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ANTITRUST DISCLAIMER

The purpose of this meeting is discuss the matters outline in the agenda. Antitrust apply to the discussions held at this meeting. Therefore, it is imperative that the participants stay within the formal meeting agenda and avoid any discussions, including informal conversations, which may violate antitrust laws. Participants should avoid discussion of pricing promotional policies, market allocation, supplier costs, conduct that could be construed as a boycott, and any company-specific trends, expenses or profit. You should consult your legal counsel if you have any questions regarding antitrust laws or appropriate meeting discussions.

AGENDA

• State of the Workers’ Compensation Market

• Renewal perspectives from • Broker• Underwriting/Insurance Carrier• Customer

• Questions and Discussion

STATE OF THE WC MARKETTHE GOOD NEWS

• According to NCCI and other sources, combined ratios continue to improve countrywide

Almost at an Underwriting Profit!

• NCCI projects a 101% combined ratio for 2013• 108% in 2012• 115% in 2011• 115% in 2010

• Rate increase moderation

STATE OF THE WC MARKETTHE BAD NEWS

• Rate Increase (Moderation)

• Medical Cost Increases

• Pharmacy

• Terrorism Concerns

• Marijuana Uncertainty

• Ebola, etc.

• Shrinking Excess WC Market

STATE OF THE MARKETINSURANCE COMPANY REACTION

• Insurers will likely differentiate themselves on relationships and flexibility (LOC flexibility, plan flexibility)

• Insurers are still focused on Underwriting Profit because interest rates remain low

• Volatility in the market remains in states such as California and New York, where negative trends continue

STATE OF THE MARKETCURRENT LEGISLATION

• Legislation around the country in 2014 focused on:• Medical Cost Containment

• Now 60% of WC Cost (40% in 1980’s)• Physician Fees• Pill Mills• Opiate Drug Abuse

Will the legislation work to control costs? Only time will tell

BROKER

Timing: “Start Early”

120 Days Out (at least)Broker/Carrier/TPA Meetings

90 Days Out Submission to Carriers

BROKER

Basic Renewal Information Needed• Audited Financials + Interim • Updated Payroll by Class by Location• Organizational Chart / Named Insured Schedule• Operation Changes• Industry Considerations• Location Schedule w/ Entity Name• Employee Concentration

BROKER

What type of plan:• First Dollar / Guaranteed Cost• Retro• Dividend• Deductible / Self-Insured Retention (SIR)• Captive• Corridor Deductible• Clash Coverage• Aggregate Stop Loss

BROKER

Other Renewal Considerations to Communicate:• Payment Terms• Claim Services (Bundled / Unbundled)• Loss Control Services• Rating Basis• Collateral Requirements

• Letters of Credit• Pre-funded Deductibles• Hybrid• Cash• Surety Bond (limited and partial)

• Audit Frequency• Broker Fee / Commission

BROKER

Loss Control Information Needed• Level of Controls in Place

• Training• Hiring Processes• Vehicle/Machinery Use/PPE• Return to Work/Lost Time

• Management Commitment

• Industrial Hygiene (IH) Needs

BROKER

Claim Information Needed• Current Year + Previous 5 to 10 Years• Currently Valued• One Year Prior Evaluation Date• Data:

• Analytics• Predictive Modeling• Mining• Identify Root Causes

BROKER

TPA/Carrier Claim Review

General Information Key Accomplishments/Overall Program Status Action Items Modeling Capabilities

Benchmarks/Trending Analytics/Scorecards Predictive Data Mining

Loss Control Partners

BROKER

TPA/Carrier Claim Review

Claim Reporting Abilities 24/7 Reporting Capabilities U.S. vs. International Capabilities Internet/Email/Tele/Fax Reporting Electronic Data Sharing

BROKER

TPA/Carrier Claim Review

Claim Management Considerations Geographic Locations East vs West Coast Considerations After-Hours/Emergency Contacts Supervisor Intervention Adjuster Case Loads Adjuster/Industry Experience Special Handling Requirements Investigations/Subrogation/Litigation Reserving Philosophy Medical Management

BROKER

TPA/Carrier Claim Review

Telephonic & Field Case Management Managed Care Report Generation Cost Containment Outsourced Services Return to Work / Transitional Duty Support

BROKER

TPA/Carrier Claim Review

Claim/Risk Management Systems Cost Real Time Access Report Generation Customization Capabilities Allocation Capabilities OSHA Recordkeeping Training Abilities/Technical Assistance Data Transfer Capabilities

Account Management

Pricing & General Administration

UNDERWRITING/INSURANCE CARRIER

• Start renewal process six months ahead for large accounts• Smaller accounts will need less lead time

• Preliminary data analysis, including loss ratios, trending of indemnity/medical claims

• Have marketing/underwriting approach broker on upcoming renewal plans

120 to 90 days ahead - begin earnest evaluation of renewal

UNDERWRITING/INSURANCE CARRIER

• Modeling: Majority of Insurance Carriers use modeling on both large and small accounts to aid in pricing business

• Large Business would generate a formal “loss pick” using industry standards and the account’s own loss experience

UNDERWRITING/CARRIER

• Modeling is proprietary• However, loss picks are generally shared

• Using the loss pick, the insurance carrier will generate a renewal price that includes

• Ultimate losses• Expenses• Reasonable Insurance Carrier profit.

UNDERWRITER/INSURANCE CARRIER

• For larger accounts, an Insurance Carrier’s Marketing/Underwriting may use underwriting judgment to set deductible amounts on a loss limit, and aggregate deductible amounts

• The goal would for the Insurance Carrier is to find an Underwriting Plan that fits the insured’s needs and the needs of carrier

UNDERWRITING/INSURANCE CARRIER

• Very early in the process Insurance Carrier will ask Broker: • “What kind of Underwriting Plan do you want?”• “What is important to the insured?” (i.e., loss control

services, TPA services, cash flow plans, dislike of letter of credit.).

• The answers to these questions will drive the renewal plan underwriting

• Brokers: Speak up early and often! • Let the insurance carrier help solve pain points for the

insured.

CUSTOMER

• Brokers – Talk to the customer before the renewal process begins

• Understand the company • Philosophy / strategic plan• Risk tolerance• Financial situation• Recent changes within the company• Customer knowledge of workers’ comp• Ask what the customer wants to change or keep the

same

CUSTOMER

As the renewal process starts

• Tell the customer about the current market conditions and how it affects them

• Suggest program changes to consider• Listen to the customer’s response

• Discuss marketing strategy

• Estimate a rate range

• Provide a list of necessary information the insured must provide, and a timeline

CUSTOMER

Broker / Underwriters

• Provide the renewal both in detail and summary

• Highlight program changes

• If the program was marketed, compare options, summarize and provide feedback

• Quote your best price

• Think of the broker, underwriter and customer as part of the same team

QUESTIONS / DISCUSSIONMeegan Williams, JD, CPCU

CL Underwriting Consultant, Liberty Mutual Insurance—Northwest Region

(503) 736-8775 Email: Meegan.Williams@Libertymutual.com

Steve Miller

Senior Vie President, Brown & Brown Northwest Insurance

(503) 219-3250 Email: smiller@bbnw.com

Eva LaBonte, MS, ARM

Workers’ Compensation Program Manager, Nike, Inc.

(503) 532-5046 Email: eva.labonte@nike.com

SOURCES

Top 10 Casualty insurance Trends for 2015: Marsh

NCCI: State of the Line, October 2014

Marketplace Realities 2015: Edge of a Cliff: Willis