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Speakers Put Finishing Touches on Presentations

More than 80 workers’ comp and disability experts are prepping for their presentations at next month’s conference.
By: | October 27, 2014 • 15 min read

This year’s conference kicks off Wednesday, Nov. 19 at 8:30 a.m. with the keynote address. Dr. L. Casey Chosewood, senior medical officer and director of Conferencethe Office for Total Worker Health Coordination and Research for the National Institute for Occupational Safety and Health, will discuss Integrating Employees’ Health and Well-Being to Improve the Bottom Line. His keynote address will be followed by two-and-a-half days of more than 30 breakout sessions. They are categorized within five tracks: Claims Management, Medical Management, Program Management, Disability Management, and Legal/Regulatory Issues.

Below is an in-depth look at several of the sessions.

The Productivity Challenge: Engaging Injured, Absent and Disconnected Workers

Wednesday, Nov. 19; 11 a.m.-12:15 p.m.

The personal touch is key to getting a company wellness program to translate to reduced workers’ comp costs, said Kevin Confetti. As director of employment practices and workers’ compensation for the University of California, he said placing coordinators at individual facilities has made the difference in getting workers involved in the various health promotion activities available.

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“The biggest plus is actually having someone sit down and talk to these employees about how these programs can benefit them,” Confetti said. “We get so much junk mail at home — written literature falls on deaf ears. If someone can talk to them, they are more apt to give it a try.”

Confetti will be joined in the session by Dr. Teresa Bartlett, senior vice president of medical quality at Sedgwick. They will discuss ways to engage employees in wellness programs in order to reduce absences and ultimately improve productivity.

“Successful companies understand the importance of employee engagement and creating a culture of wellness,” Bartlett explained. “When employers embrace these concepts and focus on a quality health care experience, the results are demonstrated by having a positive impact on productivity and safety.”

Despite the robust wellness programs the University of California has implemented at its individual campuses and medical center, getting workers to participate has been challenging. Nearly three years ago, the company developed work-strong, an occupational wellness program.

“The reason we went into it as a prevention effort is that our employees like to stay with us. … They tend to be long term. What we were finding was it was not uncommon for them to have two to four workers’ comp claims in their tenure. If we can improve the health and wellness of our employees, it will help prevent them from being injured,” Confetti said. “We have definitely seen that. The rate of repeat injuries has definitely declined. That’s the number one benefit.”

Confetti said he’s also heard impressive stories from the employees as a result of the company’s wellness activities. For example, some have been able to control their diabetes through diet and exercise rather than medications.

“They’ve committed to making these changes,” he said. “We have people saying it’s changed their lives.”

Companies of all sizes can gain valuable insight from the session. The organization is something of a microcosm of the employment world.

“The best way to look at the university is they are really small cities; each with a police force, our dorms are like hotels, the dining commons are restaurants. You name it, we have it — teachers, researchers, construction workers, pipe fitters, plumbers, custodians,” Confetti said. “Really what we do can translate to any business. Other than manufacturing we have close to every type of industry on our campuses.”

Approaches to Managing Nontraditional Claims: Including Unions, Legacy Claims and Co-Morbidities

Thursday, Nov. 20; 1:30-2:45 p.m.

While workers’ comp practitioners typically seek to close claims as soon as possible, that’s not always the best approach. An injured worker who’s been on a long-term medical pharmaceutical program, for example, should be weaned off inappropriate medications before a settlement is discussed, especially if a Medicare set-aside is involved.

“That would be a claim where it looks like you could settle it, you think you should settle it, there is no jurisdictional impediment to settling, and there might be interest for the claimant and his attorney to settle,” said Julie Fortune, senior vice president and chief claims officer for Arrowpoint Capital. “But when you do the calculations based on current medical spend, the Medicare set-aside might be reviewed and returned by CMS at an amount that would exceed your expectations. So you don’t want to settle until you get the medical appropriately managed pursuant to the guidelines of the jurisdiction.”

