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Keeping the Promise:<br />
Our Past and Our Future
Workers’ Comp:<br />
A Market Once in Turmoil
A<br />
fter experiencing several years of significant growth in<br />
the early 1990s, business owners throughout Kentucky<br />
were reaping the benefits of a strong economy.<br />
Unemployment in the state had dipped below the national<br />
average and businesses continued to expand, particularly in<br />
the construction and manufacturing industries.<br />
But Kentucky’s economy was not entirely well as <strong>sm</strong>all<br />
businesses struggled to find a reliable source for their<br />
workers’ compensation insurance coverage. Many of those<br />
businesses had no other choice but to join the Kentucky<br />
Workers’ Compensation Insurance Plan (KWCIP), a program<br />
administered by the National Council on Compensation<br />
Insurance (NCCI). The KWCIP offered workers’ compensation<br />
coverage but required employers to pay substantially higher<br />
rates than those paid for the same classification codes in the<br />
standard market.<br />
Referred to as the “Assigned Risk Plan,” the “Pool,” or the<br />
“market of last resort,” the KWCIP offered nothing more<br />
than a certificate of insurance and a guarantee of coverage<br />
to employers who were paying for workers’ compensation<br />
insurance. Most businesses with coverage through KWCIP<br />
did not know who their workers’ compensation insurance<br />
carrier was and there was no coordinated effort between the<br />
administrators of the program and its participants to address<br />
workplace safety concerns or manage the steady increase of<br />
claims due to the growing economy.<br />
One newsletter from the Kentucky Chamber of Commerce<br />
described the situation as follows: “For decades, many<br />
employers benefited when the rates in the current assigned<br />
risk pool were manipulated to artificially control premium<br />
costs. The result has been that for each of the past five years,<br />
the assigned risk plan lost an average of $100 million each<br />
year.”<br />
“To cover the unfunded liability, insurance companies who<br />
wrote business in Kentucky were required to pay a share of<br />
the asses<strong>sm</strong>ent. Over time, the added costs of the asses<strong>sm</strong>ent,<br />
combined with pressure to keep premiums competitive with<br />
the assigned risk rates, led many commercial insurers to the<br />
conclusion that they couldn’t afford to do business in Kentucky.”<br />
“With fewer and fewer insurers willing to write business (and<br />
pay the unfunded assigned risk liability) and more and more<br />
employers voluntarily purchasing insurance in the assigned<br />
risk pool because it was cheaper, we reached a crisis.”<br />
The “Pool” was a dangerous liability. News headlines<br />
portrayed a grim outlook on the situation, and pressure was<br />
building from business and trade groups across the state to<br />
push legislators in Frankfort to make drastic changes to<br />
the failing system. Among those pressing for changes were<br />
the Economic Progress Initiative Council, which held a news<br />
conference to address many of the issues relating to workers’<br />
compensation coverage in Kentucky.<br />
During the press conference, council members highlighted<br />
the high premiums that business owners were facing due to<br />
the mi<strong>sm</strong>anagement of the “Pool” and explained how the<br />
workers’ comp market was making Kentucky economically<br />
uncompetitive.<br />
“The council said workers’ comp cost Kentucky employers<br />
$520 per worker in 1993, substantially higher than any<br />
surrounding state,” wrote Bill Estep in a story published by<br />
the Lexington Herald-Leader. Fortunately for Kentucky<br />
businesses, the state legislature acknowledged the problems<br />
facing the workers’ compensation insurance market and took<br />
swift action.<br />
“The General Assembly enacted House Bill 928 on March 30,<br />
1994, after three months of spirited and tumultuous debate.<br />
The legislation was signed by the Governor [Brereton Jones]<br />
and became law on April 4, 1994.<br />
The provisions of HB 928 are far-reaching, complex,<br />
controversial, and they affect almost every entity involved in<br />
the workers’ compensation program or process in Kentucky.”<br />
-- Excerpt from Kentucky Workers’ Compensation Reform,<br />
1994 HB 928, A Citizen’s Handbook<br />
KEMI is Created<br />
Included in the sweeping changes brought by HB 928,<br />
Kentucky Employers’ Mutual Insurance Authority (KEMI)<br />
was created by the Kentucky Legislature as a non-profit,<br />
