Promethean Risk Solutions
Fairshare
Numerous companies offer voluntary benefits, but often the profitability of coverage offered goes unnoticed to the sponsoring employers, according to Kirk Watkins, founder and president of Promethean Risk Solutions.
Coverages such as critical illness, accidental injury, hospital indemnity, legal insurance and identity theft typically have loss ratios of between 25% to 30%.
“There’s one program I worked with that had $4 million in premium at a 12.8% loss ratio,” Mr. Watkins said.
“Being 100% employee paid, they are out of sight, out of mind. In fact, a lot of finance and risk people don’t even know whether the company offers them or not because they don’t show up on anybody’s (profit and loss statement),” he said.
As a result, employers are missing out on an opportunity to lower premiums and increase benefits for their employees.
Plymouth Meeting, Pennsylvania-based Promethean created a captive — Tennessee-domiciled FairShare Insurance Co. — to allow employers to participate in the risk without having to invest in a captive, Mr. Watkins said.
Promethean takes a standard commission on the business and fronting insurers are paid a 15% to 20% administrative fee, he said. The employee benefits risks are reinsured into FairShare with the scope of benefits expanded and premiums reduced so that loss ratios rise to about 50%.
<img src=”https://www.businessinsurance.com/assets/pdf/INNO-2023-09A.jpg” width=”288″ align=”right”>The company does similar programs for tenants, associations, franchisees and other large organizations, Mr. Watkins said.
“The policyholder gets better coverage for less premium, and the sponsoring organization gets 100% of the underwriting profits,” he said.
Underwriting profits from employee benefits governed by ERISA must be used to benefit employees, so employers can use them to broaden existing coverages or offer new ERISA coverages, Mr. Watkins said.
“And if the employer offers things like ID theft, electronic product coverage or pet insurance, the surplus from those lines of coverage can be used for anything the employer and the HR department wants,” he said.
With targeted loss ratios of only 50% there’s no need to reinsure the risks in the commercial market but the risks can be retroceded to participating companies’ own captives to increase their third-party premium, which can have tax benefits, Mr. Watkins said.
“We made it so that you don’t need to have an insurance company because we have FairShare, but if you do have a captive, you’ll get all the benefits that you normally would get because we’ll retrocede it out,” he said.
