All About Scale
How Insurer MEMIC Dramatically Expanded Its Business
Over the past 20 years, Maine Employers’ Mutual Insurance Company (MEMIC) has grown considerably — from a small, single-state insurer to one licensed in 47 jurisdictions across the country, with offices in eight states and assets of more than $1 billion.
by Nathan Conz
In 2013, MEMIC grew group-wide premium by nearly 15 percent and doubled its writings in Florida, one of its newly targeted marketing territories. In New York, meanwhile, the company has become the state’s fastest-growing writer of workers’ compensation insurance. CSC, which administers all MEMIC policies outside of Maine, has seen this growth firsthand. Last year, for example, CSC processed six times more business for MEMIC than it did 10 years earlier.
Karen Johnston is a 21-year veteran of MEMIC and has spent the past 15 of those years as the insurer’s director of underwriting operations. Johnston recently sat down with CSC to discuss the company’s impressive record of sustained, intelligent growth, technology’s role in that effort and what lies ahead for the Portland, Maine-based mutual company.
MEMIC is relatively young for an insurance company. How did it get started?
MEMIC was formed in 1993 after the Maine legislature reformed its workers’ compensation laws. We serve as the guaranteed market for Maine, but our founding board and management were not satisfied with just acting like a state fund. They wanted us to compete like any other private carrier, which is what we do. And we do it well. So well, in fact, that we are the leading workers’ compensation insurer, not only in our home state but also among the top five carriers in New England, and gaining significant market share in territories down the Atlantic Seaboard.
We started this diversification strategy in 2000, when we opened up a subsidiary called the MEMIC Indemnity Company. We quickly found we were able to take our successful underwriting discipline, outstanding safety and claims services, and expand that into other states and other markets.
At first, we were licensed only in New Hampshire, but we spent the next 10 years expanding MEMIC Indemnity. We now have licenses to write workers’ compensation in 47 jurisdictions.
What kind of approach has MEMIC taken as it looked to grow?
We have been very specific about our growth. In Maine, as the guaranteed market, we take any who come to us. In these other markets though, we write what we choose. We didn’t want to start writing just any policy that came across our desk just because we wanted to book premium. We wanted to make sure we were being smart. We do not sacrifice our bottom line for top-line growth. We never have and never will.
So, as we look at potential growth areas, we do our research. We seek out markets where we see good opportunities and agents who we feel would be good partners. Then we capitalize on the lessons we’ve learned in Maine by identifying the kinds of businesses that we like to work with and that we’re successful working with.
Related: Improving Speed to Market
How was MEMIC able to expand so quickly?
One of the primary reasons we were able to do that was because we kept all the support and operational functions here in Portland. We hire underwriters in the territories where we want to expand — really good people with strong backgrounds — but all the operations work happens here. Underwriting, sales support, accounting, billing, policy administration and processing — everything happens in Portland. That has really helped us with our growth, especially over the past 5 years. We were able to maintain service and support levels for the underwriters and grow as the business expanded.
The second reason is demand. We’ve clearly found that there is demand in the marketplace for a carrier that offers the specialized, high-touch service that we do. We’re not for everyone, but there is a definite segment of the market that can use our expertise to their great benefit.
How closely intertwined is all this with the concept of operational efficiency?
Keeping all the “behind the scenes” operations here in Portland was definitely the first step in acknowledging that, in order to make this work, we have to be operating efficiently. It certainly wouldn’t have made sense, from an operational standpoint, to open entire offices in other states.
Part of my job, in fact, is to look at everything we do to see if there is any improvement in efficiency that can be made — whether it’s through technology or staffing or training or whatever the case may be. That’s a constant process. Just when you think you’ve got something licked, the needs change or the system changes or a rule changes.
Efficiency has been the key to success. We couldn’t have done it and been successful any other way than to keep everything housed in Portland and running smoothly and efficiently.
How does MEMIC’s approach to technology speak to those efficiency goals?
By the late 1990s we had gotten very used to being a pretty simple technology company. We had our Maine policies and we had an in-house policy administration system that did a solid job.
As we started expanding, though, we had to do a lot of things manually for the MEMIC Indemnity business because we didn’t have the infrastructure in place. There were challenges in adding more jurisdictions and more offices. Underwriters working in new regions in our other offices needed to have access to all the same systems that everyone here in Portland had access to.
We’ve had a business process outsourcing relationship with CSC for all these years. They’ve physically been issuing our policies for us outside of Maine. CSC has a staff of people to issue, produce and mail out policies to our policyholders.
It’s a lot about the economy of scale. They’ve got these processes in place for not just MEMIC, but for all their clients. Having them perform a lot of the functions that we needed was very much part of our success.
For example, anytime you’re adding other jurisdictions, compliance becomes a major consideration. CSC has very strong compliance services. They have a system built. It already exists. They have the infrastructure and the processes in place to track compliance issues and law changes.
If MEMIC had to do that — we have 250 employees here that run the whole company — we would potentially need 10 to 15 people just to keep track of every legislation or regulation change that could happen in 47 jurisdictions.
What does the next phase of growth look like for MEMIC? Where do you go from here?
We have offices in Connecticut, Pennsylvania, New Jersey, Virginia, Florida, New York and New Hampshire. So those are really the regions where we’re focusing our efforts. We are a national carrier and we do write national accounts, but we have targeted those states as growth areas specifically.
So now our growth strategy becomes a question of: “Where do we want to focus our efforts next?” CEO John Leonard has been pretty consistent about this. He wants MEMIC to continue growing but in the same controlled manner as in the past 15 years.
So, we’re going to do our due diligence. We’re going to do our research and we’re going to see in which territories we think we can be successful. We have the luxury of being able to control that carefully.
NATHAN CONZ is a manager with CSC’s content marketing team.