Program Business

Programs Flourishing

A growing sector gathers for its annual meeting in Scottsdale.
By: | October 3, 2017 • 5 min read

The advent of more and more technology and concerns about capacity and rate are issues that will perplex and challenge every aspect of the commercial insurance business for years to come. One thing, though, is certain, the programs business is flourishing.  How the sector should respond to emerging players with new technologies, as well as other hot topics will be on the agenda at the Target Markets Program Administrators Association’s 17th Annual TMPAA Summit, Oct. 15 through Oct. 18 in Scottsdale, Ariz.

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Christopher L. Pesce, president of Maritime Program Group in Westbrook, Conn., and the TMPAA president-elect, said the level of disruption within the program market has yet to play out.

“I think what the program administrators are looking at is how to become part of the solution — how to partner with Insurtech to come up with a better mousetrap and keep themselves relevant,” Pesce said.

“It’s a tall order.”

While it’s tough to compete with “very sophisticated technology operators,” program administrators are confident in their own ability to innovate and in how quickly they can adapt to changes in the market.

John Colis, president and chief executive of Euclid Insurance Services Inc. in Itasca, Ill., said that the sector is seeing “a flood of money” backing new Insurtech start-ups aiming to digitize and, to some extent, automate the underwriting process.

Colis said it “remains to be seen” the extent to which these ventures will compete with program administrators — or become program administrators themselves. However, the issue is definitely on program administrators’ radar.

Ethan Allen, executive vice president, AIG

“What this looks like and how it is implemented remains to be seen and will be interesting to watch,” he said.

A session at TMPAA’s Summit will explore specifically how Insurtech will impact distribution networks utilized by program administrators, said Ray Scotto, executive director of the Wilmington, Del.-based trade group. Most administrators use the independent agent network, but some go to the market directly, he said.

“We need to explore the impact on this entire industry segment.”

The group’s leaders will also discuss the results of a study that shows there is continued growth of the program business segment of the market, and the segment is outperforming the general commercial segment “by a pretty good margin.”

The managing general agent and program market growth in 2016 exceeded that of the total P&C market by 32 percent, according to a July study by Conning, an investment management company for the global insurance industry.

In 2016, comparable firms in Conning’s MGA database grew by 4.9 percent compared to 3.7 percent for the P&C market overall.

“I think the program business is somewhat in vogue right now, with more carriers and surplus capacity within the industry signing on,” Pesce said.

“Deploying that capacity with program administrators is cost effective and speedy. Whether it’s a start-up carrier or a carrier simply looking for expansion, the fact that so much surplus is in the industry right now is to the benefit of program administrators.”

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Another topic of importance is heightened interest in the space from large acquirers, Colis said.

The healthy segment, he said, is “prompting an increasing number of underwriters to consider getting into the space. When demand increases, supply follows.”

Paul A. Mihulka, vice president and head of new programs at Zurich North America in Omaha, Neb., said that the carrier is seeing new program administrators being formed, with wholesalers moving into this model and other companies investing in program administration to get into the marketplace.

“We view this as an exciting time to be in the program marketplace, given all of the new entrants and new capital that’s coming in, resulting in new investment, potential new partners and transformative innovation,” Mihulka said.

“… the companies that will be most successful will be the ones that can differentiate their offerings through product, service or analysis such as predictive analytics.” — Jerry Prendergast, insurance programs underwriting manager for specialty markets, Munich Reinsurance America

Zurich, too, is particularly focused on Insurtech, he said.

“As we think about how to leverage a particular Insurtech capability — whether that’s AI, robotics or other technological advancements, we’ve embraced it as an opportunity to gain efficiencies and increase the effectiveness of our products and services to our program administrators and their retailers and customers,” Mihulka said.

Jerry Prendergast, insurance programs underwriting manager for specialty markets, Munich Reinsurance America

“Some would choose to view Insurtech as somewhat of a threat, but at this point, we would view it as a tremendous opportunity.”

Ethan Allen, executive vice president at AIG in Boston, said the carrier has “some exciting initiatives underway” involving data and technology to keep AIG “a best-in-class partner” for program administrators.

New predictive models will help PAs “to be able to go into their portfolio in a way where they’ll be enabled and empowered from a data standpoint to make better risk selection and pricing decisions in addition to more focused business development activities.”

AIG has also implemented a new underwriting and policy issuance system that allows program administrators to be more efficient in the way they transact business, he said.

“These efficiencies lead to improved profitability for our partners due to reduced frictional costs as well as allowing for faster servicing for the retail agencies and insureds they serve,” Allen said.

“In addition, this new system will give us improved access to data that will in turn enhance the value of future iterations of our predictive modeling.”

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Jerry Prendergast, insurance programs underwriting manager for specialty markets at Munich Reinsurance America Inc., said that in the MGA program space one of the challenges many companies face is the commercial auto line of business.

Over the past few years, the auto business has experienced an increase in claim frequency and severity. Many experts believe the shift is directly correlated with an increase in vehicle usage and distracted driving, Prendergast said.

Insurance companies have responded in a number of ways including exiting the line, re-underwriting a portion of their book of business and/or increasing rates.

“There are opportunities in the auto program space and the companies that will be most successful will be the ones that can differentiate their offerings through product, service or analysis such as predictive analytics,” he said.

The conference also features a Lloyd’s Open House, which will give program administrators the opportunity to meet with syndicate underwriters, said Richard Hodge, a director for Lloyd’s broker Tysers’ North America & International Specialty Division. &

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

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]