That's something that could be said for a lot of your worker's compensation business that's found its way to the specialty side of insurance.

The faster and easier you're able to identify where that business needs to go, the better experience your clients will have.

On top of that, there's a good chance over time you'll be able to help them get back to the standard insurance market.

Pat Edwards, Work Comp National Practice Leader, talks about what you can do to get them there and the conversations you should be having at renewal.

Joey Giangola: Mr. Pat Edwards, how you doing today, sir?

Pat Edwards: I'm doing well, Joey.

Joey Giangola: Pat, I want to know this before we really go anywhere too far. Have you ever tried to make a mistake on purpose?

Pat Edwards: No. I try not to. Obviously we always try to exceed expectations and do the right thing and try not to make mistakes.

Joey Giangola: Yeah. For me, I was thinking more along the lines of personal. I like to break systems sometimes, maybe have that extra piece of pizza or something and see what happens if I'm able to come back from the edge, push yourself to the [crosstalk] Never find yourself tempting fate like that?

Pat Edwards: I'm always willing to push to the next level for sure. But I try to do it strategically. Probably the best way to describe it.

Joey Giangola: That kind of takes it over to talk to me about what's going on in the world of work comp, which is a coverage centered on work place mishaps and mistakes. What are you seeing happening there in terms of the coverage and what should agents be paying attention to?

Pat Edwards: Yeah, I mean, work comp necessary requirements, so we required coverage. It's the largest casually line by premium dollars out there in the commercial space. It's also a situation where we're seeing continued deterioration of written premium associated with the line of coverage. It's a very competitive space right now. It's probably the best performing commercial line on the street right now. That in itself is pretty substantial. When you look at the PNC industry and you look at the net combined ratios associated with the lines of coverage for 2020, which is a full calendar year, comp by far is the best line, which is for me, an old hat player, surprising, but it continues to surprise. It's running an 87 combined on a net combined ratio basis. The next closest line maybe is auto at 102. And some of the other lines are running at 97.

But yeah, by and large, a lot of the PNC commercial lines are all running in excess of 100. What I mean by that is for every dollar premium that comes in the door, you're spending a dollar two or a dollar 10 or a dollar three or a dollar five out. So you're losing money basically. So comp is running an 87, which is far superior, hence why we're the nicest looking house on the block right now. Everybody wants to buy us and you have a lot of people that are bidding on the house. And that's what you're seeing in insurance. A lot of people are bidding on the worker compensation placements. And so a lot of capacity, a lot of price reduction. And that's what we're going to continue to see. In 2019 and 2020, we saw a 10% reduction in net premium. It was crazy, but we saw a significant reduction last year. We're going to see a significant reduction between '20 and '21 based on the filings that are going on right now, we're seeing by each individual state. We're probably looking at another eight to 10%, just pure base rate reduction in 2022. It's a tough time to be in the work comp space as a producer, a broker, but it's a great spot to be in if you're an insurance buyer.

Joey Giangola: Yeah, that's the thing. Generally disruption is what allows agents to sneak in there, pick up some more business. What does work? What greases the wheels? What gives them the advantage to get in there, to pick up some more business during this time? Because delivering price reductions is pretty easy business. Anything that stands out in terms of ways for agents to be it up some more business?

Pat Edwards: Well, work comp, it's a necessary evil. It's a requirement. It's something that insureds need and have to have. It's also a line that is very price sensitive. So price is a big motivator to the insureds. I would also say that it's the ancillary benefits and service platform that also helps insureds. And again, a lot of it is predicated on what is the need of the insured. So, from an agent standpoint, you're looking at well, what is the need of my client? Is my client a standard lines comp placement? Is it a specialty comp placement? Is it borderline going to be assigned risk program due to losses, raw hazards, or a combination of both? Yeah. It's really a situation where you have to identify what the needs are.

If you need to go to maybe a market that'll do and provide those necessary improvements to the risk, to the insureds, so that they can better themselves and become a better player because a lot of insureds are looking to keep their people productive, producing, not injured. And so the question is, do you have the right platforms in place to mitigate potential for loss, the right risk management platforms? Some of the carriers that are out there are better than others in how they handle that. Some of them are just, we provide a price solution. We give some baseline support and here you go. Others will do a full boat, risk improvement process, a return to work process, period of different processes to help the risk improve. And that's really what is incumbent on the agent to really assess the needs of their client and working with the right producer or broker or from their vantage point, the right carrier to get that result.

Joey Giangola: Is there a particular industry that you prefer to do, I'm wouldn't say prefer to deal with, but you find generally things goes more smoothly with maybe just based on makeup of the organization. Is there one area that if you had to give a recommendation to agents that, Hey, maybe check out this industry, if you haven't dabbled in trying to get the comp there?