independent, self-supporting, de jure municipal corporation<br />
chartered as a competitive state fund and as a market of last<br />
resort for employers.<br />
KEMI would provide coverage for workers’ compensation,<br />
employers’ liability insurance and coverage required by the<br />
Federal Coal Mine Health and Safety Act, the Jones Act and<br />
the Longshore and Harbor Workers Act incidental to and in<br />
conjunction with workers’ compensation. The organization<br />
would be entirely self- supporting with the exception of initial<br />
start-up funding (amounting to $7 million to be provided by<br />
and repaid to the Kentucky Workers’ Compensation Funding<br />
Commission) and was denied full faith and credit by the<br />
Commonwealth.<br />
The organization would be governed by an 11-member<br />
board of directors including seven voting members appointed<br />
by the governor and subject to Senate confirmation.<br />
2
Four non-voting ex-officio members would consist of the<br />
Secretary of the Finance and Administration Cabinet,<br />
the Secretary of Economic Development Cabinet, the<br />
Commissioner of the Department of Personnel, and<br />
the Commissioner of the Department of Insurance.<br />
KEMI’s enabling legislation directed that the board<br />
function in a manner similar to that of any domestic<br />
mutual insurer with corporate powers and specific duties<br />
defined by statute, including the responsibility to hire a<br />
manager to administer KEMI and present that individual<br />
for Senate confirmation, all on a time line to be fully<br />
operational on or before September 1, 1995.<br />
KEMI Board Hires President & CEO<br />
Based upon the mandate of KEMI’s legislation, the<br />
board conducted a national search for an experienced<br />
and qualified candidate to lead KEMI into a successful<br />
future that would essentially stabilize Kentucky’s<br />
workers’ compensation insurance market and initiate<br />
economic growth for the Commonwealth into the future.<br />
On January 4, 1995, Roger J. Fries, Executive Vice<br />
President of the Accident Fund in Lansing, Michigan<br />
was hired to serve as KEMI’s president and CEO<br />
and the concept of KEMI was shaping into its reality.<br />
Finding a Home, Hiring Staff,<br />
and Getting to Work<br />
Building on the foundation the board for the newly<br />
created entity had established since it began meeting in<br />
August 1994, Roger assumed responsibility for the dayto-day<br />
operations of KEMI.<br />
With an intense timeline to provide coverage effective<br />
September 1, 1995, Roger faced many challenges.<br />
KEMI had no employees and no benefits to offer,<br />
no offices and no furniture, no phones, no computer<br />
operating systems, no rates, no formal business plan . . .<br />
and essentially no time.<br />
The first six months of 1995 were a flurry of activity.<br />
Unless Roger Fries planned to underwrite and issue every<br />
policy himself, he knew he quickly had to hire and train a<br />
fledgling staff that had the potential and the motivation<br />
necessary to initiate and withstand the expected growth<br />
and challenges of the next five years. Before he would<br />
be able to entice employees with the type of character<br />
and ambition desired, a competitive benefits package<br />
would be required. With the assistance of Governor<br />
Jones’ administration, an executive order was issued<br />
allowing KEMI employees to participate in the Kentucky<br />
Retirement System even though KEMI’s employees<br />
would not be state employees or part of the Kentucky<br />
Personnel System.<br />
With essential benefits in place by early February, it was<br />
time to search for office space, establish an actuarially<br />
sound rating plan, and select a workers’ compensation<br />
information system. Each task in itself was monumental.<br />
KEMI Opens for Business<br />
Lexington’s centralized location, amenities, and potential<br />
made it an ideal location for KEMI’s headquarters. With<br />
a vision of what would be, Roger began evaluating<br />
space and subleased half of a floor in the Lexington<br />
Financial Center, contracting for first<br />
right of refusal on adjacent space and<br />
floors. As luck would have it, furniture<br />
from the prior tenant remained and<br />
Roger was able to arrange for KEMI<br />
to retain it indefinitely for minimal<br />
expense. Now that a physical location<br />
had been established, phones were<br />
installed; letterhead was ordered; and<br />
employees were being hired. KEMI was<br />
off and running.<br />
Those first months up until September<br />
