Brian J. Spero joined The Beacon Mutual Insurance Co., which specializes in mutual workers’ compensation insurance, in 2008 as vice president and general counsel. In 2012, he was promoted to executive vice president, chief operating officer, and general counsel. He was appointed as president and CEO in July 2017.
In his current position, he leads Beacon’s strategic corporate vision by working closely with its board of directors and senior management team. He oversees the company’s financial infrastructure and fiscal growth. He also works to develop and maintain strategic alliances with customers, agencies, reinsurers and the community to build credibility with stakeholders in Rhode Island.
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Previously, Spero was a founding partner at the Providence law firm of Partridge Snow & Hahn LLC, where he practiced from 1988 to 2007. He’s represented Rhode Island and Massachusetts insurance companies and agencies in licensing, regulatory, rate, form, and compliance matters. He holds a law degree from Boston College Law School and a bachelor’s degree from Colgate University.
PBN: Can you talk about the history of the Rhode Island workers’ compensation insurance market and how it led to the creation of Beacon Mutual?
SPERO: In the late 1980s, the workers’ compensation system in Rhode Island was on the brink of failure – contributing heavily to the poor business climate in the state. Workers’ compensation benefits were uncontrolled; rates increased by 32% and 55% in consecutive years, and 90% of Rhode Island businesses could not find a voluntary insurer willing to write their workers’ compensation insurance. In 1990, Beacon was formed by the General Assembly as an independent, competitive mutual insurance company to respond to this crisis.
At the same time, through a unique and unprecedented partnership between business, labor and government, the workers’ compensation system in Rhode Island was completely reformed and, in addition to its role as a voluntary competitive mutual insurance carrier, Beacon agreed to assume the role of the market of last-resort carrier. Beacon, together with the legislative reforms and changes at the Workers’ Compensation Court, have brought substantial stability to Rhode Island’s workers’ compensation system – in terms of availability, performance and cost.
PBN: Generally, how does the so-called “residual” market for workers’ compensation insurance work?
SPERO: Voluntary insurers are only required to write the workers’ compensation insurance that is profitable for them. Those carriers generally do not write businesses that have a bad history of losses or are very risky, for example, businesses working from heights or with hazardous materials. However, all businesses with employees in the state are required to have workers’ compensation insurance.
So, as part of the early 1990s reforms, Beacon assumed the role as residual market carrier and agreed to write every business requiring insurance, regardless of the type of business or loss history of the business. Today, the vast majority of Beacon’s business is voluntary business. But as the residual market carrier, about 15% of Beacon’s total premium is business that other carriers would not write. Beacon receives no state assistance for this role.
PBN: Has the number of workers’ compensation claims in Rhode Island dropped?
SPERO: That is correct. The frequency of losses has decreased in Rhode Island. A significant component of Beacon’s mission is to make workplaces safer for Rhode Island employees through the efforts of our loss-prevention programs, which are free to all our policyholders. As the insurer of about 60% of the workers’ compensation market, we can empirically show that adoption of our loss-prevention recommendations provides for safer workplaces.
Additionally, the nature of the workforce within Rhode Island has changed over the last couple of decades, from primarily manufacturing, which tends to have higher loss frequency, to primarily service-oriented, which tends to have other types of losses and much lower loss frequency.
PBN: But hasn’t the severity or cost of individual claims increased?
SPERO: Medical severity is a real issue for the workers’ compensation industry. Although the frequency of injuries is down, the medical cost of the injuries that occur is increasing. Among other things, this is a result of the deteriorating demographics of workers – age, preexisting medical issues, physical conditions, increased medical and pharmaceutical fees, and advances in medical treatment that are more expensive, such as new procedures and devices.
PBN: So, is it getting more difficult for employers to find affordable workers’ comp insurance?
SPERO: Not at all. Due to a number of factors, including the stability that Beacon brings to the market, workers’ compensation insurance in Rhode Island is readily available and affordable. Beacon, as well as other voluntary carriers, through the independent agent system, provide insurance for the voluntary market, and Beacon continues to offer availability to all others who cannot get insurance.
And, unlike many other types of insurance, workers’ compensation rates have substantially decreased over the last decade. For Beacon policyholders, on average, their rates are down 16% over the last 12 years.
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.
