The 2019 CHSI Advisory Board Research: The 2019 CHSI Advisory Board Research:

1. The 2019 CHSI Advisory Board Research: The 2019 CHSI Advisory Board Research: 2019 CHSI Customer Advisory Board Research Pat Speer, Principal, Speer Content Strategy & Development LLC

2. State of the Market • Workers’ Compensation/ • Property & Casualty • Total NUMBER OF US Workers Comp is 1,443. • Number of pure, niche workers comp insurers in the US is 243 • Between 2014 and 2019, annual growth at 1.6% Source: IBISWorld

3. State of the Market • Workers’ Compensation/ • Property & Casualty

4. The Captive Landscape State of the Market Captives RRGs Captives in all their segments Source: Marsh

5. State of the Market Captives / RRGs / Self-Insured Groups / Public Entities • More than 7,000 captives globally in 2019 (1,000 in 1980)* • Number of Risk Retention Groups: 220** • Total Number of Purchasing groups: 1014** • PRIMA counts 2,000 self-insured public entities (cities, counties, townships, school districts, parks authorities and risk pools. • AGRIP currently has more than 215 member pools *AM Best Captive Center **Risk Retention Reporter

6. 2019 CHSI Customer Advisory Board Research Report Most Important Accomplishment: 2018 Workers Comp: Tech changes underway to support workflow improvements, automate earned premium, and create more accurate loss ratio reports. Impact in two areas: ability to hit budget, and improve customer service/loyalty. SIGs: Focused on infrastructure and operations, operational policies and procedures, the establishment of new mission statements that let them rethink core values and goals. Technology accomplishments secondary, and included improvements in vehicle management, and automating claims.

7. 2019 CHSI Customer Advisory Board Research Report • Current Challenges • --Organizational/Systems YOUR BIGGEST TECH CHALLENGE -- Workers Comp: integrate business processes, improve how billing is handled, need for interactive reporting for KPI’s, and claims intake and mgt. SIGs: finding a way to work with outdated systems, seamless access to and integration of data, to help w claims/accounting/policy renewal/premium determination and certificate issuance, and to help with analysis and report generation. WHERE YOU FIND COST SAVINGS -- Workers Comp: Workflow efficiencies, productivity (UW and billing), non-tech issues (evaluating changes to pharmacy benefit mgt., medical bill repricing, physical therapy and medical equipment). SIG: Savings are not expected immediately… looking at upgrading software, predictive analytics to find claims efficiencies, finding ways to negate the need to hire staff while staying on a growth path, and reducing paper. LEAST EFFECTIVE FUNCTIONAL BUSINESS UNIT Workers Comp: Marketing SIGs: Risk management, loss prevention and member services need more focus. Lack of analytical data can’t address root cause of losses/prevention efforts.

8. 2019 CHSI Customer Advisory Board Research Report • Current Challenges • --Organizational/Systems RATE CHANGE CALCULATIONS: Workers Comp: Dealing with widely differing state-based rating bureaus, risk classifications, uses internal pricing tools, feedback from UW, claims, risk surveys, loss control/prevention and sales. SIGS: Depends on whether calculating a pool or individuals; most require actuarial support taking into account loss history and exposures, current fiscal year projections AND experience factors to get per-member rates. Approval of changes come from governing boards. KPIS AND BARRIERS TO COMPETITIVE ADVANTAGE: Workers Comp: Loss ratio, average claim costs, frequency reduction, sales goals, actuarial reports on reserve adequacy, claims closure rates. SIGS: Tracking frequency, severity and loss adjustment expenses, member acquisition goals, and competitive rates. KPIs are tied to premium and claim payments… measurement is around upgrades (to upgrade nor not to upgrade). Both groups: challenges with renewal/retention rates as a barrier to competing.

9. 2019 CHSI Customer Advisory Board Research Report • Ensuring a Path to Growth • --Internal For BOTH groups: Claims isthe most important core system, followed by UW, policy admin, and accounting/billing. Workers Comp carriers look at the importance of claims’ higher transactional volume, while SIGs also note underwriting as a way to positively impact member retention at renewal. CONTINUOUS IMPROVEMENT STRATEGIES: Workers comp: Continuous improvement is a core value tied to accountability. SIGS mentioned a slower move away from the status quo… Both have enterprise-wide efforts underway tied to mission, vision and goals, but SIGS less formal in their approach. BENEFICIAL RISK AND CLAIMS PERFORMANCE: Workers Comp: Looks at measures to deal with accounts’ performance both financially and via client performance reviews, cooperation, challenges, and opportunities, feeding all that to UW. SIGs: Looks at loss control efforts, bridging communication gaps between internal business units, and establishment of committees to collaborate on loss control.

