Paul Zamora joined ICW Group in 2006 to assume the business leadership role of ICW Group’s workers’ compensation product line. Under his leadership, the company’s work comp business has far exceeded industry and competitive benchmarks for growth, profitability and efficiency.
Prior to joining ICW Group, Paul served as an assistant vice president at Zenith Insurance, one of the top workers’ compensation carriers in the U.S., where he played a key underwriting role.
I find it really interesting that, while insurers in so many lines are having to raise rates like crazy, workers’ comp rates keep going down. That seems to mean that carriers, employees and employers are collaborating to reduce workplace injuries. At ITL, what we call “Predict & Prevent” has become a major emphasis for where we think the industry should go, and workers’ comp seems to be a great example of the potential to prevent problems rather than simply helping people recover once something goes wrong.
Maybe you could start us off by talking about how workers’ comp has made such great progress and how it can continue to reduce injuries.
I have a couple of thoughts as to why the industry has done so well.
A few states have been working to reform their workers’ compensation systems. California is an example, having passed a reform bill back in 2012. Prior to 2012, that state was having horrific results. Carriers were dramatically increasing rates, and a bunch of large businesses began to realize that they don't have to have their warehouses in California. They could move them across the border to Arizona or Nevada and save a ton of money. So there was a huge push for reform, and there were enough savings in the system to let carriers reduce rates but still obtain profitability without having a real negative effect on benefits for injured workers. That was a huge win.
Other bills throughout the various states where ICW Group does business haven't quite achieved that result but still have made progress.
The other thing I think we have going for us is the huge financial incentive for policyholders to improve safety and reduce premiums. There's a lot of synergy with us, our agents and our policyholders to try to improve safety.
At ICW Group, we have what we call the Power of Three. We're monitoring how we're helping customers have lower frequency of claims, controlling those costs when they do have claims, so we have the best outcome possible, ultimately having a positive impact on their Experience Modification factor [which compares a company’s actual losses with those that are expected for a company in their industry and plays a major role in determining workers’ comp premiums].
And we're pleased. We’re lowering ex mods for our customers and seeing fewer claims, so companies can pay less premium.
We are working on using technology to track the near misses. Most of the time, when we get a really serious claim, such as when somebody puts a hand in a machine and maybe loses their hand or arm, well, there were a lot of situations where that almost happened but, luckily, the person was able to move their hand or arm out of the way. Tracking those near misses will help us make safety improvements so we protect the worker and greatly reduce those severe claims.
One thing we're doing right now is a pilot with a wearable. It tracks unsafe behaviors that could lead to a repetitive motion claim, or maybe someone is bending the wrong way.
We think there's even better safety technology coming. We are experimenting with smart cameras that can track both unsafe behavior and unsafe conditions. For example, it could see water on the floor and quickly buzz somebody at the employer's facility to go clean it up, and not wait for somebody to actually slip on it and get injured.
The challenge right now is that some of the technology is expensive. The smart cameras are quite expensive. So, it isn’t easy to deploy them to a lot of policyholders. But we believe, no different than a laptop or a cell phone, eventually that technology will become less expensive.
What we're trying to do right now is run pilots to see if the technology works. Does it really drive different behaviors? Does it really help us find and fix the problem before an injury can occur?
We're bullish that the safety technology will be much more affordable, so we can deploy it to more policyholders, and we are also bullish that it will change behavior and mitigate claims.
That all sounds super smart. What are some other big trends you see in workers’ comp leading into 2024?
I believe we're going to continue to see rates decrease. January is the time when most states update their pure premium rates, and just about every state other than Hawaii is recommending decreases. Most are double-digit decreases.
Some of the bigger states, such as California, may have hit bottom in terms of rates. We're starting to see accident year combined ratios climb. Carriers have a massive reserve redundancy from prior years, and they'll use those reserve redundancies to make their calendar year numbers look good. But you eventually will run out of that reserve redundancy, and you will have to start charging the proper rate. We're already seeing some of that in California. We're seeing some of that in other states, as well, such as in New Jersey. But we're also seeing a lot of competition in some of our bigger states, such as Illinois and Florida, where rates have not yet hit rock bottom.
The final thing I'd say is you're going to see the smart carriers go down the path of digitization. Carriers need to understand that, today, we're competing with traditional insurance carriers but that in the future our competition might look different. Amazon could decide they want to get further into the insurance space for one reason or another. And your buyers will be expecting the Amazon-type experience, where they go online and it's really easy to do what they want to do. Carriers need to pay attention.
