Recently, A.M. Best announced that it affirmed Baton Rouge-based LUBA Workers’ Comp’s A- (Excellent) Financial Strength Rating, in the face of a persistently soft local and national market for comp.
According to Best, LUBA’s A- rating “reflects LUBA’s solid risk-adjusted capitalization, resilient operating performance and strong business profile in Louisiana’s workers’ compensation market. These positive rating factors are somewhat offset by its business concentration in a single line of business predominantly written in a single state.”
Further, A.M. Best praised the carrier’s consistency over time, noting that, “LUBA has historically exhibited disciplined underwriting and a focus on risk management, with excellent operating results, strong operating cash flows and good liquidity. Despite difficult market conditions, LUBA has outperformed its peers and the industry composite.”
Given the good news, we spoke to Mike DePaul, a CPA and COO of LUBA, along with LUBA Communications Director Kelli Troutman, about how the company has maintained its footing.
Comp Blog: A.M. Best just put out the release stating that LUBA will again receive an Excellent rating and said that the outlook for the company is stable. What is it about LUBA’s operations that keeps it so steady?
DePaul: I think it’s as simple as just staying the course. In this challenging market it is tempting to chase everything, but we’ve kept our underwriting discipline and I think that’s helped us with Best and just with the general quality of our business. But it is challenging, I’m not going to say it isn’t.
Comp Blog: Regarding the specifics of this soft market, some in the industry are calling for a rate increase recommendation from NCCI in Louisiana after several years now of decreases and declining profitability for carriers. What do you think about that?
DePaul: Well of course, NCCI just does pure loss costs here in Louisiana, [unlike in states like Florida where NCCI essentially set the rates themselves via approval from the Office of Insurance Regulation] however, I do think that the monoline domestic carriers feel the rate decreases the worst. We’re also in Mississippi, Arkansas and Texas, so there’s a cushion somewhat.
Comp Blog: On the underwriting side, Best mentioned it in their statement, and so did you, is that the major pillar supporting the company’s success?
DePaul: It’s a huge part of it. Regardless of other temptations, we’ve kept our underwriting discipline. Now, given the market conditions, we haven’t really been growing. Some companies, even large national carriers, try to outrun the current market conditions by writing whatever they can. The way we see it, we’re willing to lose a little bit of premium to look toward the future and hopefully a harder market.
Comp Blog: I imagine claims management is also likely to be a key part of how the company plans its strategy moving forward. Is there something special about how you see the practices of the LUBA claim department?
DePaul: As Best said, we’ve had consistently positive development of the years, and that looks good for us. I also believe that we excel in consistently reserving claims appropriately. In general, as an industry, Best has put a bunch of papers and things that say that they believe our industry [workers’ comp] is chronically under-reserved. So I think our [more substantial] reserves show how we responsibly manage claims here.
Comp Blog: Now, on the marketing side, I noticed that LUBA has a new website. What was the impetus for that and when did it launch?
Troutman: The new site launched just a couple of weeks ago. We pride ourselves on being really available to our customers at LUBA – we publish the direct lines of employees, people know they can reach us and that our service is personal. However, the website didn’t always reflect that. We wanted to make our information easier to access and incorporate responsive design as well. As technology moves forward we’ll update things even further.