Remi and I recently had a MEMIC-filled couple of days between job shadowing Underwriter Aaron Paiton at their office in Portland and tagging along with Safety Management Consultant Jayson Hebert on loss control jobsite visits. The timing of these job shadows worked out perfectly because it gave us a firsthand understanding of the relationship between underwriting and loss control.
Aaron walked us through the different tasks he does as an underwriter, a large part of which involves adjusting premium. He taught us about something called an experience modification factor that he uses to help him adjust premium in the right direction. This number serves as a multiplier to either increase or decrease the insurance premium that a company has to pay. A company's experience modification factor is based on how their workers' compensation claims history compares to that of companies similar in size and job type. For example, a company with an average claims history will have a 1.0 experience modification factor which will not impact their premium because they are neither coming in above nor below the average amount of claims for peer companies.
Aaron also explained to us that MEMIC is a mutual company, which means it is owned by its policyholders. Because of this, its policyholders receive a certain percentage of their premium back every year in what is called dividends. This is another way that he can "sweeten the deal" if he is competing with another carrier to write a company and he can't get the premium any lower. He can simply explain that the premium ends up being lower when you consider the dividend return that the other carrier (most likely) does not offer.
Aaron also explained to us that MEMIC is considered a guaranteed market because it is legally required to provide workers' compensation insurance to any employer that cannot find another carrier to write them.
FUN FACT: MEMIC provides workers' compensation insurance to 70% of employers in Maine.
If you're anything like me, you're probably wondering how MEMIC remains profitable (or just breaks even, for that matter) if it insures a large percentage of employers in high risk businesses that probably file their fair share of claims. That's where loss control comes in.
Let's say for example that a roofing company reaches out to an insurance agent in search of workers' compensation insurance. Their agent reaches out to several different carriers, but none of them want to insure the company due to the risky nature of their work. Their agent then turns to MEMIC, knowing it is the guaranteed market. Instead of refusing to insure the company, MEMIC writes them a policy and then sends Jayson or another safety management consultant out to their jobsites to determine how they can protect the safety of their employees. This helps reduce the amount of claims being filed.
We got to see this process firsthand when we went along with Jayson to visit a couple of jobsites of a Chalmers insured. At the first jobsite, we listened as Jayson talked with the foreman about their safety procedures and precautions. Then we visited their quarry where their VPO gave us a tour. Jayson offered advice on how to improve their safety measures throughout both jobsite visits. He was also kind enough to loop Remi and I into his follow-up email to their safety manager so that we could see how he summarizes his visits. I’m happy to report that Jayson was very impressed with the condition of our client’s jobsites!
What I love about MEMIC as a company is that it doesn’t just want to reduce the amount of claims being filed in order to protect its own bottom line. The people at MEMIC genuinely care about protecting the safety of employees. Safer work environments mean less injuries, less claims, lower premiums, and increased profitability (which benefits policyholders because of dividends), so it’s really a win-win-win-win-win situation!
In closing, I would like to extend a huge thank you to Aaron and Jayson for letting us see what their jobs are all about and for sharing so much knowledge with Remi and I!
Taylor Kashmer, Summer 2019 Insurance Immersion Intern