1995 were 24/7. There were no<br />
vacations; there were barely weekends<br />
for the handful of employees and other<br />
supporting service providers such as<br />
3
Meridian Communications,<br />
CM Management, Price<br />
Waterhouse, and Milliman<br />
& Robertson, who committed<br />
their time and talents to<br />
successfully meeting the<br />
required deadline.<br />
From day one, the plan of<br />
operations at KEMI was<br />
to achieve the mandate<br />
established by the<br />
legislature, but to do it in<br />
such a way that made KEMI<br />
more than just a “here today,<br />
gone tomorrow” solution<br />
to a problem; more than<br />
just an insurance company<br />
for workers’ compensation;<br />
and more than just an<br />
employer for those first employees determined to<br />
see the company succeed. The ultimate plan for<br />
KEMI was to make the organization the best workers’<br />
compensation insurer operating in the Commonwealth.<br />
One of the first objectives toward reaching that goal<br />
was to develop and execute a transition plan with NCCI<br />
to ensure that KEMI was prepared to issue coverage<br />
for any entity that desired it. Agencies servicing<br />
accounts were notified of their options. At the same<br />
time, KEMI was establishing a culture of customer service<br />
that would educate and assist agents as they began<br />
placing accounts with the new organization. By July 15,<br />
1995, KEMI was fully operational; operating systems<br />
and employee training were complete and customer<br />
service values were in place. By August 1, the first<br />
applications for coverage were coming through the door.<br />
Even in those early days, the culture at KEMI was<br />
defined by the sense of responsibility to the cause and<br />
a desire to do the right thing right, building integrity<br />
for the organization and establishing a defined process<br />
for doing business. As difficult as it was at the time<br />
for most KEMI employees to imagine what the first year<br />
of operations would be like, Roger and the board had<br />
a greater vision and established long-term goals for<br />
financial compliance; safety, loss control, and managed<br />
care services; actuarially sound rates; low operating<br />
expenses; experienced employees; competitive and<br />
innovative products; competitive producer commissions;<br />
data collection; and, ultimately, to make KEMI the<br />
“Market of First Choice” as the leading writer of workers’<br />
compensation insurance in Kentucky.<br />
KEMI’s First Rate Filing and<br />
Writing the First Policies<br />
During KEMI’s first year, there were countless daily<br />
obstacles – all critical in nature – and one of the most<br />
significant related to KEMI’s first rate filing, which was<br />
publicly announced in June of 1995. After months<br />
of evaluating data, actuaries for the organization<br />
recommended that the board make a rate filing that<br />
would increase rates substantially for businesses that<br />
had been insured in the pool. In explanation, Mr. Fries<br />
conceded that the rate increases would not be popular,<br />
but stated, “Our job is to take the lead in getting the<br />
Kentucky workers’ compensation system under control;<br />
we will begin providing coverage on September first<br />
with the goal of putting the system on sound actuarial<br />
footing. Other benefits will follow. These include better<br />
health and safety conditions for Kentucky workers,<br />
a better business environment to attract new industry<br />
to the state, and yes, even lower premium rates are<br />
possible once the system is on solid ground.” Though<br />
the increases required were a consequence of previous<br />
mi<strong>sm</strong>anagement of the assigned risk pool, Mr. Fries was<br />
correct that they would not be well-received. Legal<br />
action was necessary to resolve the matter and receive<br />
final approval of the rates from the department of<br />
insurance.<br />
4
KEMI Pays Off Loan from the<br />
Funding Commission<br />
KEMI’s 1995 annual report predicted that the organization<br />
would become the dominant force in Kentucky workers’<br />
compensation insurance in 1996 and take a leadership<br />
role in encouraging actions which improve the system<br />
and provide better, more affordable service to all<br />
employers, large and <strong>sm</strong>all. Demonstrating commitment<br />
to this prediction in a manner directly related to KEMI,<br />
in the spring of 1996 Roger Fries recommended to the<br />
board that they repay the $7 million start-up loan that<br />
was provided by the Kentucky Workers’ Compensation<br />
