Report Examines Risk Manager Satisfaction
Risk professionals who focus on enterprise risk management (ERM) are less satisfied with their insurance partners than non-ERM risk professionals, according to new research.
The 2014 Commercial Insurance Report — Special Report Snapshot is the first annual customer satisfaction survey conducted by the Risk and Insurance Management Society (RIMS) and J.D. Power. The full report is due to be released in February.
Overall, risk professionals at large businesses were most satisfied with their brokers (854 on a 1,000-point scale), followed by satisfaction with property insurers at 821, auto at 811, and workers’ compensation at 746.
Risk professionals at small businesses ranked satisfaction with insurance at 783.
As for ERM versus non-ERM professionals, the survey found that risk professionals with ERM responsibility scored workers’ compensation the weakest at 541 on a 1,000-point scale. That was 238 points lower than their counterparts without ERM responsibility.
Risk professionals with ERM responsibilities also ranked brokers (at 828 points) 56 points lower than their counterparts without ERM responsibility.
Of the nearly 1,000 risk professionals who participated in the study, 40 percent have at least some ERM responsibilities.
That’s an unexpectedly high number, said Carol Fox, RIMS director of strategic and enterprise risk and the report’s co-author.
More Than Transactions
As senior leadership begins to accept the benefits of enterprise risk management, the relationship between the risk professional and the company’s brokers and insurers assumes more than a simple transactional role, she said.
“ERMs are charged with coming up with ideas and solutions for risks that may not be insurable,” she said. “This is where insurers and brokers can help.”
For example, she said, the World Economic Forum recognizes water shortage as a global risk. The insurance partner of a business that depends on a plentiful water supply, such as a pharmaceutical or beverage company, could provide scenarios and analytics to help risk professionals and their organizations understand the risks.
“If a water shortage is anticipated within the strategic horizon, maybe 10 to 15 years, the broker or an engineer on the insurer’s team could help the company’s risk professional make plans.”
In one case, she said, a pharmaceutical company located on a body of salt water built a desalination plant. “The broker can provide those analytics and make recommendations.”
The different findings from survey findings from risk professionals with and without ERM responsibilities suggest that insurers and brokers are not meeting the more strategic and complex responsibilities of ERM professionals, said Timothy Bebout, commercial insurance practice leader at J.D. Power, who also co-wrote the report.
“If the brokers or insurers aren’t involved in the strategic discussions about, say, new locations or staffing, they won’t have a holistic view of their customers’ needs,” he said.
Fox also noted that there was a “significant delta” in customer satisfaction between broker-only relationships and triangular relationships that also includes the insurer.
The survey found that overall satisfaction fell by 100 points when a property insurance representative, such as an engineer or underwriter, was not involved during both a service interaction or claims process.
“Large commercial buyers really want to get in front of the underwriter to build a trusting relationship,” Fox said. “They want to work directly with the insurer’s engineers and claims adjusters — and that takes face-to-face meetings.
Clients also want direct meetings with brokers, she said. Overall satisfaction declined by 73 points among clients that didn’t have at least two in-person interactions, the report found.
Bebout said that interaction between the risk professional and insurer was the second-rated factor driving overall customer satisfaction across coverage lines.
The highest rated factor driving satisfaction in property lines was program offerings, while claims drove satisfaction in the workers’ comp line. For auto, it was price that satisfied the most risk professionals.
The study measured separate satisfaction scores for insurers and brokers, which were then weighted by importance and aggregated into composite scores, said Colleen Cairns, manager, insurance industry analytics, J.D. Power.
Insurers were scored on five factors: interaction; program offerings; price; billing and payment; and claims.
Brokers were scored on four factors: ease of contacting; reasonableness of fees; advice and guidance in selecting program offerings; and timeliness of resolving contact.
Respondents were employed by companies with $100 million or more in annual revenue that purchased a commercial property, workers’ compensation, or auto policy with a profiled insurer or broker.
Workers’ Comp Insurance Prices Improve for Employers
Policyholders renewing workers’ compensation coverage are finding relatively flat pricing in many instances along with competitive underwriters accommodating lower deductibles, several brokers said.
Even in troublesome California, accounts with a solid loss experience are seeing dramatically improved workers’ comp policy renewal pricing, said Mark Zwickel, executive VP in the Los Angeles office of Lockton.
“The work comp renewal market in California has improved significantly, certainly from three years ago and even last year,” he said. California accounts that saw 9 percent increases a year ago are experiencing 3 percent increases with their January renewals.