That’s just one instance where it might be in the best interests of all parties to spend more time addressing some of the issues in the claim rather than trying to resolve it quickly. Fortune will join Patti Colwell, manager of national workers’ compensation program for Southwest Airlines and Tron Emptage, chief claims officer for Helios to look at nontraditional claims and out-of-the-box thinking to achieve optimal outcomes.

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“Since 2004 Arrowpoint Capital has settled more than 40,000 workers’ comp claims,” Fortune said. “Our approach is fine-tuned, and we are pretty aware of what claims we can and cannot resolve or when we should or should not resolve them.”

Some states dictate the procedures for handling claims. Texas, for example, doesn’t allow claims with a date of injury after 1991 to settle future medicals on them. “That doesn’t mean we don’t aggressively use every tool and technique permitted by Texas regulations to manage the medical treatment,” Fortune said.

Among the biggest factors prolonging claims and preventing recovery are comorbidities. While comorbidities may not have been present when the worker was injured, they may develop as the person ages. In some cases there might be multiple comorbidities such as obesity and diabetes.

“The loss of function can be profound and their ability to do anything is extremely limited. They haven’t worked for 10 or 15 years, they are now obese, some morbidly obese. They can barely get around the house let alone exercise or attempt to seek other work,” Fortune said. “Complicating this further is the fact that many of the workers wind up on Social Security disability or Medicare, which now requires all parties to take into account Medicare’s interest as a secondary payer.”

Comorbidities can acutely impact workers’ comp settlements in terms of life expectancy. Fortune says through the use of data management and predictive modeling, the industry is just beginning to get a better handle on predicting life expectancy of injured workers with comorbidities to accurately calculate workers’ comp settlements.

“Part of what we are doing is carefully tracking body mass index because there are some recent studies showing that morbid obesity can reduce your life expectancy dramatically,” she said. “If you’re attempting to figure your total cost with a normal claimant with a back strain without surgery, it’s fairly easy to calculate. But if you have a person with multiple surgeries and lots of comorbidities, you need to determine how such factors are going to impact their normal life expectancy. That’s part of what needs to go into the calculation of these claims. It’s really challenging right now. There is no easy-to-use tool.”

Modeling Managed Care for Program Impact

Thursday, Nov. 20; 10:45 a.m. to noon

To bundle or not to bundle. That’s one of the questions employers are asking these days, i.e., whether it is more cost effective to put all managed care services into the hands of a single vendor.

“We reject that thought. We don’t want to put all our eggs in one basket,” said John Riggs, manager of workers’ compensation for the Disneyland Resort. “In my opinion you lose the expertise in that niche product if you go into bundle.”

The idea of bundling — bill review, utilization review, nurse case management, and other managed care services — is among the topics to be discussed by Riggs, along with John Smolk, principal manager of workers’ compensation for Southern California Edison, and Barry Bloom, principal of The bdb Group. Where he and Smolk are opposed to bundling services, “Barry will talk about his clients who have gone both routes,” Riggs said.

Employers need to be aware of the many managed care services available and how they function “so there’s an understanding of what the terms and programs are,” Riggs said. “The number of insured employers and those handled by third-party administrators is much greater than those self-insured or self-administered. They may have an agreement with the TPA that includes services. The employer needs to understand what the programs are all about and how the costs can become intermingled — and it becomes a cash cow for the provider.”

The evolution of managed care has been driven largely by the state of California. Workers’ comp payors there have been required to obtain authorization for most medical procedures.

“It’s like a big machine,” Riggs said. “It’s become more complicated, more expensive, and the outcomes are suspect and always subject to challenge … so unless your program is operating on all cylinders 24-hours a day, you can find yourself in a world of hurt.”

Riggs said the panel will offer in-depth insights into the various managed care services available, discuss how to pick the most appropriate ones depending on a company’s needs, and demonstrate how to evaluate them.

Workers’ Compensation and Its Secondary Payers: Medicare and Medicaid

Thursday, Nov. 20; 8:30-9:45 a.m.

As if the Medicare Secondary Payer Act didn’t create enough headaches for workers’ comp stakeholders, there’s a new law threatening to cause more consternation.

