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AASCIF Survey: Providing Cost-Effective Services to a Segmented Market

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.

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AASCIF Members Segmenting Markets

Based on:

% Yes

Premium Size

72

Type of Operation

66

Geographic Area

17

Loss Experience

69

Team Approach

79

Audit All Policyholders

17


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 their markets.

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.

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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.

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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 accounts.

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.

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"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.

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Web Sites

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.

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Services on AASCIF Members' Websites

 

% of respondents

Quotes: Agents only

21

Quotes: Insureds

14

Agents can view premium and loss experience

31

Insureds can view premium and loss experience

38

Agents/insureds can get Certificates of Insurance

45

Agents/insureds can send applications on the Web

41

Agents/insureds can get loss control safety info

72

Agents/insureds can get premium payment status

28

Insureds can pay bills by credit card over the Web

10

Agents/insureds can view cancellation/reinstatement

24

Information regarding rating programs is posted

48

Claim reporting instructions and forms are posted

83

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.

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