By Craig Reynolds, Maine Employers' Mutual Insurance Company;
Rick Pagan, New Mexico Mutual Casualty Company; and
Juan Ramirez, Puerto Rico State Insurance Fund Corporation
In January the Policyholder Services Committee met in Las Vegas
to discuss various topics we thought might be of interest to the
membership. One of several initiatives the committee decided to
do was a survey to determine how AASCIF members deliver cost-effective
services in a segmented market. For the purposes of the survey,
we defined "cost-effective" as "providing services
at the lowest cost, which produces the desired result" and
"segmented market" was defined as "an identifiable
group of policyholders that would benefit from the services provided."
In competitive fund states the workers' compensation market continues
to harden and premiums continue to increase. As a result more policyholders
are interested in finding out how they can reduce their insurance
costs. (Even in monopolistic states and Canadian Provinces clients
are demanding greater cost-effective services to control their costs.)
This puts increased pressure on our claims, loss control, underwriting
and auditing departments to service more accounts with the same
number of people. Historically, increases in workload cause us to
operate more efficiently, and our survey tried to identify how the
AASCIF members are currently servicing their policyholders. By sharing
the results of the survey, we hope the members review how they currently
operate to determine if there any changes which might make their
operation a little more efficient and increase the cost-effectiveness
to their policyholders as a whole.
AASCIF Members Segmenting Markets
Type of Operation
Audit All Policyholders
Source: 2001 Survey by AASCIF Policyholder Services Committee
Markets are segmented in many ways (by premium size,
industry type, type of operation, hazard groups, good/poor performers,
etc.) so we tried to determine some of the ways the membership segments
The first question we asked was, "Do you segment your market
and determine the services provided to policyholders based on premium
size?" Twenty-one of 29 respondents (72 percent) said they
did use size of premium as one of the major criterion for determining
the level of service an account would receive. It didn't seem to
matter if the respondent was an exclusive state fund, a competitive
state fund, a monoline mutual company, or a Canadian Board (although
the exclusive state funds and the Canadian Boards were less likely
to use premium as a criterion).
There was a wide disparity in the premium level at which an account
would receive visits from claims and loss control personnel. The
ranges were from a low of $10,000 to only accounts over $100,000.
Many members provided an initial service visit to new accounts that
met the minimum premium criterion and then determined future visits
based on loss ratio, claim frequency, or a request from the insured.
As the size of the premium grew, the more likely specific employees
from the various disciplines (loss control, claims, audit, underwriting
and marketing) were dedicated to handling the account.
Accounts not meeting the minimum premium thresholds generally received
service in a group setting or through written correspondence or
videos. After the initial underwriting, these accounts tend to be
monitored by computer and may receive loss control or claims service
should they develop a poor loss ratio or an unusual frequency of
claims as determined by edits programmed into the computer.
In almost all instances the members said loss control or claim
visits are made if requested by the policyholder regardless of the
amount of premium. However, before the visits are made, some members
call the policyholder to discuss their specific needs and to determine
if a site visit is actually necessary or if the policyholder's needs
can be met with a discussion over the phone and by sending supplemental
written material or videos by mail.
Next we asked, "Do you segment your market and determine the
services provided based on the policyholder's type of operation?"
Nineteen respondents said yes and 10 said no. Of the 19 that said
yes, the majority have set up affinity or safety groups and developed
specialized safety and claims management programs for these groups.
Others have set up specific safety and claims management programs
for specific types of complex or highly dangerous operations (employee
leasing, trucking, logging, construction, healthcare, oil and gas,
etc.). The goal is to match the skills of the company personnel
with the skills needed to reduce losses in the particular industry.
We asked if geographic area impacted the member's ability to segment
their market and cost-effectively service the segmented market.
Only five of 29 respondents said yes. One respondent felt their
small area was a benefit as they could service their accounts better
because of the small area. Three others had problems providing adequate
service because the combination of small populations and large land
areas made travel expensive and time consuming. Both a large, thinly
populated land area in parts of the state and mass transportation
problems in the denser populated area of the state impacted the
last respondent. For the majority of members though, they are able
to service their policyholders through a network of adequately staffed
small offices in strategic areas in their state.