The Bipartisan Budget Act signed by President Obama last year strengthens Medicaid’s third-party reimbursement rights in terms of ensuring it does not pay for medical care when there is a primary payer such as workers’ comp. That, combined with another law on the books, could open the floodgates for reimbursement efforts.

“Traditionally, we haven’t see a lot of Medicaid recipients [in the workers’ comp system] because once you are gainfully employed you are generally disqualified,” said Jennifer Jordan, general counsel of MEDVAL, LLC. “Under the expansion of the Affordable Care Act, that will change.”

The Medicaid program will be open to more than just those making minimum wage. As Jordan explained, the head of household for a family of four could have an income of approximately $35,000 and still be eligible.

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“We’re going to see a lot more people in the workforce who qualify for Medicaid and if also receiving Social Security Disability Insurance, could be dually eligible for Medicare as well,” she said. The real challenge will be “identifying your red flags with regard to who else is out there and knowing to check with them.”

The goal of the law is to enforce Medicaid’s position as the secondary payer, so it, like Medicare, would be the provider of last resort. However, unlike Medicare, Medicaid is administered on a state rather than federal level.

“The programs are very different. You can’t go to the Centers for Medicare and Medicaid Services with questions because they are state programs,” Jordan said. “It’s going to be a new layer of bureaucracy at the settlement level because now you have to go to someone else and ask them too if they want money.” Add to that the possibility of the injured worker moving to another state during the course of the claim, and there is yet another government agency with which to deal.

Jordan, and fellow speakers Vernon Sumwalt, a partner at the Sumwalt Law Firm, and Tim Nay, founding principal of the Law Offices of Nay & Friedenberg, will discuss the ins and outs of Medicaid and what the law change might mean for workers’ comp practitioners.

Additionally, regulations continue to be developed for the Strengthening Medicare and Repaying Taxpayer, or SMART Act, which reformed some of the Medicare Secondary Payer rules. The speakers will discuss that as well.

“None [of the regulations] have been finalized; they are a work in progress,” Jordan said. “We will cover where they are with regard to changes.”

Policy and practice changes at CMS will also be addressed, along with practical strategies to comply with the Medicare Secondary Payer itself, whether participating in the voluntary CMS approval program or not.

Holding Your Insurer/TPA Accountable With Customer Service Instructions

Thursday Nov. 20; 3:45-5 p.m.

High-quality service is a must these days, and there is no reason employers can’t work with vendors who offer the most advantages for their companies. That’s the message two veteran claims and risk management professionals hope to get across.

“I had an instance recently where we were using a vendor and couldn’t get copies of X-rays. … It caused delays for the employee who couldn’t get return to work. It can be a big problem,” said Darin Hampton, a workers’ compensation regional coordinator for International Paper. “That’s why we say you have a right to tailor [your program] to who you want to use.”

The particular vendor partners an employer uses do not have to be dictated by an insurer, third-party administrator, or attorney. A mainstream vendor that many companies use for a particular service might not always be the right one for the organization.

“You have these national programs,” Hampton said, “One that might be great in Florida but not in Texas. So you must tailor what you do.”

Where there can be snags is convincing claims adjusters to get on board. They may not realize they don’t have to use an inferior vendor.

“We had a diagnostic vendor [for radiological services]. There are only so many radiological facilities in the U.S. so what they have to sell is service,” said Jodie L. Massingill, senior manager of casualty claims for Sysco Corp. “But the adjuster said, ‘I have to use them; nobody is going to listen to me.’”

Building solid relationships is key. “It’s all about managing that relationship and about income streams,” Massingill said. “I tell my adjusters, ‘if you don’t want to use [XYZ] company call me and tell me who you want to use.’”

Effective partnerships with claims adjusters can go a long way — not only for more effective claims handling but for keeping adjusters happy and in their jobs. “I have adjusters that stay with us because they like my claims team,” Massingill said. “We help them. They feel like they are part of this and not a piece of meat just handling a claim.”