Funding Commission. Although the terms of the loan<br />
allowed re-payment through October 2001, according<br />
to KEMI’s Vice President of Finance, early payoff made<br />
good business sense. He stated, “At the current interest<br />
rate we’re (KEMI)<br />
paying the Funding<br />
Commission, we<br />
would have sunk<br />
over $2.2 million<br />
into interest<br />
payments by<br />
the year 2001.<br />
Policyholders are<br />
much better served<br />
over the long term<br />
by putting that<br />
money to work<br />
instead of paying<br />
it out.” Payoff of<br />
the loan six years<br />
early was a huge<br />
relief and a significant statement to the community about<br />
the viability of KEMI and its future success.<br />
The KEMI Philosophy on Customer Service<br />
The KEMI philosophy of customer service has been<br />
a core component of the organization’s corporate<br />
strategy and culture. Early in the company’s history,<br />
priority was placed on interaction with customers and<br />
developing service standards they had not previously<br />
known; these standards were defined as employee<br />
values, representing the commitment of the KEMI staff.<br />
To this day they continue to be deeply embedded in<br />
KEMI’s operations:<br />
We will reflect integrity in all that we do by making<br />
decisions that are ethical and in accordance with statutory<br />
requirements and KEMI operating policies.<br />
We understand that communication and teamwork within<br />
our organization are essential to resolving all issues.<br />
We will educate our customers about, and involve our<br />
customers in, decisions that affect their relationship with<br />
KEMI.<br />
We will listen to our customers and treat them with honesty<br />
and respect.<br />
We will understand<br />
and address our<br />
customers’ needs<br />
while providing<br />
them prompt and<br />
responsive service.<br />
We recognize that<br />
our decisions will<br />
not always meet<br />
with the approval<br />
of all customers we<br />
serve.<br />
We take pride in<br />
being a dependable<br />
and respected resource for Kentucky employers.<br />
We believe that our customers’ satisfaction is a key measure<br />
of our success.<br />
After one year of serving policyholders, Roger Fries<br />
issued a special note of thanks and appreciation to<br />
each and every member of the KEMI team. “We have<br />
been extraordinarily successful during this first year<br />
and every measure of that success can be attributed to<br />
your hard work, initiative, and dedication to excellent<br />
customer service,” wrote Roger. “What sets us apart,<br />
and will continue to make a significant contribution to our<br />
success, is your unrelenting drive to make things better –<br />
for the company and for our policyholders.”<br />
5
Since the company’s inception, KEMI staff has had<br />
an inherent understanding of the “unrelenting drive”<br />
Roger referenced in his note and its significance to the<br />
organization and the Commonwealth. That drive has<br />
been exhibited in dedicated service units like KEMI’s<br />
Center for Assistance, in providing customized training<br />
courses and materials available free of charge, in the<br />
ever-growing and improving online tools available at<br />
kemi.com, and in countless behind the scenes efforts<br />
that make KEMI more effective and cost efficient for<br />
customers.<br />
From the beginning, staff understood that there was no<br />
difference between the workers’ compensation insurance<br />
policy KEMI sold and the workers’ compensation insurance<br />
policy sold by any other insurance company. At the very<br />
basic level, policies for workers’ comp insurance provide<br />
the same protection and benefits no matter whose paper<br />
the policy prints on. But KEMI benefited from the early<br />
vision of Roger and the board as they recognized that<br />
the KEMI policy could stand apart by supporting it with<br />
a commitment to financial stability, non-complacency,<br />
creativity, and unique strategies for customer service<br />
and innovation.<br />
One of those strategies came to life in the creation<br />
of KEMI.com. Though the initial site did provide some<br />
functionality to obtain a quick quote, the majority of the<br />
site served as an informational hub for those interested<br />
in learning more about KEMI and the services the<br />
company provided.<br />
Holding true to early commitments to innovation<br />
and technology, it wasn’t long before KEMI.com was<br />
transformed into a fully interactive site which provides<br />
tools for submitting claims and applications, online<br />
payments, obtaining loss runs and certificates of<br />
