🔒Great Falls Insurance Co. takes on Maine’s workers’ comp market

If you're a startup company in Maine's workers' compensation marketplace — where MEMIC captures 60% of the business — there's no avoiding the David vs. Goliath comparison.

Gary Hall, president and CEO of Great Falls Insurance Co. in Auburn, knows that. But he's unwilling to cast even a mildly disparaging remark in MEMIC's direction, preferring to give the Portland-based mutual insurance company credit for helping to lower lost-time injuries in Maine by 30% and reducing insurance costs by more than 40% since its formation in 1993.

Hall would rather tell the story of his company's fast climb into the top 10 of Maine workers' compensation insurance providers in less than two years — with projected sales of $3.5 million in 2012 — a $2 million bump over its first-year performance. His goal is to reach $13 million in sales within five years, which would make the company one of the top three workers' comp carriers in Maine. Getting there, he says, will require being nimble and innovative enough to fill the niche of providing workers' compensation coverage for smaller Maine companies.

"With the big employers, tons of people fight for their accounts," Hall says from his third-floor office that appropriately offers a glimpse of the Androscoggin River's Great Falls. "We focus on the companies with under 50 employees. We focus on the smaller guys because we think they aren't getting the attention they deserve."

Offering choice

That business plan for Great Falls Insurance, which is the first new Maine-based licensed insurance company in 18 years, was hatched in 2007 by Robert Murch, owner of Combined Management Inc., a Lewiston company that provides payroll, tax administration and other administrative services for small Maine businesses.

Then, as now, Hall says, 85% of Maine's businesses obtain their workers' compensation coverage through the top five carriers. "Which means that if you're looking for choice there aren't a lot of opportunities out there," he says, describing why Murch thought there might be a business opportunity to provide an alternative for Maine businesses with 50 or fewer employees.

Murch began looking for investors, but the 2008 recession quickly put those plans on hold. As Hall says, "There was no worse time to be looking for capital."

In 2010, Murch entered a partnership with Scott Penwell, an attorney experienced in launching and buying insurance companies, and Tony Weller, managing director of the Bermuda-based Citadel RE, the major investor who staked $4.5 million to get the company going.

From the start, the three primary stakeholders decided to provide only workers' compensation insurance and to focus on well-managed small and medium-sized companies. They set out to create a collaborative company, one that would work with local insurance agents who knew their communities and local employers well and could refer companies whose management and employees have a common interest in lower premium costs and fewer employee injuries.

Great Falls Insurance Co. was formally launched on Jan. 1, 2011. By the end of the first quarter of 2011 it had signed up four policyholders. At that point — given that MEMIC insured 19,000 employers covering 250,000 employees and had $120 million in written premiums in 2011 — it was hardly a blip on the radar screen for the state's largest workers' comp insurer.

A fresh challenge

Great Falls Insurance Co.'s need for an experienced CEO with a firsthand knowledge of Maine's insurance market and established contacts with local agents coincided with Hall's desire to return to Maine. He'd had an eight-year stint in Boston overseeing the New England region for CNA, the seventh largest commercial insurer in the United States, and was eager to take on the challenge of starting a new Maine company from scratch.

Hall knew what he was getting into when he assumed the reins in May 2011.

"I've always been a startup guy," he says, noting that during his earlier stint in Maine he was a founding executive of Acadia Insurance Co., a commercial property casualty insurance firm that has steadily expanded throughout New England and New York since its creation 20 years ago.

He knew the Maine market and had maintained many of his earlier established contacts with insurance agents from Kittery to Presque Isle. He also knew from personal experience — having worked for both a "huge insurance company" in CNA and for Acadia, which started small and quickly grew to become a regional company — that a startup often can respond more quickly to marketplace needs than much-larger competitors.

Hall says smaller insured companies, because of their size, typically don't command much individualized attention from a national provider of workers' compensation insurance, which tend to base their rates on statistics based on industry norms. Great Falls, on the other hand, is more inclined to base rates on "local knowledge" about a prospective customer's performance in relation to workplace safety. That knowledge often creates an opening for offering a lower premium rate.

"We price things more aggressively for the right reason," Hall says. "We underwrite 'attitude.' If you can find business owners with above-average attitudes about workplace safety, you can give them a good rate. I want to go out and find the 'good guys' who are out there."

Using convenience stores as an example, Hall says national firms tend to be leery about offering workers' compensation coverage to that market in Maine. That's because their outlook is skewed by statistics driven by large metropolitan areas, where armed robberies of convenience stores are a much more common occurrence. A Maine-based insurer, on the other hand, knowing the risk is much less in Maine, can offer workers' comp coverage at a lower rate and be reasonably confident in its decision, he says.