As Hampton describes it, claims examiners should be an extension of the company. “A big thing for me is ‘Don’t call me and say the attorney wants me to do blah, blah, blah,’” he said. “I tell them, ‘It’s your claim. You tell me what you want to be done.’ I don’t want them to feel that the attorney has the upper hand.”

Adjusters who are empowered in their jobs to use the vendors they deem the most appropriate tend to stay with an organization for the long term. The two say avoiding turnover among adjusters can save a company headaches and money.

“At the end of the day, a claim is a claim is a claim. It’s handled basically the same way. So how is your adjuster going to make it better for them and for you?” Massingill said. “It’s the partnership.”

Medical Case Management: How to Position Your Program for Best Outcomes

Thursday, Nov. 20; 8:30-9:45 a.m.

Managing the medical aspect of a workers’ comp claim involves doing the right thing at the right time. It requires all hands on deck. There is no silver bullet, just hard work. But employing a companywide commitment that focuses on all aspects of the claim cycle leads to best outcomes — for everyone.

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“It’s a collaborative effort among all appropriate parties to make an effective outcome,” said Kim Weaver, director of professional services for M Hayes.

“It’s a coordination of benefits — integrating all the moving parts of a claim and identifying a basic operating philosophy so the decision making is consistent,” added Anita Weir, director of medical and disability management, Corporate Risk Department at Safeway Inc. “That means you’re always talking about taking care of your employees, timely quality care and you set your programs up with that in mind.”

The two industry veterans will share strategies to design and implement the best case management program for each organization. They say while the strategies work for larger employers, many of the same tools can also be used by midsized and small companies.

“They may not be into the total integration of long-term disability and short-term disability, but even just integrating the workers’ comp pieces — more companies are doing that,” Weir said. “I’m talking about making sure we have vendors who practice the same philosophy and have the same goals. That more of us are looking at quality care issues than cost mentality. There are a lot of employers who are doing that. … People in workers’ comp now are beginning to realize that the best cost savings is good quality care.”

While employers seek to contain costs, they are also demanding value-added services from vendor partners. It’s about more than just the bottom line.

“People are willing now to develop programs and willing to put out a little money because they are seeing that medical is a high cost driver and it’s not getting any better without that value-added service from all parties,” Weaver said. “So they are looking at that as well.”

So what are some of the elements that make for a successful case management program? “Accountability and authority,” Weir said.

“Again, addressing the right things at the right time with the right resources,” Weaver concurred. “Making sure that is happening and evaluating the process — not just going with the status quo.”

Employers must be willing to really look at their case management programs to see what is working and what is not, then take steps to improve it.

“We’re in an unprecedented time. A lot of things are changing,” Weaver said. “People are either going to look at their programs and improve them, or they are not going to survive.”

Nancy Grover is co-Chair of the National Workers’ Compensation and Disability Conference and Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at riskletters@lrp.com.
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Hearing from Employers

This year’s National Workers' Compensation and Disability Conference® & Expo will feature more input on the employer’s risk perspective.
By: | October 15, 2014 • 6 min read
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Employer engagement and superior service provider performance are acknowledged keys to successfully managing workers’ compensation claims.

Those employers that care enough to produce great results for their injured workers don’t tend to beat their own drums, though.

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But they will get an unprecedented chance to share their strategies and practices on a wide range of workers’ compensation topics at the National Workers’ Compensation and Disability Conference® & Expo at the Mandalay Bay Hotel & Casino in Las Vegas, Nov. 19-21.

Two speakers from Harley-Davidson, for example, will discuss claims-mitigation practices that saved their company millions of dollars. Those practices include integrating a variety of company resources including health services, safety and ergonomics expertise.

They will also tell how Harley-Davidson integrated the services of vendor partners, such as BTE Technologies, which helps return injured employees to the job and keeps others working with a post-offer employment testing program that assesses functional ability to safely perform work, said Beth Mrozinsky, the motorcycle manufacturer’s director of safety and health.

Their work has helped address challenges common in many U.S. workplaces, such as those driven by an aging workforce.