10. 2019 CHSI Customer Advisory Board Research Report • Ensuring a Path to Growth • --Internal AI FOR DECISION MAKING: ALL responded either evaluating, in early stages or using analytics. ALL rely on data for better decision making. Workers Comp: Salesforce, NCCI data, Connections Data – sophisticated use: pipeline model predicts premium dollars bound, producing UW risk scores—determine risk appetite. SIGs: desire for sophisticated use does not match reality: just one respondent said early stages of implementation—rest are looking at adding data fields in advance of a program, and creating formal analytics programs for loss performance/prevention. MOST PRODUCTIVE FUNCTIONAL BUSINESS UNIT: Workers Comp: Underwriting. Need to meet needs of agents, and demand efficiencies to determine if A risk worth quoting. SIGs: Here a JPA does not typically have an UW business unit, but all others noted a mix of accounting/general ledger, claims and underwriting.

11. 2019 CHSI Customer Advisory Board Research Report • Ensuring a Path to Growth • --External IMPACT OF CRM ON MEMBERSHIP AND POLICYHOLDER RETENTION: WC: Impact of CRM can’t be overstated. CRM data is used for real-time access to accurate policyholder information, in marketing, and hands-on attention to customer service. SIGs: Less about sales, more about retention. SIGs have an established relationship with members based on expectations of the group’s operations being in the best interest of the members. So CRM is important for member communications, and most use Connections’ CRM and portal technologies for customer data accuracy and efficiencies. DEVELOPMENT OF PARTNERSHIPS: Answers so similar we present together: Number one priority: two-way, honest, respectful communications around expectations and goals (effective and timely communications around project updates), followed by an understanding of each others’ businesses—all valued support from CHSI in both customer service and training, and being a CONSULTATIVE partner. Two respondents put the onus on CHSI customers to do their part in dedicating enough resources.

12. 2019 CHSI Customer Advisory Board Research Report • Plans/Concerns for 2020 and Beyond • --Business Objectives REGULATORY: Workers Comp: Fairly straightforward path, watching NCCI class code changes, medical and indemnity data call, and the obvious issues around cannabis state-by-state. SIGs: that provide workers comp cover have many of those issues, plus, sovereign immunity limits which if increased could potentially increase loss costs, and concerns about data access laws—public access to police records. PREPARING FOR GROWTH: Both groups mentioned being able to strengthen organizational efficiencies through improved use of technology. The majority of responses from both groups also noted wanting to target customers that negatively impact their bottom line. The Workers Comp group noted the desire to see top line growth in new jurisdictions, and the SIGs group is evaluating the possibility of adding a formal risk management system to their operations as well as how to grow without hiring additional staff.

13. 2019 CHSI Customer Advisory Board Research Report • Plans/Concerns for 2020 and Beyond • Technologies Required Workers Comp: Almost all WC respondents said they were evaluating wearables, and as noted earlier, looking at AI and machine learning for more accurate claim reserving, management of claims litigation/resolution, in UW for pricing accounts, forecasting, account profitability, etc. SIGs: Citing costs as a factor, SIGS are not looking at wearables, but consider AI “emerging” in the sense that it would enable them to analyze trends to determine outcomes, and they are investing in data analytics as a way to get there. One respondent noted robotic process automation – configuring bots as a way to deal with tedious processes & free up employees for higher-level work. Neither group mentioned Blockchain as an emerging technology.

14. 2019 CHSI Customer Advisory Board Research Report • Plans/Concerns for 2020 and Beyond • Technologies Required One issue also not mentioned is the state-based cybersecurity laws being enforced and/or under consideration. As more states follow the State of New York’s Cybersecurity Regulation (23 NYCRR 500) insurers across all lines of business may be required to have a full enterprise-wide security risk assessment and plan available to state regulators. Public Risk Magazine will soon publish a story on the issues around cybersecurity, namely ransomware, and two of CHSI’s customers will discuss their efforts to both protect their customers and their own systems.

15. 2019 CHSI Customer Advisory Board Research Report Questions? • Pat Speer • Speer Content Strategy & Development LLC • pspeer@speerconsulting.net