Pinnacol - A Different View

One of my blog readers that is an agent in Colorado disagreed with what I had said about Pinnacol in one of my recent posts. The verbatim quote is in the next few paragraphs. I may or may not necessarily agree with everything, but it was well thought out and written.
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Pinnacol has no plans of expanding outside the state of Colorado, which allows them to keep a federal tax exemption. They will also stay as the insurer of last resort. This portion of the business would be exempt from state premium tax. The premium tax on the remaining business is insignificant, 1%. That would translate to less than $4 million for the state based on Pinnacol's current book.

Pinnacol already has more than 50% of the Colorado WC market (that number fluctuates depending on the metric). This includes many of the best accounts in the state along with the business they have to write. They do have the ability to place other states coverage through a cut-through deal, currently with Argonaut (soon to be with Zurich).

I was confused by your statement that, "Cherry picking the good accounts that are just in Colorado would not enable Pinnacol to stay in business very long." Pinnacol has been very successful in not only writing the very best the state has to offer, but also the risks that nobody else will touch.
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Even though the discussion on Pinnacol may not directly apply to your state, I have posted on it many times as along with West Virginia, Nevada, Oklahoma, and other states the Workers Comp market is quickly changing overall. These and other states along with the health care debate should be looked at as bellwethers for your Workers Compensation situation.

Colorado - Pinnacol Is Willing To Pay How Much For What?

Recently, I posted an article on Colorado's Workers Comp carrier Pinnacol offering a staggering figure ($200 million) for autonomy. I had thought that Colorado would take the $ as the Colorado Legislature's raiding of the company's surplus to the tune of $500 million was considered illegal. After all, Pinnacol would immediately have to start paying taxes if they were given their independence from the state.

Pinncaol may actually take a lead from West Virginia's Brickstreet and expand into other states very quickly. Cherry picking the good accounts that are just in Colorado would not enable Pinnacol to stay in business very long. One has to wonder why Oklahoma's CompSource did not attempt to make such an offer to the Oklahoma Legislature.

The story does not end here. Pinnacol has just offered the State of Colorado $330 million for autonomy. Pinnacol might have taken negotiation lessons from their adjusters. Why make an increased offer of 65% over the initial offer? This is a case of very poor negotiation.

I am wondering what caused the enormous increase. There was a recent valuation of Pinnacol which set the company worth at $370 million. The next offer by Pinncaol should follow an offer from the Legislature. As any Workers Compensation adjuster will tell you, do not make another offer without receiving a monetary response from the other party.

Colorado's Pinnacol Is Willing To Pay $200,000,000 For What?

I usually am able to comprehend most things that happen in the World of Workers Comp. When I read the headlines that Pinnacol is willing to pay $200 million to have more autonomy, I was flabbergasted, to say the least.

It looks to me as if Pinnacol is willing to buy votes by saying that they will pay $200 million to be left alone. The recent bills that are in place which would change Pinnacol are:

1. The denials that Pinnacol has issued to injured employees

2. The surveillance that Pinnacol has ordered on some of the injured employees

3. The status of how Pinnacol operates - is it going to be a private insurer or still a quasi-governmental unit.

4. Will the Colorado state government be able to raid the capital surplus of Pinnacol and place it in the general fund?

5. Can Pinnacol purchase other insurance carriers while still having the quasi-governmental status?

There are many other concerns with Pinnacol. As with CompSource in Oklahoma, the best method to privatize a company is to just do it. The example of Brickstreet in WV and others such as Nevada all show that the conversion can be accomplished successfully.

The problems that Ohio and Washington have had of late show the need for a full privatization effort. The open market for Workers Compensation is always the best for the state in question.