2017 Power Broker

Workers’ Compensation

An Indispensable Partner

Christopher Bailey
Vice President
Willis Towers Watson, Greenville, S.C.

After decades coaching college football, Dave Roberts launched a new venture — Vital Care EMS, a South Carolina medical transportation company. There was a steep learning curve at first, and the company’s experience mod went “through the roof.”

Willis Towers Watson’s Christopher Bailey stepped in and analyzed Vital Care’s program top to bottom, identifying everything from quick-fix issues to long-term improvements. Roberts, the company’s president, credited Bailey with helping him turn things around.

“[He] helped us grow from five trucks and 20 people to 100 trucks and 400 people,” said Roberts. “He’s always given me great advice — even when I don’t want to listen to him.”

Roberts said the company could never have grown so fast without Bailey.

“We’ve been approached by every person in the state to [change brokers] and I won’t even go there,” he said. “I have the highest regard for him.”

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“He is the bomb,” said Dustin Pelletier, franchise owner and operator of the Big Air Trampoline Park in Spartanburg, S.C. Pelletier said Bailey had never worked with a trampoline park before. But he learned the industry so fast and so thoroughly that he soon found better insurance solutions than even Big Air corporate could offer.

“He got me better cover with less expensive premiums — better than corporate,” he said.

In fact it’s so good, said Pelletier, that corporate is asking, “Hey, can we get that guy’s number?”

A Champion for Small Employers

Riley Holman
Insurance Consultant
Dixie Leavitt, Cedar City, Utah

Dixie Leavitt’s Riley Holman understands that often the person managing workers’ comp for a small entity wears several other hats as well. That’s why he makes it a priority to streamline and simplify coverage as much as possible, while offering expert advice on safety improvements that won’t break the bank.

He also understands that even one workplace tragedy can turn a small business upside down in a moment.

Holman saw that playing out with a sand and gravel company in a tough position. A workplace accident had led to a double fatality and a large claim payout.

Carriers were not inclined to take the company on, and they were only able to find coverage with a nonstandard carrier, paying more for less coverage than they needed.

“We were practically uninsurable,” said the company president. “Other brokers said, ‘There’s almost nothing we can do.’ “

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Holman disagreed. He knew of a standard carrier with an appetite for their business. He arranged for underwriters to do a loss control visit to better understand the actual exposures, as well as the measures the company was taking to prevent future incidents.

“Riley leveraged his relationships and brought the carriers out to see the operations and to show that the fatality didn’t tell the whole story,” said the company president.

The new program saved more than $100,000, rescuing the company from being slowly strangled by excessive premiums.

Crisis Averted

Linda Joski, CRM
Area Senior Vice President
Arthur J. Gallagher, Brookfield, Wis.

The Milwaukee Center for Independence was thrown for a loop with a substantial legislative change impacting the state’s workers’ comp law. The law specified that the entity providing financial management services would become the employer of record for workers’ comp purposes for workers providing long-term care benefits under programs administered by the state.

That put MCFI, a nonprofit, in the crosshairs, as the fiscal agent responsible for withholding income taxes for employees of one such program.

The law “would have meant we had to put 18,000 workers’ comp policies in place,” at an expense of about $2.9 million, said Rob Wedel, CFO and vice president of finance for MCFI. It’s a burden that could have buried MCFI. But Gallagher’s Linda Joski came to the rescue.

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“Linda settled everybody down and got the right people in place, connected [the carrier] United Heartland and the state and got everyone on the same page with a viable solution,” Wedel said.

Joski helped arrange one master program for all participants involved, eliminating the administrative burden of single policies. Joski also negotiated using MCFI’s experience mod of .72 rather than the typical 1.00 used for new entities — resulting in additional savings of 28 percent (about $2.3 million).

Joski’s dedication and creativity “saved the state of Wisconsin about $5 million … it was just phenomenal,” said Wedel.

Bringing the ‘Wow’ Factor

Machelle McKenzie, CRM, CIC
Managing Director
Crystal & Company, Houston

Machelle McKenzie’s clients tend to talk about her in extremes — but in a good way.

“If she ever leaves, my business goes with her,” said Cheryl Wyatt, director of human resources for Stronghold Ltd. in La Porte, Texas. “There’s nothing she can’t answer, and I never have to wait for a response. I literally send emails at 2 in the morning … and I actually get her at 2 in the morning.”

