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The Next Frontier
Multi Line State Funds
Presented by
Glen Kuball CPCU,CIC,ARM,APA
Don Collins
Vice President, Underwriting
Chief Marketing Officer &
Vice President, Communications
AASCIF 2010 POLICYHOLDER SERVICES WORKSHOP, AUSTIN, TX 10/19/10
The Next Frontier
Multi-Line State Funds
“Irrational Exuberance?”
(…To drink the Kool-Aid, or not?)
October 19th, 2010
Richard J. Foster – Managing Director, Guy Carpenter
Jason Denechaud – Director of Accident, Health & Workers
Compensation Underwriting, Catlin US
The Next Frontier
Multi-Line State Funds
Establish the Perspective
“If you have seen one State Fund… you have seen one State Fund”
Organizational structure
– State Agency / Private Public Mutual / Quasi-Governmental etc..
Legislative “Charter”
Mission
Political environment
Tax position
Product distribution channel(s)
Other… (economic, geographic, etc..)
Guy Carpenter
2
The Next Frontier
Multi-Line State Funds
Establish the Perspective
Your perspective depends upon your (unique) position and view-point..
Do you see the young, or old lady?
Guy Carpenter
3
The Next Frontier
Multi-Line State Funds
Establish the Perspective
Your perspective depends upon your (unique) position and view-point..
Is this a goal – or wasn’t it?.......
Not that I’m bitter!
Guy Carpenter
4
The Next Frontier
Multi-Line State Funds - Why consider offering other lines of insurance?
“Well, let’s see...So far, I’ve got rhythm and I’ve got music.
Actually, who could ask for anything more?”
Guy Carpenter
5
The Next Frontier
Multi-Line State Funds
Why consider offering other lines of insurance?
Increasing product line offerings / Diversification
– Value added to:
Insureds
Agents
– Accretive to portfolio balance
Account retention & new business generation tool
– Competition (Package writers)
– “One-stop” point of coverage delivery
– Differentiator from competition on core WC offerings
Additional revenue / expense mitigation
– Underwriting income
– Cash flow
– Fee / commission income
Utilization of capital
Guy Carpenter
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The Next Frontier
Multi-Line State Funds
Why consider offering other lines of insurance?
Complimentary enhancements & benefits to core (WC) writings
– Management / exposure data etc.
– Claims litigation / denial rates
– Harmonization with Loss Control / Safety program
Creation of bespoke programs
– Associations etc.
Political
– Local market dislocations
– Enhancement of “mission”
Evolution
Capitalizing on corporate success and imaging
Growth
Guy Carpenter
7
The Next Frontier
Multi-Line State Funds - What are some of the considerations?
To his horror, Irving suddenly realized he had failed to check his
own boots before putting them on just minutes ago.
Guy Carpenter
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The Next Frontier
Multi-Line State Funds
What are some of the considerations?
What product lines would we consider offering?
On what basis would we consider offering other product lines?
– Direct (on “our” paper / against our capital base)
– Indirect (as a reinsurance of another carrier)
– Passive (as a conduit for coverage / other lines)
Need to establish a vehicle (agency)
– Admitted / Non-admitted
What expertise is required?
– Currently present
– Acquired
– Provided by a third party
What risk, if any, do we want to assume?
Guy Carpenter
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The Next Frontier
Multi-Line State Funds
What are some of the considerations?
What are the motivations?
– Long-term commitment
Own / Third parties
– Soft market “play”
What are the risks?
– Financial (underwriting)
– Reputational
– Divergence from core area of competency
– Political
Tax-exemption
Alien Governmental control statutes
Department of Insurance
Policyholders
Agents
Rating Agency reactions
– Credit risk
Guy Carpenter
10
The Next Frontier
Multi-Line State Funds
What are some of the considerations?
