Third Quarter 2018
With the holidays upon us, I’d like to start this update with a thank-you – a sincere thank-you to you our dedicated agents and UH teammates for making 2018 yet another year for the books. I know I may sound like a broken record with the all the “breaking-records” updates this year, but seriously, we just keep hitting new strides. We are on plan to surpass most of our key metrics, and the excellent numbers we’re seeing are a direct result of your hard work and commitment to representing, selling and partnering with UH.
Now a couple top line gems: We’ve reached nearly $60 million in new business – the most new business UH has ever written through October. Additionally, a seven-month retention trend above plan finds our current overall retention at 87%. From a top-line perspective, we expect to end the year above plan with a very healthy bottom line position, which I will get into below.
Our strategic focus on distressed business over the past couple of years has undoubtedly fueled our new business growth; I continue to be optimistic about this strategy. Did you know that UH’s most profitable segment of business is mods over a 1.25 with a favorable loss control opinion of risk? This business produces a combined ratio consistently less than 80% for United Heartland! This crosses all our business segments; long term care, healthcare, social services, manufacturing, school and wholesale/retail.
Not to mention, we have the ability to initiate high impact on high mod business. On average, when an account with a mod over a 1.25 comes to UH and stays for four years we, together with you the agent, affect that experience mod on average by -29.3%. This is something to be proud of, in fact you’ll soon see some new marketing materials on this topic in the coming months.
Net rate has been a challenge for most in an intense marketplace – which unfortunately we foresee to be a pattern that will only continue. We are very close to plan on net rate, approaching a decrease of8%, but based on our combined ratio we are committed to protecting the book. As mentioned above, we continue to be profitable. Losses are better than plan by nearly $20 million, and we are forecasting a 2018 combined ratio of 87.3% vs. a target of 92.9%.
As 2019 rates have started to be finalized and communicated, we are seeing some drastic reductions in ranges from flat to -19%. The chart (below) provides a look at the rate reductions in our core states. We believe this can create new business opportunities as other carriers without as strong of a profitability position will try to more aggressively hold onto net rate, causing some businesses to be marketed.
|Bureau Rate Impacts Summary|
|State||AF Group Effective Date||Bureau Rate Impacts|
And finally, it’s a good time to review your tiers and profit-sharing results to maximize your payouts under our new program. Contact your business development consultant with any questions and to identify strategies to take advantage of our profit-sharing program going forward. For more information about the program, please see our 2018 profit sharing flyer.
Thank you again for your commitment to United Heartland this year. Please look forward to a year-end summary and 2019 outlook after the first of the year. I wish all of you a safe and peaceful holiday season.
Vice President, Field Operations
The Kansas City team expanded into two new states this year, Texas and Oklahoma. These areas play a big role in the region’s growth. To be as present as possible for agents and policyholders in these new areas, the team staffed the territory with local underwriting, claims and loss control employees. So far, the region has written over $7.5 million in premium for Texas-based agencies, with a 48% hit-to-quote ratio! Since opening in Oklahoma in May 2017, the state premium writings have grown to $3.5M, and we are continuing to aggressively pursue new opportunities.
Throughout the region, the team focuses on collaboration with accounts that have experienced adverse loss trends. The region’s loss control and claims teams are doing an excellent job helping these accounts drive down their experience mods, in fact, nearly 43% of Kansas City’s new business had experience mods above 1.25.
Here’s a sample of some of the larger accounts the Kansas City team has written recently:
|Industry||Written Premium||State||Experience Mod||Previous Carrier|
|Healthcare||$406,468||Missouri||1.37||Missouri Employers Mutual|
|Candy Manufacturer||$200,000||Iowa||1.07||United Fire|
Overall, 2018 is shaping up to be a strong year for our Kansas City region, here’s a look (through Oct.):
- $10 million new business premium
- 88% premium retention
- 35% hit-to-quote ratio
A few closing thoughts from Adam Gildemeister, UH regional director of business development and underwriting: “A key to the success of the Kansas City Region has been the close collaboration and support from our agency partners. We recognize there are many options in the workers’ comp marketplace and yet we continuously see examples of our agents understanding and communicating the UH difference with their clients. We are thankful to have such a great group of people to work with. I’m also extremely proud of the hard work the entire UH Kansas City team has put forth so far in 2018 and while the soft market may continue, I believe we are poised for another great year.”