Pat Edwards: Oh, no, that's a difficult question from the vantage point that, I mean, there are what I would call more vanilla classes, whether it's an office class, whether it's some baseline class that doesn't have a lot of high hazard. It's pretty low hazard. Nature rates are relatively low. Where we play in our space at RPS is in the top to place comp area. We're in the debit mods, the high debit mods. Risks that have a little bit of hair to them that we need to work with to try to help find that improvement so that they can maybe move from the specialty comp arena to the standard comp arena. Right. That's where it's at. So we're working on the high hazard classes, the real difficult risks, potential occupational disease exposures, or other types of exposures that a lot of the standard, more vanilla oriented players want to entertain. We also work with those risks, those insureds, that don't have proper programs in place. We work to help initiate those safety programs, approaches to help the risk improve, get their losses under control, get their loss modification factor down to show improvement to again, potentially remarket themselves into a standard market focus. That's kind of where we play.

Joey Giangola: Yeah. It's interesting. Is there anything else that goes into that process to, like you said, or I guess, what should agents be looking for if they have maybe account that's on the edge there, and they don't have it in the right spot, maybe it does need to move over to specialty and then what can they expect to get out that, to go through that process, to maybe have a shot, to get back into the standard market?

Pat Edwards: A lot of retail agents will run across their standard markets. The underwriter may tell them not interested in the comp because of the hazards, the lost picture, whatever. It's not something we want to entertain. You may need to find another alternative market to entertain the comp. We'll write the rest of the lines, but we're not interested in the comp. It could be for example, travelers or [inaudible] markets that won't extend out to the comp and then we'll entertain the comp and then we'll work on the comp, help the insured improve, do what's necessary with our specialty comp markets. And then it may be a situation where that travelers or other underwriter may say, you know what? I want to extend out now. And cover the comp as a part of the entire program that I'm offering.

Joey Giangola: You had mentioned talking about managing that risk a little bit and mitigating it. What are you seeing in the actual workplace? There's a lot going on, we'll say telematics is the buzzword, sensor data to help sort of identify these areas. Anything that maybe differs from the standard market to the specialty market that agents should be aware of?

Pat Edwards: Yeah, it's just a matter of what the carrier's focus is on risk improvement. Is it a situation where they just go out and inspect and find out what they have on the books? Or are they committed to working with the insured, their safety director, whoever to help improve the risk? A lot of times when we look at risk, they're in tough straights. They have issues. And we look to correct those issues and put the right programs in place through our carriers, through what they offer through their service of options. Loss control, whether it's other types of programs in place to help the insured manage themselves as well as improve themselves. And that's what we're focused on.

Joey Giangola: Maybe you're an agent that has only played with the safer stuff, the more vanilla things that does find its way to standard lines of things. Is there something that you think maybe is prohibitive that they're intimidated by to maybe go after something that's a little tougher and if so, how do they start to work their way into that and what's the risk, reward, the benefit on the backside once they do finally take that plunge?

Pat Edwards: Well, part of it might be the knowledge factor of the agent in question. That's another consultative element that we provide is maybe our knowledge of that space, whether it's the actual risk space or what the entity in question is, is doing. There are a lot of retail agents, depending on size and scope and capability, who may not have been exposed to maybe that risk type. And we can maybe bring some value in terms of our knowledge of having worked on insureds in that space to find a solution that's best for them and for their client. That's ultimately what we do because we're basically an extension of the marketing efforts of our retail agents and we're trying to find the right market mix that is beneficial to their client and will get the desired result.

Joey Giangola: Now, so you mentioned that work comp being in a pretty decent position right now, what do you expect for renewals coming in with price reductions and things like that? Do you anticipate that to hang around for a while? What is that conversation agent should be preparing to have with their clients and what should they be telling them about what's coming?

Pat Edwards: It's going to be a tough market in terms of... Well actually I should stand corrected. It's going to be a great market for insureds, I think, based on where rates are going, based on the competitive nature of the comp space, The capacity that's out there, which is significant. It's highly competitive, which means you're going to have a lot of people taking interest in your account. So from the comp line standpoint. So yeah, I think that's not going to go away for a while. Obviously COVID didn't have the material effect of impact to the work comp line that a lot of folks thought it was going to have. 75% of the claims were time lost claims. So you really didn't have that heavy severity or heavy impact that everybody thought was going to happen. And in addition, claims frequency significantly reduced, the severity aspect reduced. That effect was kind of a loss, kind of an improved market position.