Harley-Davidson’s successes also come from integrating vendor partners to help explore loss-reduction processes. The company is increasingly applying those processes to non-occupational injuries after proving them successful in mitigating occupational issues, Mrozinksi said.

“We work really hard with our vendor partners to really pull this together,” Mrozinsky said. “We are almost like one unit that thinks through these processes.”

In another session, speakers Darin Hampton, workers’ compensation regional coordinator at International Paper, and Jodie L. Massingill, senior manager, casualty claims at Sysco Corp., will share their strategies for successfully overseeing a range of services and how they get the best possible support from vendor partners.

In addition to employers, presenters will include representatives from some of the nation’s largest workers’ comp insurers, third-party administrators, brokers, managed care companies and attorneys specializing in workers’ compensation.

Focus on Medical

A growing trend to improve the quality of medical care delivered to injured workers relies on measuring doctor performance to build networks limited to providers capable of producing the best claims outcomes.

Jane Ish, national networks director for Liberty Mutual Insurance, will present a conference session on outcomes-based networks.

“We believe if you start right with the right physician and his entire medical ecosystem — in terms of who he counts on for referring — then you are more likely to have injured workers go back to work quicker and reduced medical costs,” she said.

Randy L. Triplett, workers’ compensation and integrated disability manager for The Goodyear Tire & Rubber Co., will join Ish in the presentation.

Other current challenges and the tools being applied to mitigate them will also receive prominent attention at the conference.

Jim Andrews, executive VP of pharmacy services at Healthcare Solutions Inc., and David Smith, divisional VP of risk management at Family Dollar Stores Inc., for example, will talk about how analytics and predictive modeling help identify and prevent drug abuse.

The nation’s growing diversity and that dynamic’s impact on workers’ comp and disability management will be examined by Jennifer De La Torre, executive director of workforce diversity at AT&T and formerly the company’s director of risk management.

Elizabeth Demaret, executive VP, chief customer relationship officer at Sedgwick Claims Management Services Inc., will join De La Torre.

De La Torre said considerations of racial and ethnic diversity, treatment of veterans in the workforce and age differences are all impacting workers’ comp management strategies.

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Expect to hear session topics not commonly offered at workers’ comp conferences, but that nonetheless have significant impact on the industry and employer programs.

Three private equity executives, whose firms owned well-known workers’ comp companies, will discuss the growing influence of private equity in this business. It is unusual for private equity leaders to address a workers’ comp crowd, said Joe Paduda, principal at Health Strategy Associates LLC.

“Private equity people speak at investor conferences and at some other conferences, but never to my knowledge in a workers’ comp-related conference,” said Paduda, who will moderate the session. “Especially folks like these who actually assess the business, follow the workers’ comp industry and really understand it at both a granular and strategic level.”

Paduda promised to allow plenty of time for audience questions.

“We are going to have an extended question and answer [time] just because there is so much interest in the role of private equity in the workers’ comp business,” he said.

Regulatory Compliance

Legal and regulatory issues are also on tap.

The Occupational Safety and Health Administration’s 2013 temporary worker initiative directed its field inspectors to place greater emphasis on assessing whether employers using temp workers comply with their responsibilities.

“There has been a lot of postulation about what the ACA’s impact is on the industry.”  —Denise Zoe Gillen-Algire, director, managed care and disability corporate risk, Safeway Inc.

Corey Berghoefer, senior VP, risk management and insurance for Ranstad, a global employment services provider, will join two workers’ comp attorneys to discuss OSHA’s initiative and other risk-management considerations accompanying current growth in temp worker hiring.

“I’ll talk about the duties and responsibilities, and how OSHA will come in during an investigation and view each of the parties,” he said.

The Patient Protection and Affordable Care Act is another current topic that conference speakers will weigh in on at a session titled “Healthcare Reform: Strategies You Can Apply Now.”

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Denise Zoe Gillen-Algire, director, managed care and disability corporate risk, Safeway Inc.

