Colorado Workers’ Compensation Insurer Pinnacol Defends Agent Perks

By | August 17, 2009

Colorado’s dominant workers compensation insurer last week defended its spending on travel and entertainment for its agents, telling Colorado lawmakers it’s good for morale and helps lower costs in the long run.

Pinnacol Assurance’s expenses have included $143,930 for a luxury suite at Invesco Field — home of the Denver Broncos; a $133,000 trip to the Four Seasons Resort in Scottsdale, Ariz.; and a $2,515 dinner, which included two plates of $144 lobster and three bottles of $115 wine.

Some Democratic members of a legislative committee charged with looking at possible changes to the state-created workers’ compensation company questioned the appropriateness of the spending, especially in light of the recession.

State Rep. Sal Pace, D-Pueblo, said he had trouble justifying such expenses to people in his district, where the median income for a family of four is $28,000 a year.

The expenses, first reported by Denver’s KMGH-TV in May, were based on Pinnacol documents. The company didn’t dispute the figures in the report but argued it didn’t explain why the company spent the money.

Outside agents that sell Pinnacol’s policies, as well as some policyholders are invited to games, trips and dinners to build relationships that make it easier for all sides to work together, said Jeff Tetrick, Pinnacol’s chief financial officer. That has benefited everyone from injured workers to the company’s employees, he said.

“If that interface is free of friction, the transaction for everybody works well,” he told the committee. “If there’s friction in that transaction, the cost of that transaction is high for everybody.”

Pinnacol says it competes with private-sector insurance carriers that spend more on wining and dining agents. According to the Division of Insurance, Pinnacol spends 23.6 percent of what it takes in premiums on expenses, while the industry average is about 30 percent.

Republican members of the committee, meanwhile, praised Pinnacol for reversing deficits run up by a previous state agency charged with providing workers’ compensation insurance to high-risk companies that couldn’t get coverage anywhere else.

By operating more like its private competitors, Pinnacol has been able to write less risky premiums that help it provide service to the high-risk ones, the GOP lawmakers argued.

Sen. Shawn Mitchell, R-Broomfield, criticized lawmakers for suggesting that Pinnacol chief executive officer Ken Ross be paid less. Ross earned $448,813 last year.

“Pinnacol is a success story and we’re messing it up,” Mitchell said.

The committee was formed after lawmakers considered but ultimately rejected taking the company’s $684 million surplus to help balance the state’s budget. Pinnacol says its surplus is now $580 million because it again refunded more money to its policyholders this year.

The committee is looking at whether the company should have more state oversight or whether it should be sold off. But since Pinnacol is a hybrid of public and private, it’s unclear whether lawmakers have the right to sell it.

Pinnacol’s board is appointed by the governor. The company doesn’t pay taxes and its employees are part of the state’s pension program. However, state law says Pinnacol’s assets don’t belong to the state.

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