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Vendor Relationships

Southwest Emphasizes Teamwork in Workers’ Comp Services

To discover and mitigate adverse claims trends, Southwest Airline’s workers’ comp program manager fosters cooperation.
By: | July 31, 2014 • 4 min read
Patti Colwell - Southwest (2)

Subject matter expertise alone is not enough when workers’ compensation service providers want Southwest Airlines’ business.

They also need to set aside any inclination to compete with other workers’ comp companies that also provide services to the airline — even when their product offerings overlap.

And they need to adopt Southwest’s customer service culture that follows from The Golden Rule’s mandate to treat others as one wishes to be treated.

“We work really hard to foster our Southwest Airlines corporate culture and spirit into the vendors that we work with because we want our claims team, and the nurses that we have in our [workers’ comp] program, and all the [other service providers] involved, to feel like they are an extension of Southwest Airlines,” said Patti Colwell, Southwest’s workers’ comp program manager responsible for on-the-job injury care of the company’s 45,000 employees.

“At Southwest we live by The Golden Rule,” she continued. “We expect our employees to treat our paying passengers with kindness and respect so why would we expect our vendor partners to treat our employees with any less kindness and respect?”

Like many other employers, the service providers Southwest partners with include third-party administrators, managed-care companies, pharmacy-benefit managers, and attorneys.

In addition to workers’ comp expertise, Colwell looks for service providers capable of working as a team with other companies servicing her program.

There can be a tendency to compete, for example, when a TPA and a managed-care company both offer managed-care services, but under an “unbundled” arrangement, the TPA provides claims-adjusting services while the other company provides the managed-care products.

“We make it very clear they are not competing with each other for our program and we expect our data and information to be shared completely among the parties because that is the only way we will know what is going on and can come to solutions,” Colwell said.

“We also look for partners willing to be accountable for results and we do that with performance guarantees.”

“We expect our employees to treat our paying passengers with kindness and respect so why would we expect our vendor partners to treat our employees with any less kindness and respect?”

After seven years, though, Southwest recently discontinued its unbundled approach, or separating managed care and bill review services from their TPA’s services. Those services are now bundled together and provided by Sedgwick Claims Management Services Inc., Colwell said.

Even when an employer obtains a bundled product from a single source, however, there may be competing interests among a single provider’s own managers who oversee different services, she added.

“Oftentimes, which has been my experience in the past, we found even within the same company they may have competing objectives, so we still foster this team approach even when they are internal to the same organization to make sure we all have the same goals,” Colwell said.

To do that, Southwest brings together a program manager from her TPA’s claims-administration side and a program manager from the managed-care side, for both quarterly partnership meetings and monthly claims-review meetings. Other service providers also join the meetings, such as pharmacy-benefit-manager representatives

In addition to reviewing specific case files, the claims-review meetings improve communications between all the service providers and Southwest, and they provide an opportunity to spot trends needing corrective action.

“We try to find solutions to wrap claims up, but we also try to find trends that we need to address because our whole goal is to get our employees early diagnostics, get them the treatment they need, and to get them back to good health as soon as possible,” Colwell said.

One adverse trend revealed in such a meeting, for example, involved second shoulder surgeries performed on employees treated by a specific doctor.

“We had all the players at the claims review and we kept hearing the same thing over and over about second shoulder surgeries,” Colwell said. “The same doctor’s name kept coming up and it was obvious there was an issue.”

Further analysis revealed the doctor referred patients to a particular physical therapist who frequently prescribed home physical therapy after just a couple of office visits. But post-shoulder surgery therapy can be painful and injured workers were not following through with their prescribed routine.

Consequently, they suffered frozen shoulder issues requiring the second operation, Colwell said.

That occurred in a state that allowed the airline to direct injured employees to medical providers known to produce better medical and return-to-work outcomes.

Spotting and correcting the trend resulted from the relationships built through the meetings, Colwell said.

“You have to have the relationships in place to be able to act quickly and mitigate circumstances,” Colwell said.

Patti Colwell will speak on Nov. 20 at the National Workers’ Compensation and Disability Conference® & Expo in Las Vegas. She will be joined by Tron Emptage, chief claims officer at Progressive Medical Inc., and Julie Fortune, senior VP and chief claims officer for Arrowpoint Capital, to discuss “Approaches to Managing Nontraditional Claims Including Unions, Legacy Claims and Co-Morbidities.”

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 Read more of his columns and features.
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At a Glance

High Levels of Worker Stress Erode Workplace Safety


As the nature of work changes at break-neck speed, job stress poses a threat to workers and their employers, the National Institute for Occupational Safety and Health reports. “It is widely believed that job stress increases the risk for development of back and upper extremity musculoskeletal disorders.” And although additional research is necessary, NIOSH says there is growing concern that stressful work conditions interfere with safety practices and set the stage for accidents.

Meanwhile, the infographic above compiled by the American Psychological Assn. earlier this year shows that, on average, Americans’ stress levels are far higher than they believe is healthy.

