Beacon Mutual dominates market share

When it comes to insurance, Rhode Islanders like to spread their dollars around.
Progressive tops the auto market, but with only 12.4 percent of premiums as
of 2003. Nationwide writes the most homeowners’ policies, but as of 2002 it
had only a 10.5 percent market share. In commercial insurance, market leader
The Hartford has just under 5 percent.



In workers’ compensation, however, one carrier dominates Rhode Island: The Beacon Mutual Insurance Company, which wrote 76 percent of premiums last year. Runner-up Travelers Indemnity had only 2.3 percent.



This doesn’t mean Rhode Islanders have no choices. More than 130 companies held at least one policy here last year. But Dennis Charland, executive director of the Independent Insurance Agents of Rhode Island, said many are either part of a larger, out-of-state contract, or written in conjunction with another line of insurance.



For most policies, Charland said, “it’s very tough to compete with The Beacon.”



Established in 1990 as the State Compensation Insurance Fund, Beacon is a private, independent company, but with a mission defined by law: “To ensure that all employers in the state of Rhode Island have the opportunity to obtain workers’ compensation insurance at the lowest possible price” and be the “carrier of last resort.” In exchange, it is exempt from the state’s 2 percent premium tax and from contributing to the workers’ compensation insolvency fund.



Warwick-based Beacon got much of its business by default: Just as it was starting to write policies, in 1993, the other carriers pulled out of Rhode Island.



“Overnight, 13,000 policies were dumped on us,” Beacon President and CEO Joseph A. Solomon said. Beacon wrote 78 percent of the premiums that year, and 85 percent the following year.



The market hit its nadir in 1997, with only $107 million in premiums, down from $185 million in 1991. Since then, however, it’s been rebounding, and Beacon, which held 56 percent of the market that year, accounts for nearly the whole $96 million rise. Its competitors did about $47 million in business in 1997, and $49 million last year.



Solomon said Beacon has won those premiums through hard work and a strong commitment to Rhode Island.



“We fight every day for our business, and we take nothing for granted,” he said. As for the size of Beacon’s market share, Solomon noted that since the company carries all the bad risks in the state, “in order to be as strong, and as stable, as possible, we need to get as many of the good risks as we can.”



Beacon is not unique in its setup: Maine, Louisiana and Kentucky, for example, also created such companies in the early 1990s. But their market shares were much smaller: 54 percent in Maine, 35 percent in Louisiana, 27 percent in Kentucky. A few states have single, state-run carriers, but in states with competitive markets, Beacon’s dominance is unparalleled.



Yet is it a bad thing?



Marilyn Shannon McConaghy, the state’s director of business regulation, doesn’t mind it. “Employers are extremely happy with what Beacon has done,” she said. “People are happy with the service. They’re doing a great job.”



Charland, of the Independent Insurance Agents, said Beacon usually has the best rates, and it has unmatched expertise and resources. “They have been a fantastic resource for the state of Rhode Island,” he said.



Sandra L. Thompson, of Operation Clean Government, disagrees. In an opinion article published last week, she argued Beacon is placing “a huge burden” on the state, which loses out on about $2 million in revenues and can’t properly finance its insolvency fund. Rhode Island would do better, she argued, with a “level playing field.”



McConaghy countered that the insolvency fund couldn’t afford to include Beacon, because then it would have to cover its policyholders if it went under. Competitors aren’t complaining, either, McConaghy added, and given the workers’ compensation crises plaguing other states, Rhode Islanders should be pleased with their stable, affordably priced market.


“It’s a model for many other states,” she said.



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