2017 Teddy Award Winner

Getting It Right

Better coordination of workers’ compensation risk management spelled success for the Massachusetts Port Authority.
By: | November 1, 2017 • 6 min read

Imagine juggling an armful of flaming batons — all in different sizes. While blindfolded. And hopping on one foot.

That’s what it may have felt like a decade ago to lead the workers’ compensation program of the Massachusetts Port Authority, which owns and operates Boston Logan Airport and a number of additional airfields, as well as cargo and cruise ship terminals, piers and real estate holdings.

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Massport’s complex program covers 1,300 direct employees, plus hundreds of high-risk public safety employees, including police, firefighters and International Longshoremen’s Association (ILA) union members working at Conley Terminal.

Every day, Massport faces issues related to multiple labor unions, a diverse mix of risk environments and hazards and a variety of state workers’ comp statutes that need to be navigated with utmost care.

Ten years ago the authority decided to stop juggling, and start managing — strategically reshaping a program that was largely fragmented.

Since then, Massport logged $21 million in savings, including more than $2 million in medical cost savings alone. It achieved significant reductions in frequency, severity, lost-time days and claims duration.

Time for a Change

When Frank Rivera took the position of director, risk management and workers’ compensation for Massport in 2007, the program was self-insured and self-administered within a different authority unit and suffered from structural problems, administrative burdens and decentralization. It also lacked the resources to capitalize on cost-containment programs and drive results.

Moreover, Massport’s risk management team struggled to obtain excess coverage for workers’ compensation exposures.

Frank Rivera, director, risk management and workers’ comp, Massachusetts Port Authority

“Workers’ compensation is an insurance program, but Massport is not an insurance company. We didn’t have the tools to administrate a proper program internally,” Rivera said.

It became clear that collaboration would yield better results for the program and the Authority as a whole. Rivera led the charge to enlist the services of a third-party administrator (TPA), eventually selecting PMA Management Corp. of New England.

“Partnering with a TPA freed up resources to centralize, streamline and better manage the whole workers’ compensation process, including designing a new workflow to communicate with departments and employees.” Rivera said.

With everything under a single workers’ compensation umbrella, Massport eliminated a lot of confusion and inefficiency, creating greater transparency and communication between units rather than being hindered by silos.

The authority instituted weekly meetings attended by risk management, human resources, labor relations and the legal and safety departments. In addition to fostering collaboration on existing claims, the meeting helps keep all units focused on how tangible and intangible costs associated with workers’ comp can go off the rails if not managed appropriately, Rivera said.

Three years after the shift to a TPA, Massport made another significant move: transferring its program for one group of workers from a guaranteed cost policy to a self-insured program.

The risk management team had been considering the move for a while. Then the price for the guaranteed-cost program jumped from $1.9 to $3.9 million. The Massport team seized that opportunity to introduce the self-insured program — already successfully adopted for other groups within the workers’ comp program.

The change produced dramatic savings, and also helped to garner more union leadership buy-in for risk management, Rivera said. Better still, the self-insured program provides more control in addressing worker safety with the best possible methods, Rivera said, proving that Massport can save money while protecting workers.

Communication Is Key

Sheri Bowles, client services manager in the Waltham, Mass., office of PMA, said Rivera and his risk management team understand that it may not be possible for a work environment to be completely free from injuries.

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“Massport’s approach focuses on both what can be done to prevent incidents from occurring in the future and ensuring injured workers obtain prompt medical treatment,” Bowles said. “Prompt medical treatment is vital for injured workers’ recovery and helps facilitate a safe return to work.”

To that end, Massport and PMA have “continuous communication” throughout the claims process — beginning with timely reporting of each injury through claim resolution.

Better communication also has been the key to getting all stakeholders on board with the authority’s return-to-work goals.

Ten years ago, managers would often allow workers to linger off work because it was simply less complicated.

But Rivera and his team now make managers part of the solution, making sure they have the necessary information about an injured workers’ capabilities, appointments and expected injury durations.

“I think the only way to have a successful program is to view our employees as our most valuable assets.” — Frank Rivera, director, risk management and workers’ compensation, Massachusetts Port Authority

That allows managers to plan better for the distribution of tasks and manages everyone’s expectations. All but one of Massport units now have modified duty programs — and that one exception addresses it by a collective bargaining agreement. Massport’s successful return-to-work efforts have helped the authority obtain excess coverage more readily and negotiate lower rates from carriers.

Massport’s commitment to employees’ health and safety — a mandate within its workers’ comp program — is drilled “from the top-down,” Rivera said.

“I think the only way to have a successful program is to view our employees as our most valuable assets,” he said. “Massport insures physical assets like buildings and vehicles, and I believe it only makes sense that the same approach be extended to employees.”

“Our collective efforts ensure that Massport’s vision is executed and its goals are achieved,” Bowles said, which also applies to Massport’s philosophy on getting the very best treatment for its people.

While the organization participates in a medical cost reduction network, Massport doesn’t require that workers get treated by a network doctor.

It will recommend qualified providers with a proven track record, but allows workers to seek treatment elsewhere if they feel an alternate provider is better suited to return them to work sooner, Rivera said.

In addition, Massport provides a medical case manager, or a nurse, to help workers get treatment if it’s not readily available in their area.

“Working to provide employees with the right tools in a properly managed structure helps employees, in most cases, return to work sooner,” Rivera said.

“By our accounts this approach also helps Massport lower its overall medical costs per case.”

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Rivera’s statements receive substantial support if you look at the data. The changes implemented at Massport lowered its medical costs about 50 percent per claim.

“From our vantage point, assembling the right tools, continuous communications with injured employees and being attentive to their medical needs can help you lower your cost — a win-win for the employee and the organization,” he said.

Rivera believes the success of any program requires collaboration between injured employees, leadership and the people and tools offered by the workers’ compensation program.

“This team approach creates the best success — and that approach is why I want to thank my team and everyone else at Massport who helped make these positive results happen,” he said. &

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More coverage of the 2017 Teddy Award Winners and Honorable Mentions:

Advocacy Takes Off: At Delta Air Lines, putting employees first is the right thing to do, for employees and employer alike.

 

Proactive Approach to Employee SafetyThe Valley Health System shifted its philosophy on workers’ compensation, putting employee and patient safety at the forefront.

 

Getting It Right: Better coordination of workers’ compensation risk management spelled success for the Massachusetts Port Authority.

 

Carrots: Not SticksAt Rochester Regional Health, the workers’ comp and safety team champion employee engagement and positive reinforcement.

 

Fit for Duty: Recognizing parallels between athletes and public safety officials, the city of Denver made tailored fitness training part of its safety plan.

 

Triage, Transparency and TeamworkWhen the City of Surprise, Ariz. got proactive about reining in its claims, it also took steps to get employees engaged in making things better for everyone.

A Lesson in Leadership: Shared responsibility, data analysis and a commitment to employees are the hallmarks of Benco Dental’s workers’ comp program.

 

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

High Net Worth Clients Live in CAT Zones. Here’s What Their Resiliency Plan Should Include

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.

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Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”

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Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.

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“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]