Agents urge caution on changes to Missouri insurer

Some insurance agents urged caution Monday as Missouri lawmakers considered changes to a state-created workers’ compensation firm that has been criticized by the state auditor for taking advantage of a federal tax exemption while spending heavily on perks.

Legislation already endorsed by a Senate committee would set up a special panel to study whether the 1993 law creating Missouri Employers Mutual Insurance Co. should be changed. The study represents a go-it-slow approach embraced by the company’s CEO as a better alternative to bills requiring the firm to be spun off as a new, purely private insurer.

On Monday, a House committee also heard testimony on whether changes are necessary to the company. While an association for private insurers suggested Missouri Employers Mutual was unfairly benefiting from its federal tax-exempt status, some Missouri insurance agents said the Columbia-based firm helped stabilize the workers’ compensation market for small businesses in the 1990s and still provides good rates and customer service.

“Missouri Employers Mutual was good for the marketplace at a time when the marketplace really needed it,” said Louis Landwehr, president of Winter-Dent & Co., which sells insurance from offices in Jefferson City and Columbia. He added: “Missouri Employers Mutual is still financially strong and still providing great service.”

Larry Case, executive vice president of the Missouri Association of Insurance Agents, also urged lawmakers to avoid a hasty response to a February state audit. That report said that Missouri Employers Mutual has amassed a

surplus of more than $160 million while qualifying for a federal tax exemption as an “independent public corporation” yet doesn’t comply with the state Sunshine Law that applies to public entities and provides salaries and insurance-agent perks that are more common in the private sector.

Missouri Employers Mutual has said its federal tax break is offset by several extra duties it has under state law, such as offering policies to small businesses and providing workplace safety programs.

“Study this very carefully before you take any action,” Case told lawmakers considering the legislation.

After Case testified to the House Special Standing Committee on Government Oversight and Accountability, a representative of private insurance companies cast doubt on the continued justification for Missouri Employers Mutual to receive a federal tax exemption. The company’s favored status potentially puts it in “a position to cherry pick accounts” from businesses that would be good to insure, said Trey Gillespie, the senior director for workers’ compensation at the Property Casualty Insurers Association of America.

“I don’t believe you truly stabilize the market when basically you have a competitive advantage over all the other competitors,” Gillespie said. “It discourages other competitors from entering the market.”

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