Mr. Myers is the 2015 Insurance Professional of the Year
Starting in personal lines before moving over to commercial lines, to overseeing the receivership of his former employer to finally ending up as president of one of the largest workers compensation insurance writers in the Commonwealth, John A. Myers has had a wide and varied career in insurance over the last 45 years.
As President and now Chairman of A.I.M. Mutual Insurance Companies of Massachusetts, he witnessed first-hand the transformation of the Commonwealth workers’ compensation system all while he helped grow A.I.M. Mutual from $0 to almost $180 million in surplus. Honored this year as the 2015 Insurance Professional of the Year, Mr. Myers reflects on the good fortune, hard work and good times he has had during his insurance career.
How does it feel to be this year’s Insurance Professional of the Year Award winner?
It’s very humbling for a lot of different reasons. First, just to be nominated by your peers is an honor. Then, to hear that you’ve been chosen to be the Insurance Professional of the Year, is just extremely humbling. There are so many people along the way who are a huge part of my career. It’s really a tribute to all of the people who have helped and guided me that 45 years after entering this business, I get to be selected as the Insurance Professional of the Year. It’s really a tribute to many.
Going back those 45 years, how did you first get started in insurance?
I started right out of college as a sales representative for a national insurer, American Mutual Insurance Company in their personal lines division. I was able to advance within the organization of that company to a home office position in Wakefield, Massachusetts having originally started in White Plains, New York.
Eleven years later, I moved to the commercial lines division working in the Boston district sales office of American Mutual. Again, I was fortunate enough to progress through the commercial lines organization ending up as the Northeast Region Vice President. Shortly thereafter, the company was placed in receivership and later liquidation.
I stayed on as the operations manager of the liquidation of American Mutual, working closely with the special counsel to the receiver and the commissioners of insurance, who acted as the receivers, over a period of almost 7 years. We were very fortunate to be able to negotiate a workers’ compensation service contract with a new insurer in Massachusetts, sponsored by Associated Industries of Massachusetts (AIM), which was then known as the Massachusetts Employers Insurance Exchange (“MEIE”), a reciprocal insurer. That company later hired me and their Board elected me to become its president. We then reversed that service agreement where we, now as the MEIE, provided the liquidation services to the [American Mutual] receivership in its final months.
MEIE was able to hire several of the employees of American Mutual’s liquidation team to become full-time employees of the reciprocal. We later converted the reciprocal to a mutual insurance company and changed the name to A.I.M. Mutual Insurance Company.
That’s interesting. There have not been many reciprocals writing workers’ compensation in Massachusetts.
The company was originally sponsored by AIM and still is sponsored by AIM. We were formed in 1989 as a reciprocal with the initial capital being contributed by AIM and the reciprocal’s policyholders.
In 1997, we completed the conversion process from a reciprocal to a mutual insurer working very closely with the Massachusetts Division of Insurance to accomplish the conversion in a timely and efficient manner.
The conversion to a mutual company was beneficial to all parties as there was more precedent and were more regulations in place for mutual companies than for reciprocals. We could now conduct our business more efficiently.
The company has really changed and grown over the years; it is now the second largest workers’ compensation company in Massachusetts. Is that correct?
That is correct. We were formed in 1988 and wrote our first policy effective 1/1/89, when the workers’ compensation line of business in Massachusetts and other states was not the most efficient line of insurance for those who had to buy it, in particular for the employers.
AIM sponsored the formation of the company. AIM, being the largest employer association in the Commonwealth, heard directly from its membership that one of the highest costs of doing business in Massachusetts and one of the most inefficient insurance coverages that they had to purchase was, in fact, workers’ compensation insurance. Members were asking their association to get involved and help create a solution to one of the highest costs of doing business in Massachusetts.
Twenty-six years later, the system is much more efficient than it was. The Reform Act of 1991 was enacted, the administrative pieces of the system were streamlined, competition for business returned to the marketplace and this cost of doing business in Massachusetts became predictable and stable. Workers compensation rates have decreased in the area of 65% since 1989.
The system is more efficient than it was 26 years ago. The cost of workers’ compensation insurance is no longer mentioned as one of Massachusetts employers’ largest concerns. This success is the result of many working together: the Division of Insurance; the Legislature; employer associations like AIM; insurers; all the pieces of the system. When everybody works together, good things happen.
Over the years, there have been a lot of changes and improvement, as you said in this line of insurance. For you, what has been your greatest challenge during your tenure at A.I.M. Mutual? What has been your greatest accomplishment?
Well, the greatest achievement is not a personal achievement, but really an achievement by all of my fellow A.I.M. Mutual employees and Board members. That is to take something from a concept in 1989, with little capital, to an A rated insurer with $500 million in assets and $180 million in surplus – the signs of an insurer’s promise to pay. Together we have grown the company to 160 employees and more than 19,000 policyholders in the three states of Massachusetts, New Hampshire and Connecticut.
With the company’s admission to New Hampshire and Connecticut, we can now handle the cross-border operations of our Massachusetts domiciled employers who operate in those two states. Because of all of the good, hard work of every A.I.M. Mutual employee, the company has become a well-respected workers’ compensation insurer based here in Massachusetts.
Alternatively, the greatest challenge has been to keep our underwriting discipline when things get tough. It’s very important to maintain that discipline when times are tough, both on the hunt for new policyholders and the maintenance of your current customers.
I was wondering how the results had been for the mutual company paying its policyholders dividends.
I mentioned that early on, our policyholders contributed directly to the surplus of the Company. Those surplus contributions have all been returned to the respective policyholders. We now have several rating plans which allow us to compete for business with up front discounts. And we have rating plan options allowing for dividends to specific, qualifying policyholders. Rates are down 65% since 1989, a rate level that’s pretty much to the bone.
