The best workers’ compensation insurers have similar characteristics. A new study released by ACORD identified a few of those similarities, including that they pay their agency partners more than their rivals do as a way to attract better customers and achieve better results.
To find out what a “superior performer” looks like in workers’ comp, ACORD asked three questions: How should success be measured across workers’ compensation insurers? What strategies and tactics lead to superior performance? What are the implications for carriers?
To answer these key questions, ACORD’s 2018 U.S. Workers’ Compensation Performance Study, which examined the top 50 workers’ comp writers in the U.S., used five years of data. The 50 largest workers’ comp carriers account for 85 percent of workers’ compensation premium.
The top 50 carriers were screened which ultimately led to narrowing the field to only five “Superior Performers.” Together, the Superior Performer carriers account for 11 percent of the U.S. workers’ compensation market.
ACORD then analyzed the Superior Performers using non-financial factors, including regulatory complaints, social media visibility and sentiment, attractiveness to current and potential employees, digital capabilities and leadership competency.
The study found that Superior Performers held these common characteristics:
- Superior Performers had a higher agent commission ratio than competitors. Their willingness to spend more on commissions enabled them to leverage expertise, attract and retain high-lifetime-value customers, and achieve lower overall underwriting expense and loss ratios.
- Superior Performers had better-than-average combined ratios in all lines of business, with workers’ compensation accretive to overall performance.
- For Superior Performers, workers’ compensation was a strategic and tactical complement to other lines of coverage.Superior Performers had a greater proportion of premiums concentrated in their top five states than lesser performing carriers, with nearly 70 percent of their workers’ compensation business focused in each carrier’s five key markets. Superior Performers ceded more of their premiums to reinsurers.
- Superior Performers leveraged reinsurance relationships more than their competitors.
- Superior Performers also maintained a lower premium-to-surplus ratio than their competitors.
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