Now that sign is coming down, and a new sign reading Pacific Compensation Insurance Company is going up.  The name of Employers Direct is already history as of April 12th, two months ago.  The sign change is simply lagging a bit due to the regulation requirements from the Agoura Hills commission. But the new business model along with the new name is now formed, developed, and established.

But Pacific Compensation existed 20 years ago, so they are not exactly new.  Then they disappeared.  What happened? 

Jim Little, the President and CEO of the old Employers Direct now Pacific Compensation, started Pacific Compensation back in the mid-1980s.  Then, in the 1990s, Fremont Compensation Insurance Company acquired Pacific Compensation.  Jim Little then moved over to Fremont, and then from there he took over the running of it.  But, during all this time Little held onto the Pacific Compensation name.

So, when Employers Direct stopped writing direct business on June 30th 2009, and changed their business model, that’s when they started looking into name changes. Well, since Little still held onto the Pacific Compensation name and the corporate shell, it was decided to go with that name since it had a great reputation.  That pre-existing ownership helped expedite the process. 

So, what was the previous business model and why did the company decide to change it?

The previous business model was as a direct writer, a workers’ compensation specialty company domiciled in California.  They got their certificate of authority to start writing business on December 31st 2002.  At that time, it was a hard market in California when there wasn’t a lot of capacity.  And a direct writer really flourishes in that market.  But, then the market became soft—especially as it moved into the recession—and more players came in and there was more capacity available, and the rates started coming down. 

In the soft market, as a direct writer, Employers Direct would offer up their price where they knew they had to be. But now there were employers scrambling and asking their insurance agents to find them the lowest price possible. 

Jon Siglar, the Vice President of Sales of the born-again Pacific Compensation explained, “There was a lot of capital, and what we call “naïve capital” that came into the state; and a lot of MGAs from the east coast who had a fronting arrangement, and they just kept dropping the price and dropping the price.   If anything, you get to a price where it just doesn’t make sense to write business.  Because you are just going to lose money.  And as a direct writer, we had to draw the line.

Siglar says that as Employers Direct bore through the soft market, they continued to evaluate their business model.  They asked themselves, does it make sense to continue to do it this way? 

“When you have agency partnerships,” Siglar continues, “it’s a little different.  Because they may be coming to the plate with a couple of markets and you may be one of them.  A lot of times they will rule out what we call the bottom feeders. We’re looking for the clients who are looking for quality service.  To us, it’s more than just price.  That’s what we’re looking to sell. That’s what we’ve always wanted to sell.”

So, what is now the new business model?

The agency distribution model.  Now, Pacific Compensation will target their clients as the medium-sized independent agents and brokers within the state of California.   Pacific Comp will not be a direct writer.  They are reemerging and coming back into the marketplace with their goal to employ about 25 independent agents. 

Jon Siglar explains, “What we want to do is ramp up slowly in the beginning.  We want to make sure we’re doing it right, and do it right the first time.”

Thus, they have not started writing business as of yet.  Their projected time to start writing new policies is the fourth quarter of this year 2010, or at the very latest beginning January 1st 2011. 

“We’ll start appointing agencies shortly.  The systems will be ready to go mid-June,” Siglar says.  “This is a very exciting time for us.  We’ve put in a lot of time and effort.  We can see it happening.  What’s really exciting to me is that from our Press Releases and our name change, we’ve had over 75 agencies contact us that want to partner with us.  So, that’s pretty exciting that we’ve had that type of response in the markets.” 

To be continued Friday, June 11th 2010. 

Readers may write to writer Lonce LaMon at lonce@adjustercom.com