Let’s discuss the workers compensation insurance industry in Massachusetts as of today. Are you are happy with the changes that have been made to this industry? Would there be any changes in the industry however, that you would like to see happen?
During the last several years, obviously, payrolls have come back; employers have started to hire again and employers have come back in to businesses that they may not have been able to stay in during the 2007, 2008, and 2009 time frame. With payroll increases come additional premium.
I think insurers are very focused on retaining the business that they currently have, especially if those current customers have become excellent workers’ compensation partners from a loss prevention and claim handling standpoint. The prevention of injuries, and now wellness in the workplace along with return to work programs for injured employees, are three things that are important to maintain an excellent workers compensation program.
The Massachusetts assigned risk pool has grown over the last several years. I think the pool now represents more than 15% of the overall market. Even though there are hundreds of licensed workers’ compensation insurers in Massachusetts, some employers can’t find insurance in the voluntary market, so they end up in the assigned risk pool. I believe that’s a function of rate level.
The industry hasn’t had an increase in rate for many years now. I mentioned payrolls have increased which generates more premium, but with more payroll comes more employees which increases exposure to loss. Payroll increases are not the same as a rate increase.
Do you think it’s time for a rate increase?
I do think it’s time for strong consideration for rate relief. Over the years rates have gone down, yet average weekly wages have increased almost every year in the last 25 years while medical costs have increased as well. Workers’ compensation insurance is a line that pays for the lost wages of those who get hurt while at work and pays for the related medical care for that injury. Certainly those two elements of a workers’ compensation loss have escalated over the last 25 years.
Insurers’ costs of doing business have continued to increase over the last 25 years. Rents are up, salary costs are up…..granted, there are efficiencies which insurers have been able to realize with technology; still the cost of doing business has increased.
At the same time, interest rates are at all-time lows.
Workers’ compensation is a very long-tail line of business. Investment income is important to workers’ compensation insurers.. Looking at all these factors, I think it is time for strong consideration of all of these elements of the rate level and that maybe, now is the time for, at least, a small increase.
The workers’ compensation residual market is now getting close to 20% of the total market. When you get a high residual market, you get residual market loads is that right?
An ever increasing assigned risk market is not a good sign for the workers’ compensation line of business for the simple reason, that if 18% of the employers can’t find insurance in the voluntary market, there’s something wrong. There’s something going on and it’s most likely the price the insurer receives for the exposure to loss.
There are more than 250 companies licensed to write workers’ compensation in the Commonwealth. Many are affiliates of a parent, but there are many options for employers to find business in the voluntary market. An assigned risk pool approaching 20% of the total market is not a good sign of a healthy market.
If workers’ compensation insurance carriers are getting squeezed on their margins what can they do to try to make a decent profit?
A workers’ compensation writer has to be disciplined in seeking out new business. They have to have a very disciplined underwriting function, both new business and existing business. Your customers have to believe they are the only customer you have and they have 100% of your attention from a pricing standpoint, claim handling standpoint, loss prevention standpoint, and worksite wellness standpoint.
A workers’ compensation insurer also has to be very forward thinking and innovative. A workers compensation insurer has to prove, every day, that they are doing all they can, in partnership with the employers they insure, to reduce the costs associated with workers’ compensation exposures. One of A.I.M. Mutual’s innovations was combining loss prevention services with the promotion of good employee health through worksite wellness programs.
If a healthy employee has a worksite accident or injury, chances are that the healthy employee will return to work more quickly than a less healthy employee. We are focused on assisting employers in the implementation of wellness programs sponsored at the worksite. Our loss control consultants are now viewed as injury prevention and worksite wellness consultants.
Innovation is key, efficiency is key and predictive analytics are key. We have a tremendous amount of data in our electronic files. We need to use that data to help us predict profitability, prevention of worksite injuries, and potentials for positive results for employees and employers.
Where do you see that the workers’ compensation market is going based on your experience? Have there been any actual changes resulting, say from the Affordable Care Act, or from the concerns that people have that there might be cost shifting as a result of that Act’s provisions, for example?
We have heard and talked about the Affordable Care Act, making those shifts in cost, and we are just now beginning to see some of that cost shifting. Frankly, we don’t really know and I can’t quantify it.
Is there anything else you think that will affect this market aside from the ACA?
We have new, inexperienced employees entering the work force. Inexperienced workers are sometimes more exposed to loss than experienced workers. There also can be a language barrier with new workers entering the work force. A language barrier between supervisors and employees can sometimes lead to simple misunderstandings of the process and perhaps an injury.
We also have the evolution of medical technology. Pharmaceuticals and other medical innovations can be extremely expensive—with rates not adequately reflecting the resultant costs of that innovation. Advances in medical technology can present an expensive future to a workers’ compensation insurer with an individual whose injury-related medical costs are that insurer’s responsibility for the lifetime of the claimant.
Just coming full circle, having worked in personal, commercial, and workers’ compensation lines of insurance, what type of advice or words of wisdom would you share with readers from all these different lines of the insurance industry?
What I would say, and it’s really old-fashioned, is work hard, keep your head down, make some good friends along the way, do what’s right, treat people fairly, learn as much as you can from your mistakes. If you work hard and do the right thing, good things will happen.
Where’s your future now; do you have any secure personal plans of how long you’re going to stay on?
The Board elected me to stay on as chairman. I’d like to continue as chair for as long as the A.I.M. Mutual Board will have me.
I plan to stay involved. I’m just not involved in the day-to-day operations as I was prior to January 1st. We have a new senior management team, led by a new president & CEO, Mike Standing, and I believe strongly that the company will move to the next level with the new team. I’m there to help if they want and I look forward to a long, contributory role as chairman.