Greater visibility, strong relationships, and underwriting focus will lead to a record year in terms of premium for workers’ compensation specialist Specialty Comp, according to CEO and president Steve Math.
The business expects to finish on more than $200 million in premium this year, up from around $139 million in 2021.
“We're a one trick pony. All we write is workers’ comp, but it's very good trick and we do it very well,” Math told Insurance Business.
“We have the best underwriters in the industry, and we're able to tackle difficult accounts and get to the right price and underwrite effectively – this year, we should finish over $200 million in premium.”
The business is no longer a “well kept secret”, the CEO said, and in addition to its longer-term relationship building, it has this year made a “conscious effort” of getting its name out there online, through digital content, as well as social media sharing.
“Who would have thought that 30 years ago, social media would be such an effective platform for getting your name out there and engaging with customers, but now it's vital to being a leader in the industry,” Math said.
While other lines have hardened, workers’ comp has remained what many might call a soft market, with rates remaining relatively static.
“The reason why you're getting rate increases in other lines of business outside of workers’ comp is because you need them to bring the line of business into a state of profitability; however, for workers’ comp, we're already in a profitable state, so we just need to not cut our own throats with rate decreases that are suicidal and detrimental,” Math said.
“The industry as a whole is still very profitable, so workers’ comp is soft with regard to rate level, but it's strong with regard to performance, and I don't see that really letting up in the next couple of years.”
Profitable growth should not just be about delivering results for the MGA, but also about providing good results for insurers through fraud reduction and safety efforts, according to Math.
Math may have been confident that his business will continue to thrive, but he did have words of warning that some firms may find themselves in a more precarious position.
“The companies that don't know what they're doing are going to move from a profitable state to an unprofitable state; those that rely on cash flow underwriting and investment earnings, and those that are willing to ignore some of the early warning signs, either on an account-by-account basis or in the industry those companies will have some rough times ahead,” Math said.
“But I think being the best in breed in workers’ comp – those that are in the top 50th percentile and 25th percentile – will continue to find ample opportunity to develop profitable business results. “
One niche that has proved to be a success story for Specialty Comp is staffing companies that provide skilled workers, and this has been buoyed by some employers’ post-COVID approach.
“Post-COVID, many companies chose not to hire workers back, but rather to engage in staffing companies that provide skilled labour force,” Math said.
“We are large into the staffing niche, where we've written several staffing companies that have grown significantly once the COVID rebound occurred, and we've enjoyed success as those staffing companies have grown materially.”
Staffing may have proved a win for the business, but one area that continues to trouble workers’ comp underwriters is the gig economy. Sixteen percent of Americans had at some point earned money through a gig economy platform as of August last year, according to a Pew Research Center survey.
“It's very difficult to understand when gig employees are on the clock, doing actual work for which they're compensated for versus when they're not on the clock, and thus not subject to or entitled to workers’ compensation benefits,” Math said.
“That's really a curveball that the gig economy has thrown the workers comp industry, and it's still yet to be determined how the industry gets its arms around that.”
For decades, workers’ comp fraud had been estimated at $7 billion a year, but a recent report by the Coalition Against Insurance Fraud pegged it at around $34 billion annually. Of this, $9 billion comes from employee fraud, while $25 billion is employer fraud, the coalition’s workers’ comp task force found.
Employer fraud could be a business hiding or misrepresenting its payroll or taking advantage of the “gray area” between whether a worker is a staff member or a contractor.
What Specialty Comp sees more of, though, is misclassification of employees, for example classifying a roofer as being in a clerical position.
“During the course of my career, I've seen many [employees in clerical positions] falling off of roofs, and that doesn't make a whole lot of sense to me,” Math said.
As for how agents and brokers on the front line can help to combat workers’ comp fraud, Math said: “Agents just need to be true to themselves; agents will sometimes view themselves as an advocate for their client, but agents are really an extension of the insurance carrier.
“As such, they owe the insurance carrier a proper amount of due diligence and representation and [must make sure they are] collecting all the correct information and reporting it accurately.”