Again, COVID did not impact and have the desire of shifting and moving the needle to more of a firmer market position. So that's where that. Now there could be some long tail effect of individuals who've caught COVID. You got some who got vaccinated, but they already have been impacted by having caught COVID and down the road, there could be some ancillary issues that could arise for that individual that could turn into a potential work comp claim. You have that long tail effect of COVID that can come back and rear its head down the road for employees of the firm. That's something that obviously carriers are taking a look at. We're all taking a look at. It was really interesting when you really looked at the amount of loss in 2020, it was only about $460 million of reported COVID-19 claim.

I think it was 45,000 claims. It wasn't anything of significance that a lot of people thought it was going to be. That's why the comp line has corrected relatively quickly. Some of the states that were originally going to have increases in their rate filings for 2022, backed off those increases and have turned into reductions like California. It's pretty crazy just the sheer number that we're seeing right now in terms of rate reductions. Tennessee, for example, has had eight to nine years of rate reduction. Oregon just had their ninth straight reduction in rate. So when you look at a state like Tennessee, we're at 60% plus where the rate was eight to nine years ago. And that's what we're seeing in a lot of other states is that these rates continue to come down. It's going to be some point where we're going to have to break even, and then things are going to start shifting. But at this point, the states are seeing the numbers from the various bureaus, whether it's NCCI or the respective state bureaus. And they're basically pushing for rate decreases for the constituents.

Joey Giangola: You brought up an interesting point, with again the trend seeming to continue. We talked about trying to get in and get new business, but what about on the other side? A good defense is sometimes the best offense. What do you think should be done there to ward off anybody trying to sneak in and come after any of these accounts?

Pat Edwards: Well, I mean, one thing to do from a retail agent standpoint is communicate with your client. Keep them up to speed with what's going on in the marketplace. From my a vantage point, and from a lot of carriers' standpoints, we're going to try to get out at the 90 day mark, 120 days out prior to the effective date, to see what we can do about what the marketing situation's going to be, what the needs are, what the targeted anticipated needs are of the insured. We'll try to pull early and take the account out of market so that it doesn't turn into a feeding frenzy, in certain respects as we see it coming into 2022. We're already seeing some unbelievable heavy, downward pressure on price here in the fourth quarter of 2021. And we anticipate that that should continue into 2022.

Joey Giangola: Pat, if you had to leave agents with maybe one thing that maybe stands out above everything else that we might have gone over, is there something that you would say if you had to focus on one thing, this, I think, is the most important for you to do well when it comes to work comp.

Pat Edwards: I think you need to focus on what the true need of your client is. I think the number one thing is when you're working on an account in the work comp space, what is your client's ultimate need? Do they have a poor loss record? Do you need a focus on finding the right requirement to get that under control? Is it a situation where the exposures are high hazard in nature? Are you finding the right mix of markets and bringing a lot of options to your client? That's something... Do you have the markets, or do you need to go elsewhere to extend, to get the right market mix for your client? Get those options on the table. And then really, I think the key cornerstone is really evaluating this safety programs and the various arrangements that are in place and do those need work? Do they need improvement? And talking to your client to find out what are they looking for? What do they need? What do they perceive that they need for their operation, that maybe they're not getting from the current carrier that is on the program, or just something that they feel that they need, whether it's coming from the decision maker or whether it's coming via the safety director of that respective firm.

Joey Giangola: All right, Pat, I've got few more questions for you, sir. And the first one, very simply, what is one thing you hope you never forget?

Pat Edwards: I think the one thing I don't want to ever forget is the value that over my years of working with sub producers and retail agents, how I've been able to help them and their clients improve upon and provide a relevant difference for those folks.

Joey Giangola: Now, on the other side of that, Pat, what's one thing you still have yet to learn?

Pat Edwards: Well, for me, it's trying to integrate all the changes, in insured tech and all the state of the art, [inaudible] that IT element into the mix of improving risk and utilization of that, the wearables, all the different things that are being incorporated into the process of helping risks manage themselves and manage the process. And I think that's the thing that I'm always just... It's crazy because when I started in the industry 30 some years ago, there was nothing in that light and it's just amazing to me to see the progression of the tools that risks have now to help them. And I'm just trying to stay on the pulse of all the different things that are going on. It's pretty mind boggling to myself and that's the thing that I want to stay close to and continue to learn and grow with that.

Joey Giangola: All right, Pat, last question, sir. If I were to hand you a magic wand of sorts to reshape, change, alter, speed up, really any part of insurance, what is that thing? Where is it going? And what is it doing?

Pat Edwards: Obviously, the whole progression of insured tech with what's going on with the various online platforms, trying to disrupt the traditional approach to doing business, it's interesting to see how that whole process is integrating into the insurance process for commercial insurance. That's the thing that I find intriguing and interesting and that I'm watching very closely.