The CPCU, or Chartered Property Casualty Underwriter designation, is the most prestigious designation in the property casualty insurance industry, held by only about 4% of all property casualty employees and often referred to as the “CPA of the insurance industry.” This specialty designation normally takes years to complete, but Tyler Fee, UH business development consultant, recently knocked it out of the park in just 24 months! We interviewed Tyler, and here’s what he had to say:
Please share a brief history about your time with United Heartland.
I joined the United Heartland team two and a half years ago as a business development associate/underwriting support. I became the underwriter of the Nebraska/Sioux City, Iowa region in December 2016.
What made you decide you wanted to work toward your CPCU designation?
As soon as I stepped into commercial insurance, I knew this was an industry I could see myself in for the long term. I had heard the CPCU was the highest regarded designation in the industry, and I decided that if I wanted to be serious about advancing my career and providing my agents with the best service possible, the CPCU was something I needed to obtain.
What advice could you provide to someone who is also looking to gain this title?
Be disciplined. Set your test date and a deadline so you can’t put off studying. Setting a deadline will give you a goal to reach and will help you set, and keep, a study schedule.
Generally, the CPCU takes more than five years to complete, how did you complete this complex designation so quickly? What was your motivation?
I set deadlines for myself. Every time I passed a test, I took a week off and then I would set a deadline for the next and start back up again. I wanted to get the designation as fast as possible because I knew taking time off would make me less motivated. I also truly enjoyed learning new things. I was excited to learn about insurance-related subjects, especially those that I didn’t know much about; I was hungry to keep learning. My motivation increased after passing each test and knowing the end was nearing.
How does the CPCU designation add value to your current role with United Heartland?
My only commercial background has been with workers’ compensation, so the CPCU certainly helped me gain a broader perspective of insurance and has allowed me to have more educated conversations with my agents about the other pieces of an account. Now, I am able understand everything my agent is working on, how the entire package policy works and how I can make their job easier. I think being a CPCU also shows colleagues and agents that you are willing to put in the work to provide the most well-rounded insurance expertise possible – and that you’re committed to the job.
I would like to say that AF Group does a fabulous job of providing resources and being supportive of their employees who are trying to complete the CPCU or obtain any other designation. I would not have been as motivated had AF Group not offered to pay for the study materials and testing fees. I also completed the Accredited Advisor in Insurance (AAI) designation right after the CPCU. I only needed to take one test to do it, so it was a no-brainer.
We’re happy to announce that AF Group – which includes United Heartland – has been named to Business Insurance magazine’s list of “Best Places to Work in Insurance” in 2018, for the ninth year in a row!
The prestigious Best Places to Work in Insurance program is a joint effort of Business Insurance and Best Companies Group. Its two-part assessment process recognizes companies that have created high-quality workplaces in which employees can thrive and enjoy doing so. We look forward to sharing more details about this honor next quarter, as well as recognizing our agent partners who also earned the accolade this year.
In an Oct. 11 memorandum, OSHA clarified that post-incident drug testing and safety incentive programs are not prohibited under the anti-retaliation provisions in OSHA’s electronic recordkeeping rule.
In the October 2016 memo, OSHA explained that drug testing employees who report injuries or illnesses is prohibited unless an employer has an “objectively reasonable basis.” In addition, the agency will only consider whether the drug test is capable of measuring impairment at the time the injury or illness occurred and will consider this factor for tests that measure alcohol use, but not tests for drug use.
The memo outlines five examples of acceptable drug testing, including:
- Evaluation of the root cause of a workplace incident that harmed or could have harmed employees. (Under this circumstance, employers who choose to test for drugs “should test all employees whose conduct could have contributed to the incident, not just employees who reported injuries.”)
- Random drug testing
- Testing unrelated to reporting an occupational injury or illness
- Testing under state workers’ compensation laws
- Testing under other federal law such as a Department of Transportation rule
The 2016 rule advised that incentive programs — though well-intentioned by employers to encourage safe work practices – have the potential to discourage reporting. In the Oct. 11 memo, OSHA stated that incentive programs that seek reductions in the number of injuries and illnesses reported, or rate-based programs, are permissible if they do not discourage reporting — adding that employers who withhold a prize because of an injury report are not in violation as long as the employer has implemented adequate precautions to ensure that employees feel free to report an injury or illness.