We asked if policyholders with poor loss experience were segmented
into a group. Twenty said yes and nine said no. Of those that said
yes, many had specific rating programs for poor performers. Some
coupled the higher rates with loss control visits or mandatory attendance
at specific safety seminars to try to improve the account's loss
experience. Some had the option of non-renewing poor performing
Then we asked, "Do these policyholders, no matter what the
premium size, all receive individual attention to address the reasons
for the poor experience?" Of the 20 respondents that said yes
to the previous question, 13 said yes and seven said no. Of those
that said no, three indicated the Occupational Health and Safety
Division was responsible for poor performers but they (the AASCIF
member) did identify poor performing industries, and rates and programs
would be developed for those industries. Smaller accounts are required
to attend safety seminars and follow individualized safety improvement
plans. Larger accounts meet with claims and loss control for a more
specific action plan tailored to the policyholder's specific needs.
Some smaller accounts are not renewed or priced upward.
"Do you use a 'team approach' to develop a service plan for
larger accounts?" Twenty-three respondents said yes. This is
a new concept to 25 percent of the respondents. The team members
liked this format because all participants can assist in developing
the service plan and therefore the "buy-in" is greater.
Many respondents also feel the customers like this format because
it shows a unified approach from the company and they can get all
their questions answered during the group meeting. Several of the
Canadian Boards have excellent relationships with the Occupational
Health and Safety Divisions and work together in presenting information
and suggestions on how to reduce losses to their larger policyholders.
The team concept seemed to increase customer satisfaction whether
you operate as an exclusive fund, Canadian Board, monoline mutual
company, or competitive state fund. In the end, we are all concerned
with customer satisfaction and we react accordingly. While the team
concept has taken on an important role with regard to customer satisfaction,
it is not the only measure and those funds or Boards which do not
use the team approach have developed their own methods of satisfying
their policyholder base.
Then we asked whether this approach is cost-effective and increases
account retention. All respondents found the team approach valuable
and most likely cost-effective. Members felt this approach increased
customer loyalty and improved their image with the customer. Even
some of the customers of monopolistic funds and Canadian Boards
liked the approach because it helped the policyholder understand
what needed to be done to reduce losses.
The majority of us do not feel it is cost-effective to audit all
of our policyholders (only five of 29 audited all policies). Once
again, depending on the number of policyholders, criteria were established
to allow the current staff to handle the audit function. There did
seem to be a pattern of waiving the audits on small policies and
doing voluntary audits on policies with premiums less than $5,000
- $10,000. Many audited all new business and certain types of operations
were targeted to be audited annually (contractors, labor contractors,
accounts with losses when the classification had no payroll, etc.).
Physical audits are done almost universally on accounts over $10,000.
The responses regarding the use of the web sites were interesting
and once again indicated a wide variance amongst the members.
We asked, "Do you use your web site for any of the following?"
- Quotes: Agents only: Six do provide agents quotes online and
23 do not.
- Quotes: Insureds? Four do provide quotes to policyholders online
and 25 do not.
- Can agents view their premium and loss experience over the
web? Nine answered yes and 20 said no.
- Can insureds view their premium and loss experience over the
web? Eleven answered yes and 18 answered no.
- Can agents/insureds get Certificates of Insurance over the
web? Thirteen replied yes and 16 replied no.
- Can agents/insureds send applications over the web? Twelve
replied yes and 16 replied no.
- Can agents/insureds obtain loss control safety program information
over the web? Twenty-one said yes and 8 said no.
- Can agents/insureds obtain premium payment status over the
web? Eight said yes and 21 said no.
- Can insureds pay their bills by credit card over the web? Three
said yes and 26 said no.
- Can agents/insureds view cancellation/reinstatement information
on the web? Seven said yes and 22 said no.
- Is information regarding rating programs posted on your web
site? Fourteen said yes and 15 said no.
- Are claim reporting instructions and forms posted on your website?
Twenty-four said yes and five said no.
Services on AASCIF Members' Websites
% of respondents
Quotes: Agents only
Agents can view premium and loss experience
Insureds can view premium and loss experience
Agents/insureds can get Certificates of Insurance
Agents/insureds can send applications on the Web
Agents/insureds can get loss control safety info
Agents/insureds can get premium payment status
Insureds can pay bills by credit card over the Web
Agents/insureds can view cancellation/reinstatement
Information regarding rating programs is posted
Claim reporting instructions and forms are posted
Many respondents indicated their web site is being updated to perform
many of the above functions. Until then, the principal use of the
web sites will be for the dissemination of loss control and claims
information. However, in the future the web will be a useful tool
to provide policyholders (and in some instances agents) with a greater
degree of information than is now available.
We would like to thank everyone who participated in the survey.
We appreciate you taking the time to respond and we hope the results
of the survey provide you with some food for thought on how you
can provide cost-effective services to a segmented market.