insurance, obtaining quotes, and completing audits. Since<br />
KEMI.com has become a huge component of how we<br />
efficiently serve customers and control expenses,<br />
improvements to the site remain under constant<br />
consideration by KEMI’s Information Technology and<br />
Communications staff, as well as management.<br />
Even with the implementation of online services available<br />
via KEMI.com, management and employees at KEMI had<br />
no intention of sacrificing service values.<br />
Recognizing the speed of change and the importance<br />
of personal service in an environment that was<br />
becoming more and more automated, KEMI created a<br />
specialized unit of employees technically proficient in<br />
all areas of KEMI’s operations and then empowered<br />
them with authority to completely handle inquiries being<br />
received by phone and via KEMI.com. KEMI’s Center<br />
for Assistance (CFA) began operating before KEMI’s<br />
five-year anniversary and has remained one of the<br />
most significant units within the company. In a single<br />
year, the CFA team handles more than 45,000 calls<br />
and responds to more than 7,500 messages sent to<br />
answers@kemi.com.<br />
6
Our policyholders were surprised when we called<br />
to ask how we could help them. They had never<br />
received that kind of service from a workers’<br />
compensation insurance provider before.<br />
Roger Fries<br />
President & CEO of KEMI
Controlling Your Own Destiny: Safety Impacts the Bottom Line<br />
Companies that placed their coverage with KEMI in<br />
1995/1996 had likely not experienced the type of<br />
workers’ comp service or involvement KEMI was focused<br />
on providing. With a full staff of loss education<br />
specialists located in Kentucky, policyholders quickly<br />
learned that KEMI’s free resources were easily<br />
accessible. Site evaluations were conducted as a<br />
routine course of business and available upon request<br />
of policyholders. Effective solutions to safety concerns<br />
on the jobsite were presented and carried forth with<br />
KEMI’s “Control Your Own Destiny” message; a message<br />
which has resonated over the years with businesses that<br />
accepted KEMI’s recommendations and implemented<br />
improved safety measures within their workplace. As a<br />
result, those businesses saw reductions in their workers’<br />
compensation premiums through the stabilization of their<br />
experience modification, rate reductions, the application<br />
of credits, and even preferred pricing. KEMI’s approach<br />
to loss control has made safety a worthwhile investment<br />
for policyholders.<br />
At every opportunity KEMI has endeavored to make<br />
safety and loss education affordable for Kentucky<br />
businesses. In addition to safety materials and<br />
evaluations, in 2010, KEMI’s loss education specialists<br />
began offering free OSHA training courses in General<br />
Industry and Construction Training which provides an<br />
incredible value for businesses. One attendee expressed<br />
the appreciation of his company as follows: “Our<br />
Superintendents who have gone through similar training<br />
in the past all noted how beneficial and common sense<br />
that his (KEMI trainer) approach to the course was. We<br />
appreciate that he trained us on our level and for the<br />
position that we represent in the field. Everyone was<br />
very satisfied that they learned a great deal more with<br />
his approach to training than any other trainer that they<br />
have had in the past. Retention should be very high<br />
with this approach and that means more success for our<br />
company.”<br />
At KEMI we have earned a tremendous amount of<br />
respect in the workers’ compensation marketplace<br />
both in Kentucky and beyond with such efforts. Our<br />
employees are working hard each day to empower<br />
KEMI policyholders to control their own destiny by<br />
making workplace safety a top priority.<br />
But our efforts to promote workplace safety do not stop<br />
with just KEMI customers. Take, for example, the KEMI<br />
Mine Safety & Training Competition held in Pikeville<br />
each year.<br />
This annual KEMI event is free of charge for all coal<br />
companies to attend and features more than 500 coal<br />
miners competing in events for Mine Rescue, Pre-Shift,<br />
Bench and First-Aid.<br />
In 2011, over 50 coal companies from Alabama,<br />
Illinois, Kentucky, Pennsylvania, Tennessee, Virginia and<br />
West Virginia were in attendance, and more than 200<br />
officials from the Mine Safety & Health Administration<br />
(MSHA) and the Kentucky Office of Mine Safety and<br />
