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
6
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
8
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
9
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
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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
13
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
18
Typical Plan Design
 AD&D: Varying benefit levels based on client need and price point
considerations
 Range: $25,000 - $75,000
 Key Riders:
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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.):
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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:
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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:
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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:
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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