Amazon is already dabbling. They've started to offer some insurance to small businesses, and it will be interesting to see how that evolves.
I think it's an important point you're getting into about long-term customer relationships. Beyond what you've already said, what is ICW Group doing, and what do you think others need to do, to foster those really long-term, profitable, mutually beneficial relationships?
The number one thing is making sure we're helping our customers have positive long-term results. So how do we make sure of that? How do we make sure they're safer and they’re paying the lowest amount of premium possible because they have safe operations. That they're not losing employees because they're injured? If we're not able to deliver on our Power of Three value proposition, customers are going to find another home.
Providing other value-added services is important, as well. We have a product called HR OnDemand, which was a huge benefit during COVID. There were a lot of HR questions around being in compliance with all of the new COVID regulations, and HR OnDemand allowed customers to talk to an HR expert and get free advice. We also have something called Safety OnDemand. We provide risk management services in-house, meaning we can go out and sit down with you and work with you. There are folks who want that advice at 2:00 am, so a self-help capability through online tools is critical.
Nurse triage is popular now, too. Maybe I don't know if I need to send an employee to the doctor or if they only need first aid. With nurse triage, I can call and speak with a registered nurse who can provide me guidance.
The final one is telemedicine, where you can see a doctor in your own workplace and not have to get in a car and drive to the clinic and maybe sit in the waiting room before you're seen.
Beyond the value-added services, you have to focus on the customer experience. And, as I said, we’re not going to just compete with the traditional insurance carriers in the future. We will probably be competing with companies like Amazon or Google.
Beyond what you just talked about, are there other ways for carriers to support their independent agent networks?
For us, it's extremely important to make sure we listen to our agents and figure out what they need. We are not a direct writer. We have zero direct business, and we don't have any plans to be a direct writer. So 100% of our business is from the independent agent force. Without them, we don't exist. So we try to make our interactions with them as efficient as possible for both of us.
This means focusing on how they submit accounts to us, how we go through the whole quoting process, the binding process, the mid-term servicing of the account and more. How do we make sure they don't have to add staff to try to be more effective in working with us? We've implemented some programs based on feedback from them, such as LeadGen OnDemand, which is a tool that allows them to market themselves to potential insureds in a very efficient manner. We pay for the platform, the mailers and the marketing collateral to help them grow their business. And that has paid huge dividends for us.
We introduced an Agent Portal so they can be more efficient in managing their business and keeping track of what's going on with their customers 24/7. Finally, we make sure we provide a quality product that they're proud to sell. They do not want to get that call at 11:00 pm asking, why'd you put me with that insurance company?
We take a franchise approach, which I think is important for carriers to do. I mean, you can appoint every agent that's got a license to do business, but then your agent community has nothing to differentiate themselves. If you take a franchise approach, you're giving your agents something valuable to have in their toolkit.
Are you expecting any particular changes in regulation?
We kind of wish the states would all be more similar and less nuanced on certain things. When they all have their little nuances, it creates a lot of extra work for everybody. Most of what we write, and I'm sure this is true for most carriers, is for risk that has multi-state exposure. It's a challenge, from a technology standpoint, to make sure your systems recognize all the nuances in, for example, California, Nevada and Arizona. And we need to make sure customers understand them, as well. If the customer is predominantly in one state, they think the insurance rules of that state apply to their business in all states, and that’s not true.
But we understand that change isn’t coming any time soon, if ever. So we just have to stay on top of the issues.
I wonder about some macro trends. It seems like the return-to-the-office movement has stabilized, but there could still be some adjustment, and some offices will be redesigned or repurposed, which could change the dynamics for workers’ comp. I also wonder what will happen with all this “onshoring” of manufacturing that seems to be in the works. Are there any other trends we should be tracking?
Onshoring would mean more jobs and more workers here to insure. At the same time, companies are automating a lot more. I saw a company the other day that has self-driving trucks on a dedicated route. No human being needs to be in the cab. If that level of automation spreads, there's no employee, there's no payroll and there's no workers’ comp premium associated with that job. We have started to see restaurants where wait staff kind of goes away. There's an iPad on your table for you to place your order, and then there's just a person who brings you out the food.
We probably won't see fully automated factories in my lifetime, but we’re paying attention to the trends.
Thanks, Paul. This has been a great conversation.