Licensing (OMSL) served as judges for the three-day<br />
safety training event.<br />
KEMI recognizes that our commitment and message of<br />
safety must reach beyond just our policyholders; we<br />
must engage this close-knit industry by offering safety<br />
training to anyone who is interested. While several<br />
employees were focused on promoting this free event<br />
to policyholders and other coal companies in Kentucky,<br />
a coordinated communications effort was underway to<br />
draw in out-of-state competition as well. The result in<br />
our first year: more than 20 coal companies from five<br />
different states attended KEMI’s free safety event,<br />
and the word spread quickly throughout the industry<br />
that KEMI was offering an opportunity too good to be<br />
passed up.<br />
We are proud to report that in only its fourth year, the<br />
KEMI Mine Safety & Training Competition has grown to<br />
be the largest annual mine safety event in the nation.<br />
8
Financial Stability:<br />
It’s More than Just the Bottom Line<br />
As a start-up operation, KEMI didn’t have money that<br />
would be needed to pay employees, secure space,<br />
obtain an operating system, begin paying benefits to<br />
injured workers, or do anything for that matter. As<br />
mentioned, HB 928, KEMI’s enabling statute, authorized<br />
KEMI to borrow up to $7 million from a state agency<br />
to meet start-up expenses. In May 1996, six years<br />
earlier than expected, KEMI held a payoff celebration<br />
and repaid the $7 million start-up loan to the Kentucky<br />
Workers’ Compensation Funding Commission. Since that<br />
time, KEMI has been debt-free.<br />
The Purpose of a Policyholders’ Surplus<br />
Recognizing the nature of workers’ compensation<br />
insurance, development of KEMI’s surplus required<br />
immediate attention. By definition the term “surplus”<br />
is typically misunderstood outside the insurance industry<br />
and is misconstrued as profit or excessive funding.<br />
However, surplus is essential as the ultimate backstop for<br />
policyholder claims. As individual claims are reported<br />
they are evaluated and KEMI sets a monetary reserve<br />
for medical costs and income benefits. In addition,<br />
insurers like KEMI must set a reserve to cover claims that<br />
have occurred but have not been reported each year.<br />
In contrast to reserves, surplus is accumulated to cover<br />
unexpected occurrences such as mining catastrophes,<br />
unanticipated medical inflation over the long tail<br />
of workers’ compensation claims, and the impact of<br />
legislative action like the federal Byrd amendment<br />
which passed with the healthcare reform bill of 2010.<br />
That retroactive legislation provides for the filing<br />
and reopening of workers’ compensation insurance<br />
claims for benefit payments which it would have been<br />
impossible to anticipate when initial claims reserves<br />
were set. Essentially, surplus is a safety net providing<br />
financial stability above and beyond operating expenses<br />
and claims reserves; it is the working capital needed to<br />
support past, present, and future risk and operations,<br />
and it ensures a workers’ compensation insurance<br />
company can live up to its obligation to pay claims as<br />
required by law.<br />
The Comp Market Stabilizes as KEMI Grows<br />
Though very few people knew exactly what to expect<br />
when KEMI opened its doors for business, under Roger’s<br />
leadership, the board, management, and staff were<br />
prepared for changes to Kentucky’s insurance market.<br />
By the end of 1996, KEMI had grown to over 18,000<br />
policyholders and was the largest workers’ compensation<br />
insurance company in the state - writing more than $93<br />
million in premium. Just as expected, competition in the<br />
workers’ comp insurance market returned to Kentucky<br />
and by the end of 1999 KEMI’s written premium was<br />
reduced to $28 million. After just five years, the workers’<br />
compensation market in Kentucky was recognizing the<br />
impact of KEMI’s successful creation and execution. All<br />
the while, KEMI was continuing to fine-tune its services<br />
and anchor itself in the solid business practices that<br />
would reinforce the company’s competitive presence<br />
and be necessary for future growth.<br />
KEMI Rated “Excellent” by A.M. Best<br />
In 2000, after four complete years of operations, KEMI<br />
had reached the age necessary to apply for a financial<br />
strength rating from A.M. Best. The evaluation process<br />
was extremely intense and time-consuming; historical<br />
