We are a specialty provider of workers compensation insurance focused on select
small businesses in low to medium hazard industries. We employ a disciplined,
conservative underwriting approach designed to individually select specific
types of businesses, predominantly those in the lowest four of the seven workers
compensation insurance industry defined hazard groups, that we believe will
have fewer and less costly claims relative to other businesses in the same hazard
groups. Workers compensation is provided for under a statutory system wherein
most employers are required to provide coverage for their employees medical,
disability, vocational rehabilitation, and/or death benefit costs for work-related
injuries or illnesses. We operate as a single reportable segment and conduct
operations in 33 states and the District of Columbia, with a concentration in
California, where over one-half of our business is generated.
Workers compensation provides insurance coverage for the statutorily prescribed
benefits that employers are required to provide to their employees who may be
injured or suffer illness in the course of employment. The level of benefits
varies by state, the nature and severity of the injury or disease, and the wages
of the injured worker. Each state has a statutory, regulatory, and adjudicatory
system that sets the amount of wage replacement to be paid, determines the level
of medical care required to be provided, establishes the degree of permanent
impairment, and specifies the options in selecting healthcare providers. These
state laws generally require two types of benefits for injured employees: (a)
medical benefits, including expenses related to the diagnosis and treatment
of an injury, disease, or both, as well as any required rehabilitation, and
(b) indemnity payments, which consist of temporary wage replacement, permanent
disability payments, and death benefits to surviving family members.
Our strategy is to pursue profitable growth opportunities across market cycles
and maximize total investment returns within the constraints of prudent portfolio
management. We pursue profitable growth opportunities by focusing on disciplined
underwriting and claims management, utilizing medical provider networks designed
to produce superior medical and indemnity outcomes, establishing and maintaining
strong, long-term relationships with independent insurance agencies, and developing
important alternative distribution channels. We continue to execute a number
of strategic initiatives, including: focusing on internal and customer facing
business process excellence; emphasizing the settlement of open claims; diversifying
our risk exposure across our markets; utilizing a three-company pricing platform;
utilizing territorial multipliers in California; non-renewing under-performing
business; and targeting profitable classes of business across all of our markets.
We believe that we have a strong capital position. We periodically reassess
our capital needs to ensure an optimal use of capital consistent with our goal
to create shareholder value over the long-term. Our capital strategy is focused
on supporting our business operations by maintaining capital levels commensurate
with our desired ratings from independent rating agencies, satisfying regulatory
constraints and legal requirements, and sustaining a level of financial flexibility
to prudently manage our business through insurance and economic cycles while
allowing us to take advantage of investment opportunities, including mergers
and acquisitions and related financings, as and when they arise.
The role of our claims department is to actively and efficiently investigate,
evaluate, and pay claims, and to aid injured workers in returning to work in
accordance with applicable laws and regulations. We have implemented rigorous
claims guidelines and control procedures in our claims units and have claims
operations throughout the markets we serve. We also provide medical case management
services for those claims that we determine will benefit from such involvement.
We utilize an outcome-based medical network that incorporates predictive analytics
to identify medical providers who achieve superior clinical outcomes for our
injured workers that allows us to optimize our provider network and enhance
the quality of care. We have also implemented a proactive pharmacy benefit management
program that, along with our outcome based medical network, focuses on reducing
claims costs and accelerating injured workers return to work.
In addition to our medical networks, we work closely with local vendors, including
attorneys, medical professionals, pharmacy benefits managers, and investigators,
to bring local expertise to our reported claims. We pay special attention to
reducing costs and have established discounting arrangements with the aforementioned
service providers. We use preferred provider organizations, bill review services,
and utilization management to closely monitor medical costs. We actively pursue
fraud and subrogation recoveries to mitigate claims costs. Subrogation rights
are based upon state and federal laws, as well as the insurance policies we
issue. Our fraud and subrogation efforts are handled through dedicated units.
Our claims department also provides claims management services for those claims
incurred by the Nevada State Industrial Insurance System (the Fund) and assumed
by EICN and subject to a 100% retroactive reinsurance agreement (the LPT Agreement)
with dates of injury prior to July 1, 1995. Additional information regarding
the LPT Agreement is set forth under “–Reinsurance–LPT Agreement.”
We receive a management fee from the third party reinsurers equal to 7% of the
loss payments on these claims.
We conduct premium audits on substantially all of our policyholders annually
upon the policy expiration. Premium audits allow us to comply with applicable
state and reporting bureau requirements and to verify that policyholders have
accurately reported their payroll and employee job classifications. We also
selectively perform interim audits on certain classes of business or if unusual
claims are filed or concerns are raised regarding projected annual payrolls,
which could result in substantial variances at final audit.
We maintain business continuity and disaster recovery plans for our critical
business functions, including the restoration of information technology infrastructure
and applications. We have two data centers that act as production facilities
and as disaster recovery sites for each other. In addition, we utilize an off-site
data storage facility for critical customer and systems data.
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