Workers comp wholesalers can make
quite a difference in open-rating states and don’t do
To better serve retailers, several of the country’s
largest wholesalers, those traditional trollers of specialty
risk, are hanging shingles in the
compensation world. This is particularly true in those states
subscribing to a so-called open-rating system, allowing
carriers more flexibility with schedule credits, deductibles,
and other factors that create significant fluctuations in
premium and intense competition.
Yet wholesalers often find their message of helping
retailers place and maintain accounts in this coverage line
falling on deaf ears. Jeff Sandy, vice president and workers
compensation broker at Westrope, explains why he believes many
retailers overlook the wholesale marketplace for workers
compensation: “Workers compensation is not an E&S
world. Retailers have direct access,” he says. He also
explains that, while wholesalers like Westrope can broker
workers comp nationally, it’s even more challenging to
convince retailers of the wholesale advantage in states that do
not subscribe to open rating. States like Florida, he says,
apply the same rates to everyone, leaving few options beyond
dividend plans for competition.
In an open-rating state, however, bringing in a wholesaler
could change everything.
Westrope, he says, has access to about 20 workers comp
carriers, some regional, others national.
“In open rating, the relationship that I have with
carriers, driven by both experience and premium volume in other
lines, has a direct impact on the number of [competitive
markets] and level of schedule credit,” he says.
The level of competition in the workers compensation
marketplace follows that in other casualty lines, he explains.
“If there’s a need for market share, it drives the
price down. We’ve seen prices down 15% to 20% in many
Just how flexible can pricing be? In some states, a carrier
could apply schedule credits (or debits) and discount anywhere
from 25% to 50% based on good loss experience. Add a carrier
with an appetite for a specific class of business and the word
“contortionist” comes to mind.
Blake Baker agrees. Baker is workers compensation program
director at Colemont Insurance Brokers in Woodland Hills,
“In California, carriers are essentially wide open to
dictate their own pricing. Each carrier adds their own LCM
[loss-cost multiplier] to the filed pure premium rates. They
can also file for additional deviations, including premium
discounts and a wide range of other potential credits and
Baker provides a candid and sobering explanation of the
significant rate decline in California, brought forth by
unprecedented competition. However, he says, data are starting
to show that underwriting results are beginning to deteriorate.
Rates are too low, costs are on the rise and some results are
starting to look rough. He expects that some carriers will
begin to pull back in the very near future.
Still, he explains, market conditions in states like
California are the reason why Colemont is more aggressively
pursuing a workers comp presence there. “We have success
there because of the nature of the marketplace, the volume of
business, and our expertise. This is combined with our
agents’ need to gain access to some of the many markets
that they cannot otherwise obtain direct appointments
Colemont provides its retailers access to about 20 carriers.
The broker also recently announced an exclusive managing
general agent arrangement, called Contractor’s Select,
with Employers Direct Insurance Co. to serve the needs of an
extensive portfolio of construction risks. What makes this
program unique, Baker says, is that, while most California
workers comp programs (risks with limited exposure in Nevada
and Arizona are also OK for this one) are all about rate, there
is little or no back-end service. Most outsource loss control,
third-party administrator claims service, etc. The model for
this program is based on providing clients the best possible
service to improve risk and perpetuate their business.