Examples provided in the memo include:
- Incentive programs rewarding employees for identifying unsafe workplace conditions.
- Employee training programs that reinforce reporting rights and responsibilities and emphasize an organization’s anti-retaliation policy.
- Taking steps to accurately evaluate workers’ willingness to report injuries and illnesses.
For more information, click here to read OSHA’s memorandum.
*Please note that this message is to inform you of the clarification put out by OSHA. For legal advice, always consult with legal counsel on any issues or matters..
“We’re not your average workers’ comp company. We care about our customers. We care about doing what’s right.” That’s the message in a new video that focuses on the people-first philosophy that sets United Heartland apart from our competition.
This short video highlights a hypothetical injured worker’s experience with United Heartland’s personalized approach to customer service, from the time of injury to recovery. By sharing the benefits of our exceptional claims service and return-to-work programs, the positive impact made on this man’s life becomes clear.
This video closely aligns with our recently-launched digital advertising campaign, which targets current and potential agents and policyholders in key states and business segments. The campaign’s creative work includes a series of brand-specific videos which share personal “comeback stories” of real injured workers (played by actors) and their road to recovery. Check out the campaign here: unitedheartland.com/comeback.
The goal with this campaign was to demonstrate the integral role workers’ compensation plays when an injury occurs – and portraying our business in a compassionate and empathetic way. This will help position us not only as experts in the industry, but also as a company who cares about our people, our customers and doing the right thing. We hope you’ll check out the video today and share it with current and potential United Heartland customers to help in demonstrating our value to our mutual customers.
Illinois – General Assembly to Override Governor Veto of Work Comp Bill
Governor Rauner recently vetoed workers’ comp prior rate approval and premium increase notification provisions within Senate Bill 1737. Of most concern to AF Group is the portion of the bill that states carriers cannot adjust discretionary rating more than 5% up without sending notice 30 days out to policyholders/agents. Although this portion has been removed by the Governor, we feel confident the General Assembly will override his veto, making this provision law. Moving forward, we anticipate newly elected Democratic forces will continue to promote legislative initiatives on price controls and the creation of a state fund. The industry must work diligently throughout 2019 to negotiate the best compromise possible to all negative proposals.
Federal – Bipartisan Opioid Legislation
Recently, the United States Senate passed a comprehensive bill package intended to impact the national opioid crisis. Included in the bill are efforts to increase access to treatment programs for those citizens addicted as well as initiatives aimed to significantly reduce the number of painkillers entering the United States illegally. Earlier this summer, the House of Representatives enacted similar legislation. We anticipate the Senate and House will come to some form of compromise on this initiative and send a final bill package to the President for signature by the end of the year.
Texas – Proposed Rule §§114.1 -114.15, 114.16
The Texas Division of Workers’ Compensation has proposed a new rule aimed at employers seeking to transition from a certified self-insured into the voluntary market. Under the current system, employers remain liable for all claims that remain open, even after such an employer has opted out of self-insurance and entered the voluntary market. The proposal intends to allow former self-insured employers to obtain a workers’ comp policy that covers all claim obligations that occurred while the employer was operating as a self-insured. AF Group will continue to monitor this proposal at it progresses through the regulatory process.
Election Overview – Increased Risk
In the following key AF Group markets, we anticipate increased public policy activity and risk following the mid-term election results.
- Newly elected Governor Gavin Newsom likely to present challenges for industry.
- Primary risk involves Governor approval of legislative curtailing of 2012 workers’ compensation reforms.
- Democrat Robert Pritzker defeated incumbent Republican Bruce Rauner.
- With control of all three branches of state government, Democrats positioned to pursue legislative initiatives, including price controls and possible creation of a workers’ compensation state fund.
- Gretchen Whitmer will be the first Democratic governor in eight years.
- Potential risks associated with newly appointed Insurance Commissioner and Workers’ Compensation Director.
- Republican Scott Walker narrowly lost to Democratic Tony Evers
- While Governor-elect Evers will appoint a new Insurance Commissioner which initiates unknowns, the bipartisan Wisconsin Workers’ Compensation Advisory Council, initiates all legislative proposals impactful to the industry, minimizes the risk of any major shift in policy.