Cost
– Hard & Soft
Systems / IT
Staffing
Distraction from core (WC) & mission
Reputational
Legal
- Changes to legislation
- Establishment of agency
- Licensing etc
“Opening Pandora’s box”
– Political pressure to cover “distressed” market segments
Target market segments
– Small / medium / large accounts
Guy Carpenter
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The Next Frontier
Multi-Line State Funds - Potential Lines of Insurance
Guy Carpenter
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The Next Frontier
Multi-Line State Funds
Potential Lines of Insurance
Lines that have been entered into / discussed include, but are not limited to:
Employment Practices Liability Insurance (EPLI)
General Liability
Commercial Auto
Property
Equipment Breakdown
Crime
Inland Marine
Liquor law liability
Professional Liability (Public Officials E&O / Police Professional etc.)
Guy Carpenter
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The Next Frontier
Multi-Line State Funds
Potential Lines of Insurance
Lines that have been entered into / discussed include, but are not limited to:
“Cyber-Risk”
Surety
Group Medical
Group Life
Accident & Health
– AD&D
– Group Business Travel Accident
– Disability (LTD/STD)
Guy Carpenter
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The Next Frontier
Multi-Line State Funds – Markets in this “space”
Hey! Look at me everybody! I’m a cowboy!…Howdy, Howdy, Howdy
Guy Carpenter
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The Next Frontier
Multi-Line State Funds
Markets in this “space”
Include, but are not limited to:
Lloyd’s of London & London Companies
– Various Syndicates
Beazley*, Brit, Amlin, ARK, Omega, Atrium, Catlin
Hartford Steam Boiler
General Re
AIG / Chartis / Lexington
Argo (Alteris)
Beazley Insurance Company*
Catlin
Various life insurers & reinsurers
Guy Carpenter
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Accidental, Death & Dismemberment (AD&D)
Product Pairing:
“A Perfect Fit”
Guy Carpenter
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Why Offering PA Products to Casualty (WC) Clients is a “Perfect Fit”
Offers differentiator in highly competitive casualty (WC) market
Simple, low cost & customized package
24 Hour Coverage
Benefits paid in addition to any other group or individual coverage
Highly Underinsured Employee Population
Improved Client Retention
Goodwill enhancement for Workers Comp settlement options
Correlation with any workplace safety programs in place
High perceived value of benefit features
Guy Carpenter
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Typical Plan Design
AD&D: Varying benefit levels based on client need and price point
considerations
Range: $25,000 - $75,000
Key Riders:
Guy Carpenter
Escalator (5% for 5 years)
Emergency Room Visit
Special Education Benefit (Spouse and/or dependents)
Child Care Center Benefit
Home Alteration/Vehicle Modification
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Typical Plan Design (cont.)
Key Riders (cont.):
Guy Carpenter
Hospital Stay
Seatbelt/Airbag
Burial/Cremation
Common Carrier
Felonious Assault
Bulletproof Vest (police/security groups)
Infectious Disease (hospital/medical groups)
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Implementation
Analysis of the WC database
Headcount by industry classification
Demographic determination of relevant riders, benefit levels and
premium tolerance
Creation of composite rate for whole group or buckets by industry
groupings
Agree to final plan design: Consider value of one simple offering or
Plan A or B option
Guy Carpenter
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Implementation (cont.)
Creation of marketing plan:
Branding
Product marketing name
Collateral (agent and consumer)
Email blasts
Website/dedicated URL
Messaging: tie-in with workplace safety themes and restating
of value proposition
Administration:
Guy Carpenter
100% Employer Pay vs. Voluntary
Coordinate with WC renewal notices
Match WC billing frequency
Administer in-house if capabilities present or defer to writing
carrier
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Post Implementation
Regular monitoring of premium flow and characteristics of submitted
business and match against initial expectations
Adapt product offering as needed based on client/agent input and
sales trends
Annual audit to evaluate demographics, loss experience, persistency,
take-up rates, sales practices, etc.
Consider offering of additional supplemental products as needed:
Life
Short Term Disability
Limited Medical
Critical Illness/Cancer
Hospital Cash
One carrier for all products is optimal
Guy Carpenter
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www.guycarp.com