For the Times West Virginian
FAIRMONT —
BrickStreet Mutual Insurance Co., in its fifth year doing business, is a financial success.
You may recall that BrickStreet began its historic role as West Virginia’s first private workers’ compensation carrier on Jan. 1, 2006. West Virginia’s market, by design, has significantly changed since then, but this summer, Greg Burton, the firm’s president and CEO, said BrickStreet is pleased to be surpassing its goals.
He explained that while BrickStreet’s financial plan projected premiums of $236.8 million for July 31, the company actually surpassed that amount and reached $250 million.
Burton said BrickStreet started with $10 million in unencumbered surplus at the beginning of 2006, but quickly saw that disappear when the Sago Mine disaster hit the first day BrickStreet was in business. Now, the company has achieved a surplus of $423 million, and Burton expects that amount to jump to $435 million or $440 million by the end of this year. The company has $1.3 billion in assets, he added.
In 2006, BrickStreet got set up with a 10-year surplus note of $200 million from the state, and payments were scheduled to settle the loan. BrickStreet ended up paying off the entire surplus note a year ago, which was six and a half years early, Burton said.
BrickStreet’s success shows the wisdom of moving toward a new, business-like model.
Compare the current situation with West Virginia’s first private workers’ compensation carrier to what existed when it was a state-run system.
As we noted in December of 2005, the state system had been plagued for years by out-of-control costs, fraud and inefficiency. It ran up hundreds of millions of dollars in unfunded liabilities. Some employers didn’t pay rates high enough to cover costs of compensation for their workers. Others paid rates too high. West Virginia was one of only five states running its own workers’ compensation system. It was an undesirable place to do business, hampering its ability to retain and attract employers.
At the same time, workers were suffering. Some were receiving undeserved benefits, while many, many more had to wait far too long to get the benefits they did deserve.
West Virginia’s workers’ compensation system changed from a state system to the private market when Gov. Joe Manchin signed Senate Bill 1004 into law in February 2005.
In the first year of BrickStreet, there were rate changes for workers’ compensation insurance, a swift crackdown on employers who didn’t pay premiums for coverage and an audit of every company covered.
BrickStreet no longer enjoys a monopoly on the state’s workers’ compensation market. The company remained the single source until July 1, 2008, when the market for all but government opened to private insurance carriers licensed to do business in West Virginia. Then, on July 1, 2010, governmental agencies in the state were allowed to start buying workers’ compensation insurance from other insurance carriers. The opening of governmental business to competition was the final step in privatization.
While BrickStreet has experienced a decrease in governmental business, its bottom line has increased by $6 to 8 million, Burton said.
BrickStreet ended 2009 with 76 percent of the market share in West Virginia, which Burton said is too high. Now that governmental business has opened up, the company has 60 to 65 percent of the share.
BrickStreet estimates the workers’ compensation insurance market in West Virginia currently generates about $385 million in premiums annually.
Last year at this time BrickStreet had $283.5 million in premiums. The approximately $34 million decrease includes government accounts that moved, businesses that went to other carriers, companies that went out of business and policies BrickStreet decided not to renew because they produced significant losses, the company said.
“We’re very happy where we are right now,” Burton said.
The state’s businesses and workers should be as well, with the inefficient state-run system a thing of the past and BrickStreet a part of a private business system that is doing well in its place.
