employee tells a supervisor that they need to go twice a week for medical treatment for the next six months, or requests time off for extended medical treatment, the EEOC and the courts will likely find this to be sufficient notice of an accommodation request,” Morris said.
One potential accommodation could be allowing employees time off to adjust to new medications or a new combination of medications, he said. But it should be for a reasonable and finite period of time until the problem can be controlled and for the employee to resume being productive at work.
Employers can ask workers for the medical opinion that demonstrates their disability, and then get a second opinion by their own medical professional, said J. Bradley Young, partner, Harris, Dowell, Fisher & Harris LC. Those professionals can help structure reasonable accommodations.
“For example, if the employee’s psychiatrist has prescribed the anti-psychotic Thorazine, that medication typically makes people sleep 20 hours a day — and it would not be reasonable to have the employer provide a bed to sleep on the job,” he said.
“However, a reasonable accommodation would be to have a different psychiatrist prescribe different medications instead of Thorazine that would not make the person too sleepy, allowing them to continue in their job.”
Employers do not have to accommodate people who are violent or make any threats of violent action, even if the employee has a mental disorder, Young said.
“They can be removed from the property and terminated,” he said. “But if an employee is simply acting erratically, that’s a completely different story.”
Employers can ask to have the person taken to a psychiatric hospital for evaluation, and if the employee is diagnosed with a mental disorder, the employer and employee have to work together to try to come to a mutually agreeable decision on a reasonable accommodation, Young said.
Some disability carriers have mental health consultants who can assist employers with proactive accommodations to help at-risk employees avoid a disability leave, or with return-to-work plans that can help an employee transition back to the workplace after taking a leave, said Brian Kost, director of the workplace possibilities program at The Standard, a disability insurer based in Portland, Ore.
For employers that have at-risk employees, mental health consultants can help ensure that employees are connected with resources — such as an EAP or wellness program — for assistance, Kost said.
“Above all, a consultant can help an employer and employee communicate better by keeping everyone involved up-to-date on an employee’s condition, his or her medical restrictions, when they may be returning to work and potential accommodations,” he said.
“This collaboration and communication can go a long way to ensure success.”
Feds Propose Increased Oversight of Workers’ Comp
The U.S. Labor Department is elevating the debate over whether the federal government should create standards that could trigger federal oversight for state workers’ comp programs.
Across states, workers’ comp costs are increasingly being shifted from employers to workers and their communities, as well as to federal programs including Social Security retirement benefits, Social Security Disability Insurance and Medicare, “placing additional strains on these programs at a time when they are already under considerable stress,” according to the Labor Department’s State Workers’ Compensation Report, “Does The Workers’ Compensation System Fulfill Its Obligations to Injured Workers?”, released on Oct. 5.
“The time to act is now,” Labor Secretary Thomas E. Perez said during an agency web forum where the report was released.
“I suspect taxpayers don’t even know that a portion of their nest egg for retirement — Social Security and Medicare — is going to subsidize workers’ comp.”
The agency’s report recommends that Congress consider whether to increase federal oversight of workers’ compensation programs. Options include the appointment of a new National Commission to study the workers’ comp system, similar to the 1972 commission that recommended floors for benefit payments; reinstitution of federal tracking of changes in state workers’ comp programs; establishment of standards that would trigger increased federal oversight if workers’ comp programs fail to meet those standards; increased monitoring and data-sharing of workers’ comp information among states and the public, among other recommendations.
The agency’s report also outlined recent changes to the workers’ comp laws, procedures and policies in numerous states that have limited benefits, reduced the likelihood of successful application for workers’ comp, and discouraged injured workers from applying for benefits.
Particularly onerous are “opt-out” statutory proposals that restrict workers’ benefits or rights, according to the report. In 2013, the Oklahoma legislature passed a law that substantially limited benefits and included a provision that allowed employers to opt-out of the state workers’ comp system and largely design their own compensation plans with “considerable latitude.”
“We need federal standards to maintain a floor in these state programs or the system is going to self-destruct.” — John F. Burton Jr., professor emeritus, Rutgers School of Management and Labor Relations
The plans included provisions that excluded payment for specific injuries, required 24-hour or end-of-shift reporting of injuries, allowed no review of claims except by employer-chosen physicians, among other limitations, while allowing employers to retain their immunity from civil negligence legal actions.
The Oklahoma Supreme Court last month ruled that the opt-out provisions of the state law are unconstitutional under the Oklahoma state constitution. Still, opt-out provisions are currently being considered in other states, including Tennessee and South Carolina.
Moreover, new issues have arisen across states, according to the report. Workers who file for compensation are blocked in some cases from receiving benefits because of the combination of higher evidentiary bars, exclusion of conditions that do not meet standards like “major contributing cause,” and requirements for drug testing.
Some states have enacted arbitrary limits on the number of weeks that benefits can be paid; some have enacted caps on medical payments as well.
The agency’s forum also included a panel discussion of the report, and implications on the future of state workers’ comp programs. John F. Burton Jr., a Rutgers School of Management and Labor Relations professor emeritus, said that state programs have been restricting benefits and shifting costs as states compete with one another to attract more employers.
“We need federal standards to maintain a floor in these state programs or the system is going to self-destruct,” Burton said.
“But I’m skeptical — under the current environment, it’s much too tough to develop federal standards.”
Ahead of the Oct. 5 release of the Labor Department’s report, the Washington, D.C.-based business group UWC—Strategic Services on Unemployment & Workers’ Compensation, suggested on its website that the report likely was prompted by an October, 2015 letter sent to the agency by Democrat lawmakers and Senator Bernie Sanders (I-Vt.) calling for a review of the workers’ comp system. In the letter, the lawmakers wrote that they would “welcome a report from the department on how it will reinstate oversight of state workers’ compensation programs.”
In response, the business group wrote on its website, “As employers, states, insurance carriers and worker representatives well know, there has never been federal ‘oversight of state workers’ compensation programs’ and federal requirements imposed on a national basis would be inconsistent with the state workers’ compensation system, which has been in place for more than 100 years without federal oversight.”
The Labor Department’s Wednesday forum also included the release of the report, “Workers’ Compensation: Benefits, Coverage and Costs,” by the National Academy of Social Insurance in Washington, D.C.
The number of U.S. workers covered by workers’ comp in 2014 rose 1.9 percent from a year earlier, to roughly 132.7 million, and by 6.4 percent from 2010, as employment numbers recovered from the Great Recession.
Total benefits paid in 2014 fell 0.3 percent from a year earlier, to $62.3 billion. Medical benefits paid for health care were $31.4 billion, a decrease of 0.1 percent from 2013. Cash benefits paid for lost work time were $30.9 billion, a decrease of 0.6 percent from 2013. Total benefits paid were $0.91 per $100 of covered wages, down by 5.5 percent from 2013.
Total workers’ comp costs to employers in 2014 rose 4.9 percent from a year earlier, to $91.8 billion. Employers’ costs were $1.35 per $100 of covered wages in 2014, unchanged from 2013.