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The Next Frontier Multi Line State Funds. Presented by. Don Collins Chief Marketing Officer & Vice President, Communications. Glen Kuball CPCU,CIC,ARM,APA Vice President, Underwriting. AASCIF 2010 POLICYHOLDER SERVICES WORKSHOP, AUSTIN, TX 10/19/10.

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The next frontier multi line state funds
The Next FrontierMulti Line State Funds

Presented by

Don Collins

Chief Marketing Officer &

Vice President, Communications

Glen Kuball CPCU,CIC,ARM,APA

Vice President, Underwriting

AASCIF 2010 POLICYHOLDER SERVICES WORKSHOP, AUSTIN, TX 10/19/10


The Next FrontierMulti-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 funds1
The Next FrontierMulti-Line State Funds

“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..)

Establish the Perspective


The next frontier multi line state funds2
The Next FrontierMulti-Line State Funds

Establish the Perspective

Your perspective depends upon your (unique) position and view-point..

Do you see the young, or old lady?


The next frontier multi line state funds3
The Next FrontierMulti-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!


The next frontier multi line state funds why consider offering other lines of insurance
The Next FrontierMulti-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?”


The next frontier multi line state funds4
The Next FrontierMulti-Line State Funds

  • 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

Why consider offering other lines of insurance?


The next frontier multi line state funds5
The Next FrontierMulti-Line State Funds

  • 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

Why consider offering other lines of insurance?


The next frontier multi line state funds what are some of the considerations
The Next FrontierMulti-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.


The next frontier multi line state funds6
The Next FrontierMulti-Line State Funds

  • 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?

What are some of the considerations?


The next frontier multi line state funds7
The Next FrontierMulti-Line State Funds

  • 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

What are some of the considerations?


The next frontier multi line state funds8
The Next FrontierMulti-Line State Funds

  • 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

What are some of the considerations?


The next frontier multi line state funds potential lines of insurance
The Next FrontierMulti-Line State Funds - Potential Lines of Insurance


The next frontier multi line state funds9
The Next FrontierMulti-Line State Funds

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.)

Potential Lines of Insurance


The next frontier multi line state funds10
The Next FrontierMulti-Line State Funds

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)

Potential Lines of Insurance


The next frontier multi line state funds markets in this space
The Next FrontierMulti-Line State Funds – Markets in this “space”

Hey! Look at me everybody! I’m a cowboy!…Howdy, Howdy, Howdy


The next frontier multi line state funds11
The Next FrontierMulti-Line State Funds

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

Markets in this “space”



Why offering pa products to casualty wc clients is a perfect fit
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


Typical plan design
Typical Plan Design “Perfect Fit”

AD&D: Varying benefit levels based on client need and price point considerations

Range: $25,000 - $75,000

Key Riders:

Escalator (5% for 5 years)

Emergency Room Visit

Special Education Benefit (Spouse and/or dependents)

Child Care Center Benefit

Home Alteration/Vehicle Modification


Typical plan design cont
Typical Plan Design (cont.) “Perfect Fit”

Key Riders (cont.):

Hospital Stay

Seatbelt/Airbag

Burial/Cremation

Common Carrier

Felonious Assault

Bulletproof Vest (police/security groups)

Infectious Disease (hospital/medical groups)


Implementation
Implementation “Perfect Fit”

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


Implementation cont
Implementation (cont.) “Perfect Fit”

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:

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


Post implementation
Post Implementation “Perfect Fit”

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


www.guycarp.com “Perfect Fit”


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