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Sponsored Content by AIG

Global Program Premium Allocation: Why It Matters More Than You Think

Addressing the key challenges of global premium allocation is critical for all parties.
By: | June 2, 2014 • 5 min read

Ten years after starting her medium-sized Greek yogurt manufacturing and distribution business in Chicago, Nancy is looking to open new facilities in Frankfurt, Germany and Seoul, South Korea. She has determined the company needs to have separate insurance policies for each location. Enter “premium allocation,” the process through which insurance premiums, fees and other charges are properly allocated among participants and geographies.

Experts say that the ideal premium allocation strategy is about balance. On one hand, it needs to appropriately reflect the risk being insured. On the other, it must satisfy the client’s objectives, as well as those of regulators, local subsidiaries, insurers and brokers., Ensuring that premium allocation is done appropriately and on a timely basis can make a multinational program run much smoother for everyone.

At first blush, premium allocation for a global insurance program is hardly buzzworthy. But as with our expanding hypothetical company, accurate, equitable premium allocation is a critical starting point. All parties have a vested interest in seeing that the allocation is done correctly and efficiently.

SponsoredContent_AIG“This rather prosaic topic affects everyone … brokers, clients and carriers. Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”

– Marty Scherzer, President of Global Risk Solutions, AIG

Basic goals of key players include:

  • Buyer – corporate office: Wants to ensure that the organization is adequately covered while engineering an optimal financial structure. The optimized structure is dependent on balancing local regulatory, tax and market conditions while providing for the appropriate premium to cover the risk.
  • Buyer – local offices: Needs to have justification that the internal allocations of the premium expense fairly represent the local office’s risk exposure.
  • Broker: The resources that are assigned to manage the program in a local country need to be appropriately compensated. Their compensation is often determined by the premium allocated to their country. A premium allocation that does not effectively correlate to the needs of the local office has the potential to under- or over-compensate these resources.
  • Insurer: Needs to satisfy regulators that oversee the insurer’s local insurance operations that the premiums are fair, reasonable and commensurate with the risks being covered.

According to Marty Scherzer, President of Global Risk Solutions at AIG, as globalization continues to drive U.S. companies of varying sizes to expand their markets beyond domestic borders, premium allocation “needs to be done appropriately and timely; delay or get it wrong and it could prove costly.”

“This rather prosaic topic affects everyone … brokers, clients and carriers,” Scherzer says. “Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”

SponsoredContent_AIGThere are four critical challenges that need to be balanced if an allocation is to satisfy all parties, he says:

Tax considerations

Across the globe, tax rates for insurance premiums vary widely. While a company will want to structure allocations to attain its financial objectives, the methodology employed needs to be reasonable and appropriate in the eyes of the carrier, broker, insured and regulator. Similarly, and in conjunction with tax and transfer pricing considerations, companies need to make sure that their premiums properly reflect the risk in each country. Even companies with the best intentions to allocate premiums appropriately are facing greater scrutiny. To properly address this issue, Scherzer recommends that companies maintain a well documented and justifiable rationale for their premium allocation in the event of a regulatory inquiry.

Prudent premiums

Insurance regulators worldwide seek to ensure that the carriers in their countries have both the capital and the ability to pay losses. Accordingly, they don’t want a premium being allocated to their country to be too low relative to the corresponding level of risk.

Data accuracy

Without accurate data, premium allocation can be difficult, at best. Choosing to allocate premium based on sales in a given country or in a given time period, for example, can work. But if you don’t have that data for every subsidiary in a given country, the allocation will not be accurate. The key to appropriately allocating premium is to gather the required data well in advance of the program’s inception and scrub it for accuracy.

Critical timing

When creating an optimal multinational insurance program, premium allocation needs to be done quickly, but accurately. Without careful attention and planning, the process can easily become derailed.

Scherzer compares it to getting a little bit off course at the beginning of a long journey. A small deviation at the outset will have a magnified effect later on, landing you even farther away from your intended destination.

Figuring it all out

AIG has created the award-winning Multinational Program Design Tool to help companies decide whether (and where) to place local policies. The tool uses information that covers more than 200 countries, and provides results after answers to a few basic questions.


This interactive tool — iPad and PC-ready — requires just 10-15 minutes to complete in one of four languages (English, Spanish, Chinese and Japanese). The tool evaluates user feedback on exposures, geographies, risk sensitivities, preferences and needs against AIG’s knowledge of local regulatory, business and market factors and trends to produce a detailed report that can be used in the next level of discussion with brokers and AIG on a global insurance strategy, including premium allocation.

“The hope is that decision-makers partner with their broker and carrier to get premium allocation done early, accurately and right the first time,” Scherzer says.

For more information about AIG and its award-winning application, visit

This article was produced by AIG and not the Risk & Insurance® editorial team.

AIG is a leading international insurance organization serving customers in more than 130 countries.
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