“Significantly challenged [California] accounts, both in terms of losses and lack of management controls, can still see increases in the teens,” Zwickel said. “But the general market has certainly improved. Going from 9 percent down to 3 percent is a pretty dramatic improvement.”
Nationwide, decreases in renewal pricing are possible for some accounts while many others are seeing increases of 1 percent to 2 percent, on average, the brokers said.
Insurers “right sized their books” over the last few years, said Stephen Allen, director, commercial insurance services in New York for Crystal & Company.
The underwriters did so by increasing their pricing to account for the ongoing low-interest rate returns on their investments. Additionally, medical inflation has moderated and their combined ratios are much improved.
Underwriters’ combined ratio is projected to drop to 96 for 2014, according to an NCCI Holdings Inc. estimate released in November. If realized, a 96 combined ratio would mark the first underwriting profitability since 2006.
Insurers are now comfortable with their pricing levels and “they are not looking for increases on everything while decreases are possible now,” Allen said.
Some variation in renewal pricing remains, however, depending on a client’s risk profile, company size and whether they maintain a deductible, he added.
But overall, “pricing is coming down much closer to flat than it was a year, two or three years ago,” Allen elaborated. “We are seeing slight increases to flat renewal on workers compensation right now.”
He is seeing a push for rate increase of around 5 percent, however, for “very large, million-dollar plus, guaranteed cost workers’ comp accounts” where taking a deductible is not an option due to private equity ownership. The same goes for employers seeking mono-line workers’ comp insurance.
But for large-deductible programs, purchased by “truly large buyers,” and for middle-market guaranteed cost accounts he is seeing flat to 1 percent renewal increases.
Market conditions are “pretty consistent” with a “very tight trading range,” said John J. Liston, area president in Tampa, Fla. for Arthur J. Gallagher & Co.
A review of clients with guaranteed-cost programs who renewed coverage in 25 states on January 1, revealed that two-thirds of them experienced a decrease while the remainder saw an increase. Those were accounts paying about $250,000 in annual premiums for their workers’ comp policies.
While flat pricing is common, single-digit decreases are possible for accounts that go out to bid, Liston said.
Pamela F. Ferrandino, national casualty practice leader for Willis North America in New York expects the stable market environment to hold for upcoming renewals. While some large and middle-market insureds saw price decreases during year-end renewals, most experienced flat pricing or increases of 1 percent to 2 percent as insurers looked to cover their own cost increases.
For California, Ferrandino agrees that the state’s employers are seeing some of the smallest renewal price increases in years. Senate Bill 863 — reform legislation signed into law in 2012 — is beginning to favorably impact workers’ comp pricing, she said.
Meanwhile, nationwide insurer competition is also favoring employers wanting to adjust their retention levels.
While some insureds have learned to benefit from larger retentions assumed when market conditions were less favorable, others are taking advantage of an improved situation to return to a lower deductible, the brokers said.
“It’s those clients that started looking at bigger retentions a few years back to save premium dollars,” Ferrandino said.
Those purchasing lower retentions are typically “upper middle-market, small national accounts,” she elaborated. They are generally accounts that have found competing insurers offering a lower retention than their incumbent underwriter provided them.
“There is no shortage of hungry underwriters in workers’ compensation,” Ferrandino added.
Zwickel said he is not seeing policyholders return to smaller deductibles as much as he is witnessing the number of accounts moving from guaranteed-cost arrangements to loss-sensitive programs decline.
But other employers grown comfortable with managing their exposures are selecting to reduce their premiums by increasing their retentions further.
“They are getting some pretty significant pricing relief if they will move from, say, a $250,000 retention to a $500,000,” deductible, he said.
Diversifying Top Management in Workers’ Comp
The panel at the inaugural Women in Workers’ Compensation (WiWC) Forum. From left to right: Eileen Ramallo, Elaine Vega, Nina Smith-Garmon, Nancy Hamlet, Michelle Weatherson, Nanette de la Torre, Danielle Lisenbey.
Across the country, the business community is engaged in a robust conversation about women being under-represented among c-level positions.
Why aren’t more women breaking into upper management roles? Does gender bias still exist? And, perhaps more importantly, what can women and men do to add more diversity to top leadership ranks?
Elaine Vega and Nancy Hamlet, of Healthcare Solutions, the Duluth, Ga.-based health services provider to the workers’ compensation and auto liability/PIP markets, have discussed the issue between themselves many times over the years.
