Self Insurers of South Australia Introducing Gallagher Bassett

Self Insurers of South Australia Introducing Gallagher Bassett

Who is GB ? ØArthur J. Gallagher & Co ØGallagher Bassett Services Inc. ØGallagher Bassett Australia ØIMA Gallagher Bassett

Brief History - Who is AJG ? Post WW 1 - 1919 ØNo brokers - insurance sold by agents ØAJG a bookkeeper at an insurance agent ØSuccess at door knocking ØResigned 25 Aug 1927 ØFocussed on commercial lines ØInsurance readily available – ample labour pool ØNo financial incentive for risk management

The Beginnings of Risk Management ØAJG recognised an opportunity for businesses ØReduced losses = time and productivity savings ØHannah trucking = driver incentive rewards and penalties. ØBonus for driving well, penalties for chargeable accidents or unsafe driving ØExpanded to dairies, other transport companies ØTruck safety focus as a consequence

The Beginnings of Self Insurance Ø 1938 - AJG co-designed the Retrospective Rating Program of the Hartford Group ØGave customers credit for containing their losses ØPremium reflects insured’s experience – 18 month review - 12 month review thereafter ØThe first step towards self insurance and the alternative market ØBeginnings not only of self insurance, but of risk management services

The Beginnings of Self Insurance ØFurther steps towards SI Ø 1938 wrote the first large deductible fire policy in Chicago for the Bowman Dairy Co. ØLater, AJG established self insurance plan for Chicago archdiocese ØLarge deductibles and experience rating are now common practice

The Beginnings of Self Insurance Ø 1957 - AJG wins Beatrice Foods account Øpremiums based on exposure to loss, irrespective of the actual losses ØBeatrice keen to establish their own ins company to reduce costs ØAt this time some comp SI but no commercial SI

The Beginnings of Self Insurance ØNeed a claims system and claims managers to be a successful SI ØSterling Bassett claims adjuster at the General Adjusting Bureau. ØA friend and neighbour who caught the train into Chicago Ø“Gallagher Bassett” November 10 1962 ØMarch 1 1963, Beatrice becomes a self insurer

The Beginnings of Self Insurance ØAdjusters and in house lawyers recruited ØDeveloped a claims management system ØCreated a insurance company style operation ØBecame very unpopular with other insurers ØSelf insurance program for the archdiocese to be self insured ØMillions saved in insurance costs

Recent Gallagher Bassett Statistics Ø 660, 000 claims per annum Ø 3400 employees ØRISX-FACS® Ø 80% of global claim volume = compensation claims Ø 15, 000 approved physios, chiros, occ therapists in 6000 locations across the US ØOperations in US, UK, Canada, Australia

Recent Arthur J. Gallagher & Co. Statistics Ø 2006 revenue $US 1. 5 bill Ø 8700 employees ØVirtually debt free ØTangible net worth $US 334 mill

IMAGB Ø 15 years operational presence SA Ø 120 years experience in the management team ØGB’s Work. Cover tender application ØIMA an ideal fit with GB’s claims management background ØSupport for IMA’s core claims, OH&S and other consulting service

Applying the Knowledge Recent Gallagher Bassett Assignments

Examples of GB assignments ØMercury energy ØNZ Earthquake Commission ØVictorian workers compensation ØNSW workers compensation ØHIH Claim Support Limited ØLarge domestic insurer

Mercury energy Ø 19 Feb 1998 Auckland CBD loses power supply ØDamage to main power supply infrastructure ØGB team of 30 established within 10 days Ø 10, 000 claims settled in 3 months ØNot one class action commenced ØEntire project settled for less than once third of the government’s actuarial assessment.

NZ Earthquake Commission ØNatural Disaster Fund approx $5. 4 bill Ø 60 Year history ØApprox 7000 claims per annum ØOperates from GB’s Brisbane office ØBusiness continuity considerations ØNZ time and procedures ØClient branded service

Victorian workers compensation Ø 22 April 2002 – license granted – 14 staff ØOperational 1 July 2002 with 90 staff Ø 9000 “active” claims – unmatched mail Ø 18000 employers Ø 11. 7% market share ØCurrently approx 2700 open claims Ø 180 staff ØOct 2006 – actuarial release of $165 mill

NSW workers compensation ØOctober 2005 - license granted Ø 5% market share premium - 10% market share policies ØApprox 30, 000 employers -32, 791 policies Ø 4660 long tail claims received ØTail now at 2460 – reduction of 2200 ØApprox 190 staff

HIH Claim Support Limited ØAustralia’s largest corporate collapse ØICA intervention - entitlement scheme ØTender in 2004 - GB successful ØKPI – 60 per month – GB achieved 127 per month ØLegal cost component reduction ØInternal mediation capability ØFee saved prior to the start of the contract

Large domestic insurer Portfolio A 12000 claims reserves settlements 3. 8 m 1. 0 m savings 2. 8 m Portfolio B 8500 claims reserves settlements 5. 3 m 0. 9 m savings 4. 4 m Total Savings 7. 2 m The Third Portfolio

Future Direction ØSteady, considered growth ØContinue the focus on working with underwriters and brokers ØGovernment sector ØNew Zealand – ACC ØSelf Insurers ØSouth Australia and Queensland jurisdictions