Agents Urge Caution on Changes to Missouri Work Comp Insurer

Some insurance agents are urging caution as Missouri lawmakers consider 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 to change the 1993 law creating Missouri Employers Mutual Insurance Co.

On April 2, a House committee heard testimony on whether changes are necessary. While an association for private insurers suggested MEM 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 has 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, urged lawmakers to avoid a hasty response to a state audit that said MEM 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.

MEM 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.

A representative for private insurance companies told the House Special Standing Committee on Government Oversight and Accountability that the federal tax exemption potentially puts MEM in “a position to cherry pick accounts” from businesses that would be good to insure.

“I don’t believe you truly stabilize the market when basically you have a competitive advantage over all the other competitors,” said Trey Gillespie, the senior director for workers’ compensation at the Property Casualty Insurers Association of America. “It discourages other competitors from entering the market.”