Contractors’ Insurance Pool Lowers Costs and Reduces Claims Losses

Risk is everywhere in the construction industry, from the individual worker’s safety to cost exposures and economic turmoil. In this industry, insurance costs can be a major business expense affecting contractors’ ability to compete.

Helping contractors manage risk cost-effectively, control insurance costs, reduce losses and promote safety were the goals behind the foundation of the American Contractors Insurance Group (ACIG) in 1981. ACIG writes workers’ compensation, general liability and automobile liability insurance and provides related services to construction industry contractors in 49 states and the District of Columbia. Currently ACIG comprises some 37 contractor shareholders, making it one of the largest captive insurers in the industry.

Bringing Data under One Roof

In 2000, ACIG was looking to control its costs and streamline its claims and risk management. The company decided to replace its outdated AS/400-based claims systems and standardize on a Microsoft/SQL Server architecture which was already in place for other applications. After reviewing the available options, the insurance pool turned to CSC’s RISKMASTER to handle claims management, reporting, risk management and loss prevention.

“We selected RISKMASTER because it gives us more flexibility and control over our data,” said Mike Kernan, MIS manager at ACIG. “It provides an open database that gives us a lot of options to get data out — it lets me pull data into Excel and other programs and easily write custom scripts — but the real key is it provides logical field and table names and intuitive relationships between tables that make report-writing and data mining extremely easy.”

The ability to easily access and share information is key for a company like ACIG that not only has members distributed across the country, but also gets support from 10 third-party administrators (TPAs) in various regions. Each week, the TPAs post reserve and payment transactions that ACIG then uploads into RISKMASTER using the system’s Data Director tool. “We run a tool to adjust the reserves, then we generate the reports and push that data to our in-house system that calculates equity for the members, reconcile the amounts, and then push that data to our private Web site for the members to access and create their own reports,” Kernan noted. “And again, without RISKMASTER’s intuitive data structures we couldn’t do any of this.”

A Powerful Tool for Reducing Losses

RISKMASTER has played an important role in ACIG’s initiative to reduce claims losses across its membership. The company’s mission includes saving lives, preventing injuries and reducing losses. To this end, in 2004, ACIG’s CEO introduced a program called Project Life Saver with the objective of reducing losses by 50 percent, specifically job-related fatalities. The insurance pool’s safety experts instilled safety practices in the member companies, and ACIG used data from RISKMASTER to compile reports that showed the loss records of each of the member companies and documented how they were performing in relation to their peers.

“We met our 50 percent loss reduction goal in the first phase of the project, and RISKMASTER played a key role by making the data accessible to produce those reports and rankings, so the members could see how they and their neighbors were doing,” Kernan noted. “It really opened everyone’s eyes. I don’t see how we could have gotten there as easily without RISKMASTER.” ACIG reduced losses even further in the second phase of the project and is currently working on a third phase.

Keeping claims losses down also means ACIG can keep insurance premiums lower — a key competitive advantage for its contractors in this difficult economy. “It’s a major issue in contractor bidding,” said Kernan. “Their bid contains the cost of insurance and if that cost isn’t competitive then you’re out of business.”

Because the pool’s contractors share risks, any reduction in claims losses benefits the entire group. “How many companies do you know that use their insurance program as a profit center?” Kernan asked. “Well, our contractors do.”

Building for the Future

Currently ACIG is running the Web-based version of RISKMASTER, which Kernan says has made the system even easier to maintain and deploy. The organization is also rolling out the RISKMASTER Business Analytics tool for its contractor members. “Business Analytics will enable them to slice and dice information such as loss mitigation data on more of a self-serve basis and do ad hoc reports,” Kernan said.

“If you look at any other company, it’s unreal that we’ve supported premium levels of $200 million in peak years — with 1,000 open claims at any given time — with only five people in our IT shop,” Kernan said. “The only way we were able to achieve that was through consolidating on the Microsoft and SQL Server platform and RISKMASTER, which allowed us to push report-writing back to our user group because it is so easy to use.”

Kernan adds that the other element in ACIG’s success with RISKMASTER is its strong working relationship with CSC. “For me, the individuals we work with at CSC are all outstanding. They understand our challenges, and we can rely on their service.”

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