As an example of being nimble to meet a customers' needs, Hall says Great Falls recently began offering a "seasonal pay plan" that allows companies with seasonal employees to pay their workers' comp premiums "when cash is coming in." For a small company, he says, that can be a big help during the off-season.

"I thought of that idea and we had it in place within three weeks," Hall says. "We try to figure out ways to deal with unique characteristics of Maine businesses. I've spent a lot of time in my insurance career finding unique approaches, instead of marketing 'one size fits all' [policies]."

Trending in the right direction

Hall says he's confident that going after that niche of small companies will pay off for Great Falls Insurance for two basic reasons: first, small companies with 50 or fewer workers make up more than 90% of Maine's businesses and employ almost 50% of its work force, and secondly, it's the model that spurred Acadia Insurance's rapid growth when he worked there during the 1990s.

The 2012 annual report on Maine's workers' compensation system, submitted to the 125th Legislature in February, provides additional reasons for Hall's optimism:

• Frequency of claims is down
• Compensation rates have dropped 56% since 1993
• Dispute resolution is "performing at high levels of efficiency"
• Compliance with the Workers' Compensation Act is high
• Maine's Workers' Compensation Board had reduced its assessment to employers by roughly $3 million over the past two years

Add to that the $13 million-plus dividend MEMIC is paying to 19,000 policyholders for the 2009 policy year — the latest installment of more than $146 million it has returned since 1998. Those factors led to the 2012 report's conclusion that Maine now has "one of the more stable workers' compensation systems in the country."

What it all adds up to, says Paul Sighinolfi, executive director of Maine's Workers' Compensation Board, is that "insurance companies realize this is a good market, a competitive market where they can make some money." The key, he says, will be for everyone to keep all of those trends moving in a positive direction.

"The best workers' comp claim is not having to make a claim at all," he says.

"Here's a company that looks forward to writing workers' compensation coverage in Maine at this point in time — that's a good thing," adds Thomas Record, senior staff attorney with Maine's Bureau of Insurance, which regulates the insurance industry in the state.

Although Great Falls Insurance is based in Maine, Record finds it significant that much of the startup investment money came from an out-of-state investor.

"When you talk about improving Maine's 'business climate,' the proof is in the pudding," he says. "That's a good example … an out-of-state business that saw fit to invest here in Maine."

Although the prevailing trends in the state's workers' compensation system are all moving in a positive direction, Sighinolfi says there's still room for improvement. The Work Loss Data Institute 2012 state report card — based on OSHA recordable injuries and illnesses — gives Maine a 'B' grade and places it in Tier 3 (with trends improving or at least level) of the six-tier ranking system. Those state comparisons are based on incidence rates, cases of missing work, median disability durations, delayed recovery rate and incidence of low-back strain.

The 'relationship' market

As Great Falls Insurance enters the final quarter of its second year in business, Hall believes the company has laid down a solid foundation to capture an even greater share of Maine's workers' comp market. It already has achieved a B++ (Secure) rating by A.M. Best and has lined up almost 50 independent agents in Maine, who are knowledgeable about local small businesses and able to partner with Great Falls in offering workers' comp policies tailored to those businesses' needs and work-injury claims history.

"We trade on the relationships our agents have with our customers," Hall says. "The agents know we're there to back them up. We're going to listen to what the employers tell us they need. We're very problem-solving oriented. … That's really our niche: The 'relationship' market. It's a great niche for us."

Hall says customer service is an integral aspect of fulfilling Great Falls' corporate mission. The advantage of leading a startup company, he says, is that it allows him to hire exactly the right people — "creative, customer-focused kind of people" who aren't "rules oriented" but instead focus on solving problems in timely fashion whenever they arise.

Looking down the road, Hall believes Great Falls Insurance is on track to become one of the top three workers' compensation insurance providers in Maine within five years. It has already begun exploring the feasibility of entering the New Hampshire and Vermont markets, which Hall says would only happen "two or three years down the line" and only after the company has a solid footing in Maine.

"I've done business in both of those locations," he says, noting that their market characteristics are similar to Maine and would enable Great Falls to handle Maine accounts with "multi-state exposure" that it can't handle right now.

In the meantime, Hall says he and his employees are focusing on getting the word out about the company's competitive pricing options for Maine businesses demonstrating a favorable loss history and commitment to safety.

"We don't just sit in our office waiting for paper to cross the desk," he says.