New plan widens workers comp market.

New plan widens workers comp market

Superior National to make a market for smaller firms

A new agreement between Calabasas-based Superior National Insurance Co. and the Independent Insurance Agents and Brokers of California will provide a market for small workers compensation accounts, a development expected to benefit independent agents and small businesses.

The plan, called I-Comp and approved by the Independent Insurance Agents' board of directors on June 28, is also expected to be a moneymaker for Superior National, the 22nd largest workers compensation carrier in the state.

"We feel because of our expertise in the workers compensation arena, that we can bring handling methods and unique business practices to this program which will make it profitable," said David Arrillaga, vice president of communications at Superior National. "It is too early to say if it will contribute significantly to our revenues."

Until now, insurers shied away from small accounts because they thought them unprofitable, which forced many small businesses to turn to the State Compensation Insurance Fund. That excluded independent agents from the picture, since the State Fund uses its own agents exclusively.

"Because they didn't have (insurance) companies that would write small comp accounts, agents and brokers in many parts of the state have lost a great deal of business -- so much so that many are ready to represent the State Compensation Insurance Fund at a tremendous discount just to have the market," said Leon Ulis, president of the IIABC, the largest trade association of insurance brokers and agents in the state.

And while all small businesses were guaranteed insurance at fixed rates under state law through the State Fund, they were unable to receive the greater service that independent agents claim they provide customers.

A business with $5,000 in annual workers compensation premiums would have payroll costs averaging $100,000, said Lee Lewis, technical director of the IIABC.

Arrillaga said Superior National approached IIABC with the idea for the plan earlier this year.

Under the plan, Superior National will pay a 7 percent commission to agents who place accounts with estimated annual premiums of $5,000 or less, a commission similar to what agents would receive as employees of the State Fund.

To participate in the I-Comp program, agents must be active members of the IIABC, complete a brokerage agreement and provide a copy of the appropriate license and errors and omission insurance documents.

One reason why Superior National officials believe the plan will be profitable is because it excludes certain high-risk classes of coverage, such as labor contractors, liquor stores and 24-hour convenience stores. And in Los Angeles and Orange counties, where insurers' loss ratios have historically been 5 percent to 10 percent higher than the state average, commissions will only be 5 percent.

"While the program doesn't solve the entire availability problem, I'm proud to say that I-Comp -- a viable market with a highly regarded carrier -- is a significant step in the right direction," Ulis said.

The program will begin Aug. 12, when three teams from the IIABC and Superior National will sign up and train agents and brokers in nearly 40 locations in the state.