Wyatt’s company split into two entities in early 2016, a complex undertaking with a high volume of moving parts.

“We wanted all of our billing to be separate,” said Wyatt. “Machelle had to split out the cost by entity. In particular for workers’ comp, that’s not easy … we work in almost every state.”

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Wyatt was impressed with how quickly McKenzie was able to find a workable solution, not to mention how quickly she completed the project.

“She did it in a couple of weeks,” said Wyatt. “It would have taken me six months.”

Clients value McKenzie’s ability to assess every angle and identify substantive ways to help the business succeed.

For one client, McKenzie recently discovered and corrected a carrier reporting error, bringing the company’s experience mod down from .98 to a more manageable .80. For another, she got a letter of credit reduced from $990,000 to $200,000.

The Next Frontier in Claims Audits

Joe Picone, CPCU, AIC
Claim Consulting Practice Leader
Willis Towers Watson, Glen Allen, Va.

Jenny Novoa, director of risk management for The Gap, threw down the gauntlet for her broker, Willis Towers Watson’s Joe Picone: Help us find a better way to evaluate third-party administrators (TPAs). More specifically, Novoa wanted to measure TPA performance based on outcomes rather than using standard “best practice” audits.

“We had to figure out how to build a tool to do that,” said Novoa.

Picone rolled up his sleeves and dug in, recruiting additional stakeholders from Foot Locker, Saks Fifth Avenue and Corvel.

To build the new audit tool, Picone, Novoa and the team incorporated numerous factors into the claim process such as employee co-morbidities, failures in the return-to-work process and life events as well as the hiring process and performance management.

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They completed audits using both the new tool and the old tool, and compared the results, which turned out to be a revelation. Using the traditional audit tool, some claims scored high even though they had poor outcomes, while some with good outcomes had lower scores.

For example, a file that received a perfect “100” score on a best practice audit may have exceeded expected medical disability guidelines by 400 percent.

Using the outcomes-based audit tool, there was a far higher correlation between high scores and good outcomes. It’s a “very cool tool,” said Novoa — the first of its kind in the industry.

Rolling Into Claims Success

Dennis Tierney
Director of Workers’ Compensation Claims
Marsh, New York

Power Brokers love a challenge. Marsh’s Dennis Tierney got that and more when he took on Motivate International as a client. A global bike share leader, Motivate International partners with governments and brands in major cities around the world.

The company was at a crossroads after the acquisition of a troubled bike share operator. The acquired company, which didn’t have a risk management department, had amassed $10 million in claims in only three years.

“Our broker at the time was on cruise control,” said Grant Barkey, Motivate’s risk manager. “We needed somebody who was strong on claims, someone who understood our business.”

Barkey partnered with Tierney and his team at Marsh, and he is effusive when explaining how far things have come since then.

“My entire team is pretty rock star,” said Barkey. “[They] really turned around our claims and claims management.”

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One key hurdle, said Barkey, was that carriers didn’t really understand the bike share business, which is a fairly young industry, or its sometimes nuanced exposure. But Tierney got it, Barkey said, and strove to make sure that carriers could wrap their heads around it.

The company ultimately ended up with a new carrier, said Barkey, and Tierney has been instrumental in ensuring that the carrier has a solid handle on Motivate International’s exposures. The company has made incredible strides in closing out open claims and setting up special handling agreements with the carrier.

 Finalists:

Jeffrey Breskin
Director
Crystal & Company, Los Angeles

Carol Murphy
Managing Director and Casualty Growth Leader
Aon, Chicago

Thomas Ryan
Managing Director
Marsh, New York City

Teri Weber
Partner
Spring Consulting Group, Boston

More from Risk & Insurance

More from Risk & Insurance

2017 RIMS

Resilience in Face of Cyber

New cyber model platforms will help insurers better manage aggregation risk within their books of business.
By: | April 26, 2017 • 3 min read

As insurers become increasingly concerned about the aggregation of cyber risk exposures in their portfolios, new tools are being developed to help them better assess and manage those exposures.

One of those tools, a comprehensive cyber risk modeling application for the insurance and reinsurance markets, was announced on April 24 by AIR Worldwide.