“There has been a lot of postulation about what the ACA’s impact is on the industry,” said Denise Zoe Gillen-Algire, director, managed care and disability corporate risk at Safeway Inc. and the conference’s program co-chair. “We want to say, ‘OK, what is the takeaway? What does it mean to employers?’ We want to take that information and say, ‘What can you do as employers to manage your workers’ comp program and either prepare or mitigate some of the impacts?’ ”

William Wilt, president of Assured Research, will join Gillen-Algire.

Here are some other presentations:

Opening Keynote: Integrating Employees’ Health and Well-Being to Improve the Bottom Line
L. Casey Chosewood, M.D., is senior medical officer and director of the Office for Total Worker Health Coordination and Research Support at the National Institute for Occupational Safety and Health. Chosewood will demonstrate how to reduce employer costs by integrating occupational health and safety with health promotion and post-injury management.

Session: Modeling Managed Care for Program Impact
Speakers from two large, self-insured employers and a national workers’ comp consultant will explain managed care services and how to evaluate which ones deliver the best outcomes and greatest cost savings.
Speakers: Barry Bloom, principal at The bdb Group; John Riggs, manager of workers’ compensation, Disneyland Resort; and John Smolk, principal manager, workers’ compensation, Southern California Edison.

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Session: Risk Financing: Selecting the Best Option for Your Company
Mark Walls, conference program co-chair and VP, communications and strategic analysis at Safety National, will cover a range of considerations for employers weighing various insurance arrangements. From buying first-dollar coverage and large deductible programs to self-insuring, he will lay out the key considerations for each.

Session: Loss Mitigation of High Value Workers’ Compensation Claims
Hear about risk analysis that can identify old claims previously considered incapable of being resolved. The session will seek audience participation while discussing several cost drivers such as treating-doctor issues and Medicare set-asides.
Speakers: Christianne Quinn, national workers’ compensation manager at Pep Boys; and David R. Kunz, managing partner at Kunz & Germick.

Session: Behavior-Based Safety Program: How You Can Prevent Injuries and Improve Product Quality
Safety and product quality go hand in hand, so a behavior-based safety program stands to improve loss prevention and high-quality production throughout a company.
Speaker: Julia Sfurm, corporate senior risk operations manager, Elkay Manufacturing Co.

Visit www.wcconference.com/agenda.html for a look at the conference’s complete agenda.

Roberto Ceniceros is senior editor at Risk & Insurance® and co-chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at rceniceros@lrp.com. Read more of his columns and features.
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Sponsored: Liberty International Underwriters

A Renaissance In U.S. Energy

Resurgence in the U.S. energy industry comes with unexpected risks and calls for a new approach.
By: | October 15, 2014 • 5 min read

SponsoredContent_LIU
America’s energy resurgence is one of the biggest economic game-changers in modern global history. Current technologies are extracting more oil and gas from shale, oil sands and beneath the ocean floor.

Domestic manufacturers once clamoring for more affordable fuels now have them. Breaking from its past role as a hungry energy importer, the U.S. is moving toward potentially becoming a major energy exporter.

“As the surge in domestic energy production becomes a game-changer, it’s time to change the game when it comes to both midstream and downstream energy risk management and risk transfer,” said Rob Rokicki, a New York-based senior vice president with Liberty International Underwriters (LIU) with 25 years of experience underwriting energy property risks around the globe.

Given the domino effect, whereby critical issues impact each other, today’s businesses and insurers can no longer look at challenges in isolation one issue at a time. A holistic, collaborative and integrated approach to minimizing risk and improving outcomes is called for instead.

Aging Infrastructure, Aging Personnel

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Robert Rokicki, Senior Vice President, Liberty International Underwriters

The irony of the domestic energy surge is that just as the industry is poised to capitalize on the bonanza, its infrastructure is in serious need of improvement. Ten years ago, the domestic refining industry was declining, with much of the industry moving overseas. That decline was exacerbated by the Great Recession, meaning even less investment went into the domestic energy infrastructure, which is now facing a sudden upsurge in the volume of gas and oil it’s being called on to handle and process.

