Employers Direct Sheds Direct Calif. Workers’ Comp; Will Return with Brokers

August 26, 2009

Just a short time after announcing it was leaving the California workers’ compensation insurance market because it was not profitable, Employers Direct Insurance Co. is announcing it is back.

The Southern-California-based company said yesterday that it has signed a definitive agreement to sell the renewal rights of its direct placed workers’ compensation insurance policies to GNW-Evergreen Insurance Services, of Encino, Calif.

In July, Employers Direct said that it was no longer going to sell policies directly in California and would sell through independent agents and brokers from now on.

“This is really about our strategy of coming back into the market most effectively,” said Mark Webb, vice president of government relations at Employers Direct. “California still remains the most important market for us.”

Mike Morey, chief operating officer at Bolton and Co., an insurance broker in Pasadena, said the news of these moves by Employers Direct “definitely caught me off guard.”

He said the company’s abrupt reversal of its intent in California, and its approach to the market, has not been adequately explained as yet. But the California workers compensation market is still highly competitive, despite warnings to the contrary. And the strategy of using brokers and agents may be a way to get the company more sellers of its policies, he suggested.

Using independent agents, “They get more looks at business,” he said.

Morey also noted that it has not been made clear exactly when the company will begin writing policies through brokers and agents, and what specific markets, if any, the company will focus on.

“We don’t know if they have their toe in, or their whole foot,” he said.

Headquartered in Encino, GNW-Evergreen is one of the largest independent insurance brokerages based in Southern California.

Employers Direct will appoint GNW-Evergreen as a producer in Arizona, California, and Nevada following the close of the sale.

“Our partnership with GNW-Evergreen is a critical first step in implementing our distribution plans throughout the Western United States through independent agents and brokers,” said James E. Little, president and CEO of Employers Direct, in a statement.

Earlier this summer Employers Direct announced that it was cutting its workforce by 18 percent. Those job cuts were mostly in sales and marketing and should be all the workforce reduction needed, Webb said. Some of those people now work for GNW-Evergreen.

In the statement, Little said that having those former employees at GNW-Evergreen should help customers to experience an easy transition.

“We could not be more pleased with this partnership,” he said.

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