Affiliated Construction Trades
President and CEO
Win Win Win
A group captive blazes a trail by proposing a model to put union contractors on an equal footing with nonunion competitors.
Forming a group captive, even if it's to insure a niche like higher-paid union laborers, is nothing new. When such a purchasing group turns in loss ratios of less than 35 percent, and a combined ratio of between 70 and 80 percent, though, it's time to take a closer look.
Such is the story of the West Virginia Workers' Compensation Consortium Inc. and Ullico Casualty Co., a specialty underwriter of risks faced by skilled craftsmen employed by trade unions.
The partnership could serve as a model for containing workers' comp costs for union contractors around the country, according to consortium and Ullico officials, because it allows higher-wage union contractors to compete with nonunion contractors.
"This program puts us on an even keel and rewards good behavior and safety," said Steve White, director of the Charleston, W.V.-based Affiliated Construction Trades and a member of the W.V. Workers' Compensation Consortium, which represents more than 30 building trade contractors in the state.
Because members of the group captive consortium put up the capital, they watch their losses far more closely than contractors who send premium payments to an insurance underwriter.
"If you have money in the game, you watch things more closely," said Ed Smith, president and CEO of Ullico Inc., which handles all the underwriting for the captive. "You can control the destiny on the premium."
The consortium is managed by Roundstone Mgmt. Ltd. in Westlake Village, Ohio, and claims are managed by Wells Fargo. More than 30 members belong to the captive, up from the original 13.
Chris Kramer, director of marketing for captive programs with Ullico Casualty Group Inc., said that creating a group captive made up of contractors that have signed off on collective bargaining agreements was "unique to the captive world."
Tom Reese, consortium chairman and president of RC General Contractors, an employer of 80 union-trained carpenters, laborers and masons, said his company's workers' comp premiums dropped from $170,000 in 2008 to about $78,000 last year.
Much of the drop has to do with lower volume, changes in experience modification factors and competition in the West Virginia workers' comp marketplace, he said. Still, he also credits joining the consortium, which vets the contractors seeking to join the pool and maintains tighter control of its loss experience.
Union contractors are typically faced with higher workers' comp costs due to their higher payroll volume, safety standards and benefits, and as a result often lose construction bids to nonunion contractors who bid lower for the job. The lower bids are possible because nonunion tradesmen are often not as well paid. Nor do nonunion contractors operate with the same safety margins, and therefore suffer higher rates of injury.