The duo agreed that starting an industry-wide conversation would be an effective start to addressing the challenge. After three years of internal discussions, the inaugural Women in Workers’ Compensation (WiWC) Forum became reality. Judging by the attendance, content and feedback, it was an auspicious, very successful, debut.
Specifically, Healthcare Solutions and LRP Publications teamed up at the National Workers’ compensation and Disability Conference (NWCDC), held Nov. 18-21, 2014 in Las Vegas, to present the first WiWC event focused on the development of women as leaders within the industry. The WiWC debut featured a keynote speaker, a panel discussion and a networking cocktail hour.
“We believe this is just the beginning for the WiWC organization,” said Hamlet, senior vice president of marketing, adding that the event’s main theme was the conversation regarding challenges that still exist for women in the workplace is “current, real … and relevant.”
Originally the forum was allocated a room to hold 150 people. Vega and Hamlet worried about the room being too large, so they asked LRP what the contingency would be to make the room smaller if they couldn’t fill it. They needn’t have worried, as more than 400 women, and some men as well, registered and attended, requiring an even larger room.
“Clearly, the topic is relevant and there was plenty to discuss,” said Vega, senior vice president of account management.
Hamlet explained that WiWC was formed to create an open forum to promote a strong sense of community and support for current and future female leaders in the workers’ compensation industry. Going forward, the WiWC forum will provide insight and ideas with opportunities for members to:
- Engage … with accomplished industry professionals and build lasting relationships.
- Enrich … their knowledge base with tactical insights from speakers and panelists.
- Explore … opportunities and challenges facing women leaders today.
- Encounter … senior executives’ perspectives on leadership.
- Examine … leadership strategies and how to effectively apply the strategies.
- Empower … themselves and others to achieve success and groundbreaking results.
At the inaugural event, keynote speaker Peggy Holtman, co-author of “Leading at the Edge: Leadership Lessons from the Extraordinary Saga of Shackleton’s Antarctic Expedition,” discussed how a seemingly unconnected historical event can offer critical lessons on leadership in the workplace, especially for women looking to move into top executive spots.
After Holtman’s talk, a panel discussion, moderated by Vega, offered the perspectives of five workers’ compensation industry executives on ways in which women can navigate past the glass ceiling. Panelists included Eileen Ramallo , EVP Healthcare Solutions; Danielle Lisenbey, CEO Broadspire; Nanette de la Torre, VP Zenith; Nina Smith-Garmon, EVP Mitchell International; and Michelle Weatherson, Director, Claims Medical and Regulatory Division, State Fund of Calif.
The panelists discussed a wide range of topics related to women in workers’ compensation. For example, one topic focused on the need to take the big risks when it comes to moving past workplace barriers. Other topics included the importance of women in higher positions serving as sponsors and advocates for younger, less experienced women; and the impact of industry consolidation on women’s careers and how to best manage that change. Another topic was how women could best master conflict and emotions in the workplace.
“What’s clear is conflict has to be managed; it will not go away. It will only get worse,” said Healthcare Solutions’ Ramallo. “It then can create other rifts that won’t necessarily be visible immediately, but can have a very large impact. You have to be able to understand what it is early on from another’s perspective, why the situation exists, and then encourage and try to resolve a conflict situation, whatever may be driving it.”
In the wake of the first WiWC Forum, Hamlet noted that while there are countless general reports showing that women have not yet achieved equal representation in top leadership positions in the workplace, studies deal with averages rather than individual stories. And while women must continue to look at the data and work toward closing the gap, hearing from accomplished women in the workers’ compensation industry at NWCDC drove home critical messages on a person level.
Today, Vega and Hamlet are looking to expand WiWC to make it “truly owned” by the industry. For example, they expect to recruit companies interested in becoming sponsors, forming an advisory council, creating a charter and discussing future possibilities for the organization on both the national and regional levels.
“Much remains to be done, but I have confidence that we will come together and make the organization stronger so that it prospers for years to come,” Hamlet said. “After all, it’s clear that our industry is filled with talented women who can make things happen!”
Vega added that WiWC has already received requests to live stream the event in the future, so it will examine the feasibility of that option in an effort to be even more inclusive.
“We have a shared vision for improving opportunities for current and future women leaders in workers’ compensation,” Vega said. “It doesn’t matter our gender or our title, it’s all about supporting the greater vision. As was said several times at the event, this is just the beginning. We hope more women and men will join us in this continued dialogue.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthcare Solutions. The editorial staff of Risk & Insurance had no role in its preparation.