S.C. Carrier to Stop Writing New Workers’ Comp Policies; Won’t Renew Without Other Coverage

November 21, 2005

The Companion Property and Casualty Insurance Group has announced it will stop issuing new workers’ compensation policies in South Carolina next month and won’t renew certain other accounts starting in January.

Companion, a Columbia-based subsidiary of BlueCross Blue Shield of South Carolina, said in a letter to its independent agents that a Dec. 1 moratorium on new policies “will remain in effect until we see adequate evidence that sufficient changes are in motion to help return the marketplace to profitability.”

The company also announced it will not renew customers who limit their coverage to workers’ compensation only. Steven Bloss, Companion vice president, said that workers’ compensation customers will be able to extend their policies if they property, casualty or automobile insurance.

Bloss told the said the decision to scale back its workers’ compensation exposure was driven solely by the bottom line, and that the company is “absolutely not” trying to bully single-policy customers into steering additional insurance business to Companion.

“We’re losing money on workers’ comp,” Bloss told the Charleston Post and Courier. “Since we don’t have anything else for these customers, we don’t have an opportunity to make any money.”

Statistics indicating the number of South Carolina policyholders who could be affected by the underwriting freeze was unavailable. Those customers will be eligible for coverage through the state’s “assigned-risk plan” if they can show two other carriers have turned them down.
Companion already has met with many of the 60 agents statewide who offer its workers’ compensation policies to explain its decision, Bloss said.

“None of them believe they’re going to have any problems replacing this business,” he said. “This isn’t going to create an upheaval in the marketplace. … If we thought it was going to cause major upheaval, it would have been harder to do than it already is.”

Companion will continue to provide workers’ compensation policies for customers who can’t obtain coverage elsewhere, under a “carrier of last resort” service contract it has with the state.

The company is hunkering down amid a lingering fight over a hefty rate request for workers’ compensation insurance that began in July when an industry-led group proposed an unprecedented 32.9 percent increase for South Carolina. Companion and many other carriers also are calling for various legislative reforms to fix what they say is a broken system.

Insurers have said they need higher rates because they are losing money on workers’ compensation. For every $1 paid in premiums in South Carolina in 2003, insurers paid out $1.27 in losses and expenses. Nationwide, that figure was $1.02.

Consumer and business groups have challenged the proposed rate increase, saying it would cost policyholders at least an extra $130 million in premiums and would discourage business expansion in South Carolina. The issue is now before a state administrative law court.

Companion’s underwriting moratorium drew criticism from Frank Knapp, president of the South Carolina Small Business Chamber of Commerce.

“They’re trying to throw their weight around to either scare everybody into giving them a major rate increase that’s unjustified or into making major changes to the workers’ comp system,” Knapp said.

He said the industry is pushing for higher premiums and reforms when it should be focusing on skyrocketing health care costs, which on average account for half the costs of workers’ compensation claim.

“They’re just shuffling the seats on the Titanic,” he said. “Our system works just fine, thank you.”

Gary Thibault, executive director of the South Carolina Workers’ Compensation Commission, said Companion’s moratorium suggests the company is “posturing for discussions on both the rate increase and issues before the General Assembly this year.”

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