“We are in a renaissance for energy’s midstream and downstream business leading us to a critical point that no one predicted,” Rokicki said. “Plants that were once stranded assets have become diamonds based on their location. Plus, there was not a lot of new talent coming into the industry during that fallow period.”

In fact, according to a 2014 Manpower Inc. study, an aging workforce along with a lack of new talent and skills coming in is one of the largest threats facing the energy sector today. Other estimates show that during the next decade, approximately 50 percent of those working in the energy industry will be retiring. “So risk managers can now add concerns about an aging workforce to concerns about the aging infrastructure,” he said.

Increasing Frequency of Severity

SponsoredContent_LIUCurrent financial factors have also contributed to a marked increase in frequency of severity losses in both the midstream and downstream energy sector. The costs associated with upgrades, debottlenecking and replacement of equipment, have increased significantly,” Rokicki said. For example, a small loss 10 years ago in the $1 million to $5 million ranges, is now increasing rapidly and could readily develop into a $20 million to $30 million loss.

Man-made disasters, such as fires and explosions that are linked to aging infrastructure and the decrease in experienced staff due to the aging workforce, play a big part. The location of energy midstream and downstream facilities has added to the underwriting risk.

“When you look at energy plants, they tend to be located around rivers, near ports, or near a harbor. These assets are susceptible to flood and storm surge exposure from a natural catastrophe standpoint. We are seeing greater concentrations of assets located in areas that are highly exposed to natural catastrophe perils,” Rokicki explained.

“A hurricane thirty years ago would affect fewer installations then a storm does today. This increases aggregation and the magnitude for potential loss.”

Buyer Beware

On its own, the domestic energy bonanza presents complex risk management challenges.

However, gradual changes to insurance coverage for both midstream and downstream energy have complicated the situation further. Broadening coverage over the decades by downstream energy carriers has led to greater uncertainty in adjusting claims.

A combination of the downturn in domestic energy production, the recession and soft insurance market cycles meant greatly increased competition from carriers and resulted in the writing of untested policy language.

SponsoredContent_LIU

In effect, the industry went from an environment of tested policy language and structure to vague and ambiguous policy language.

Keep in mind that no one carrier has the capacity to underwrite a $3 billion oil refinery. Each insurance program has many carriers that subscribe and share the risk, with each carrier potentially participating on differential terms.

“Achieving clarity in the policy language is getting very complicated and potentially detrimental,” Rokicki said.

Back to Basics

SponsoredContent_LIUHas the time come for a reset?

Rokicki proposes getting back to basics with both midstream and downstream energy risk management and risk transfer.

He recommends that the insured, the broker, and the carrier’s underwriter, engineer and claims executive sit down and make sure they are all on the same page about coverage terms and conditions.

It’s something the industry used to do and got away from, but needs to get back to.

“Having a claims person involved with policy wording before a loss is of the utmost importance,” Rokicki said, “because that claims executive can best explain to the insured what they can expect from policy coverage prior to any loss, eliminating the frustration of interpreting today’s policy wording.”

As well, having an engineer and underwriter working on the team with dual accountability and responsibility can be invaluable, often leading to innovative coverage solutions for clients as a result of close collaboration.

According to Rokicki, the best time to have this collaborative discussion is at the mid-point in a policy year. For a property policy that runs from July 1 through June 30, for example, the meeting should happen in December or January. If underwriters try to discuss policy-wording concerns during the renewal period on their own, the process tends to get overshadowed by the negotiations centered around premiums.

After a loss occurs is not the best time to find out everyone was thinking differently about the coverage,” he said.

Changes in both the energy and insurance markets require a new approach to minimizing risk. A more holistic, less siloed approach is called for in today’s climate. Carriers need to conduct more complex analysis across multiple measures and have in-depth conversations with brokers and insureds to create a better understanding and collectively develop the best solutions. LIU’s integrated business approach utilizing underwriters, engineers and claims executives provides a solid platform for realizing success in this new and ever-changing energy environment.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.


LIU is part of the Global Specialty Division of Liberty Mutual Insurance.
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