data had to be generated and analyzed, corporate<br />
structure and planning had to be discussed, financial<br />
forecasts had to be prepared and presented, the<br />
impact of potential legislative involvement had to be<br />
considered and business strategy had to be laid out in<br />
detail. After months and months of working through the<br />
9
process, in March 2001, A.M. Best issued KEMI’s first<br />
financial strength rating, A- (Excellent), which would be<br />
one of the most significant events in KEMI’s short history.<br />
At the end of the 90’s and start of the new century,<br />
the workers’ compensation insurance industry across the<br />
nation was struggling with irresponsible business practices<br />
and pricing wars; Kentucky was no exception. Now that<br />
KEMI had obtained an “Excellent” rating from A.M. Best,<br />
the organization was keenly positioned to compete with<br />
the other insurance companies in the state to provide<br />
workers’ comp insurance for large, highly-respected<br />
Kentucky operations, many of which are restricted to<br />
obtain coverage from insurance carriers rated “A-” or<br />
better by A.M. Best. Even in this new culture dominated<br />
by competition, KEMI maintained a position to avoid<br />
price wars, evaluate each risk, and price each policy<br />
accordingly. Many other carriers and self-insured funds<br />
were irresponsibly pricing policies to post policy premium<br />
on their books, but KEMI was unwavering in its commitment<br />
to ensure adequate rates and financial stability. That<br />
particular time in workers’ compensation insurance<br />
history led to the demise of many insurance companies.<br />
In Kentucky, AIKComp fell victim to its self-inflicted<br />
wounds, unable to fund claims liabilities being forced<br />
to assess policyholders and ultimately close their doors.<br />
Sharing Our Success<br />
The financial success KEMI has garnered from avoiding<br />
compromise and conducting business with integrity is a<br />
concrete advantage of placing coverage with KEMI;<br />
the long-term financial stability of the organization<br />
provides peace of mind to policyholders and injured<br />
workers alike. Repeated affirmation of KEMI’s<br />
“Excellent” rating by A.M. Best and clean financial<br />
audits from KEMI’s independent auditors as well as<br />
the department of insurance confirm the continued<br />
solvency of the organization. A conservative investment<br />
strategy, placing 90% of investments in bonds, and<br />
routinely monitoring the portfolio with reputable asset<br />
management partners has proven beneficial for KEMI<br />
even when markets have struggled. Though as a<br />
mutual insurer, KEMI has the ability to issue dividends<br />
to policyholders, and did so in 2010, the company has<br />
found greater long-term impact for its policyholders<br />
by returning premium to them through rate reductions.<br />
Over the course of the past 15 years, KEMI has issued<br />
eight rate reductions; keeping rates lower than they were<br />
when KEMI opened for business in 1995 and promoting<br />
Kentucky’s economic development by providing a<br />
quality source for workers’ compensation insurance and<br />
outstanding service at a competitive price.<br />
KEMI continues to excel and is positioned to face the<br />
future with great confidence. We expect KEMI to<br />
continue to be the cornerstone of a stable, competent<br />
workers’ compensation system in Kentucky with all<br />
the attendant benefits to workers, businesses, and<br />
the prospects for sustained economic development<br />
for our great state.<br />
David Snowden<br />
Board Chairman<br />
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Awards & Honors<br />
- Roger Fries has served on the Board of Directors for the Workers’ Compensation<br />
Research Institute (WCRI) since 1996<br />
- KEMI has been rated A- “Excellent” by A.M. Best since 2001<br />
- KEMI Received the Award of Excellence from the Professional Insurance Agents<br />
of Kentucky (PIAK) in 2001, 2003, and 2007<br />
- In 2004, KEMI received the inaugural Top Business for Women Award by<br />
Women Leading Kentucky<br />
- KEMI was recognized by National Underwriter magazine in 2005 for its<br />
underwriting discipline<br />
- KEMI was chosen as one of the Best<br />
Places to Work in Kentucky in 2006,<br />
2008, 2009, and 2010<br />
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- In 2007, KEMI was ranked as one of the top 50 workers’ compensation insurance<br />
companies in the nation in an independent study published in National Underwriter<br />
magazine<br />
- KEMI received the Central Kentucky Volunteer Award in 2007 from the United Way<br />