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Last year at RIMS, AIR announced the release of the industry’s first open source deterministic cyber risk scenario, subsequently releasing a series of scenarios throughout the year, and offering the service to insurers on a consulting basis.

Its latest release, ARC– Analytics of Risk from Cyber — continues that work by offering the modeling platform for license to insurance clients for internal use rather than on a consulting basis. ARC is separate from AIR’s Touchstone platform, allowing for more flexibility in the rapidly changing cyber environment.

ARC allows insurers to get a better picture of their exposures across an entire book of business, with the help of a comprehensive industry exposure database that combines data from multiple public and commercial sources.

Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

The recent attacks on Dyn and Amazon Web Services (AWS) provide perfect examples of how the ARC platform can be used to enhance the industry’s resilience, said Scott Stransky, assistant vice president and principal scientist for AIR Worldwide.

Stransky noted that insurers don’t necessarily have visibility into which of their insureds use Dyn, Amazon Web Services, Rackspace, or other common internet services providers.

In the Dyn and AWS events, there was little insured loss because the downtime fell largely just under policy waiting periods.

But,” said Stransky, “it got our clients thinking, well it happened for a few hours – could it happen for longer? And what does that do to us if it does? … This is really where our model can be very helpful.”

The purpose of having this model is to make the world more resilient … that’s really the goal.” Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

AIR has run the Dyn incident through its model, with the parameters of a single day of downtime impacting the Fortune 1000. Then it did the same with the AWS event.

When we run Fortune 1000 for Dyn for one day, we get a half a billion dollars of loss,” said Stransky. “Taking it one step further – we’ve run the same exercise for AWS for one day, through the Fortune 1000 only, and the losses are about $3 billion.”

So once you expand it out to millions of businesses, the losses would be much higher,” he added.

The ARC platform allows insurers to assess cyber exposures including “silent cyber,” across the spectrum of business, be it D&O, E&O, general liability or property. There are 18 scenarios that can be modeled, with the capability to adjust variables broadly for a better handle on events of varying severity and scope.

Looking ahead, AIR is taking a closer look at what Stransky calls “silent silent cyber,” the complex indirect and difficult to assess or insure potential impacts of any given cyber event.

Stransky cites the 2014 hack of the National Weather Service website as an example. For several days after the hack, no satellite weather imagery was available to be fed into weather models.

Imagine there was a hurricane happening during the time there was no weather service imagery,” he said. “[So] the models wouldn’t have been as accurate; people wouldn’t have had as much advance warning; they wouldn’t have evacuated as quickly or boarded up their homes.”

It’s possible that the losses would be significantly higher in such a scenario, but there would be no way to quantify how much of it could be attributed to the cyber attack and how much was strictly the result of the hurricane itself.

It’s very, very indirect,” said Stransky, citing the recent hack of the Dallas tornado sirens as another example. Not only did the situation jam up the 911 system, potentially exacerbating any number of crisis events, but such a false alarm could lead to increased losses in the future.

The next time if there’s a real tornado, people make think, ‘Oh, its just some hack,’ ” he said. “So if there’s a real tornado, who knows what’s going to happen.”

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Modeling for “silent silent cyber” remains elusive. But platforms like ARC are a step in the right direction for ensuring the continued health and strength of the insurance industry in the face of the ever-changing specter of cyber exposure.

Because we have this model, insurers are now able to manage the risks better, to be more resilient against cyber attacks, to really understand their portfolios,” said Stransky. “So when it does happen, they’ll be able to respond, they’ll be able to pay out the claims properly, they’ll be prepared.

The purpose of having this model is to make the world more resilient … that’s really the goal.”

Additional stories from RIMS 2017:

Blockchain Pros and Cons

If barriers to implementation are brought down, blockchain offers potential for financial institutions.

Embrace the Internet of Things

Risk managers can use IoT for data analytics and other risk mitigation needs, but connected devices also offer a multitude of exposures.

Feeling Unprepared to Deal With Risks

Damage to brand and reputation ranked as the top risk concern of risk managers throughout the world.

Reviewing Medical Marijuana Claims

Liberty Mutual appears to be the first carrier to create a workflow process for evaluating medical marijuana expense reimbursement requests.

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.

RIMS Conference Held in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.

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