of the Bluegrass in honor of its commitment to serving the non-profit community<br />
- KEMI was honored nationally with the Alfred P. Sloan Award for Workplace<br />
Flexibility in 2009, 2010, and 2011<br />
- In 2010, KEMI was named to the prestigious list of Ward’s 50 top performing<br />
property and casualty insurers<br />
- KEMI was recognized in 2010 with the We CARE Award by Republic Bank for<br />
service to the community<br />
- KEMI was ranked #1 Nationally as a Best Place to Work in Insurance (amongst<br />
<strong>sm</strong>all-sized property and casualty companies) by<br />
Business Insurance magazine<br />
- In 2011, the KEMI Mine Safety & Training Competition<br />
was recognized as the largest annual mine safety<br />
and training event in the nation<br />
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KEMI in the Community<br />
Over the years, KEMI has invested a significant amount<br />
of time, energy, and resources in building lasting<br />
community partnerships. We understand that in order<br />
to truly make a noticeable impact, we must not only<br />
contribute as an organization, but we must also foster<br />
a work environment that promotes and recognizes<br />
active community participation and volunteeri<strong>sm</strong> on<br />
an individual level for each of our employees.<br />
To encourage community involvement and volunteer<br />
work, KEMI has developed an Activities Committee<br />
composed of a diverse group of employees. This<br />
Committee is responsible for coordinating volunteer<br />
opportunities, fundraisers, awareness campaigns, and<br />
much more throughout each year. The Committee<br />
also surveys employees and makes recommendations<br />
regarding special contributions to organizations during<br />
the holiday season or during times of local, national<br />
or global crisis.<br />
KEMI is also engaging the community through its<br />
corporate wellness program, beWell@KEMI, where<br />
KEMI employees can earn gift cards and other<br />
recognition by participating in local walks and runs<br />
which benefit the many non-profit organizations that<br />
coordinate these events to raise support and<br />
awareness.<br />
Thanks to the significant contributions from our staff,<br />
our commitment to serving the community has been<br />
recognized with numerous awards and honors.<br />
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Here are just some of the organizations<br />
KEMI has supported in recent years:<br />
• All God’s Children<br />
• American Diabetes Association<br />
• American Heart Association<br />
• Bluegrass Domestic Violence Program<br />
• Bluegrass State Games<br />
• Books As Bridges<br />
• Carnegie Center for Literacy & Learning<br />
• Catholic Action Center<br />
• Chrysalis House<br />
• Dare to Care Soup Kitchen<br />
• Girls on the Run<br />
• God’s Pantry<br />
• Habitat for Humanity<br />
• Homeless for the Holidays<br />
• Junior League of Lexington Holly Day Market<br />
• Kids’ Chance of Kentucky<br />
• Lexington Clinic Foundation<br />
• Lexington Hearing & Speech Center<br />
• Lexington Humane Society<br />
• Lions Club Walk for Sight<br />
• March of Dimes<br />
• Rolex 3-Day Event<br />
• Ronald McDonald Charities of the Bluegrass<br />
• Salvation Army<br />
• Sayre Christian Village Nursing Home<br />
• St. Vincent de Paul Food Bank<br />
• United Way of the Bluegrass<br />
• Women Leading Kentucky<br />
• Woodford County Humane Society
Keeping the Promise<br />
When KEMI started doing business, a promise was made to Kentucky to sustain financial stability in the everchanging<br />
world of workers’ compensation insurance, to maintain strong claims reserves as a commitment to ensure<br />
benefits for injured workers now and in the future, to deliver outstanding service and competitive pricing,<br />
to educate businesses about workplace safety, and to make workers’ comp work.<br />
KEMI is fulfilling that promise every day.<br />
Our mission is to protect our policyholders, promote safer workplaces, preserve<br />
our financial stability, and provide superior service to all our customers.<br />
Our vision is for KEMI to be the workers’ compensation carrier<br />
of choice for Kentucky businesses.<br />
. . . . . . . . . . . . . . . . . . . . . . . . . . .<br />
To see recent news from KEMI, view our current and past annual reports,<br />
or access our diverse library of workplace safety resources, visit us at:<br />
www.kemi.com<br />
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Kentucky Employers’ Mutual Insurance<br />
250 W. Main Street, Suite 900<br />
Lexington, KY 40507<br />
www.kemi.com<br />
2011