As a for-profit mutual insurer owned by policyholders, our story is about shared risks, hard work and welcomed rewards in the world of workers’ compensation insurance.
As you read here, and see in our video referenced below, there’s no longer any doubt about the MEMIC MIRACLE. After 30 years, our state, our economy, our employees, the companies we insure and, most importantly, the people who dedicate their lives working for our policyholders, are all better together.
HOW DOES A MUTUAL INSURANCE COMPANY WORK?
The mutual insurance company is a classic American form of corporation dating back to The Philadelphia Contributorship, a mutual fire insurance company started in 1752 by Benjamin Franklin and his neighbors that later incorporated in 1768. A mutual creates a shared purpose among its policyholders.
In our world, insurance is called the spread-of-risk so no single person, employer or business bears the financial consequences when a loss occurs. In fact, insurance allows people to buy homes, cars, start businesses and hire people. Buying insurance allows people to take reasonable risks with their money. Without insurance, not much would happen.
Now, fast forward to 1916 when the idea of workers’ compensation insurance became law in Maine, around the same time as similar laws were passed in most other states. These laws ensured that employees who were injured on the job had their medical bills and part of their lost wages paid by their employer’s insurance. In return, employers offering insurance were not sued by their injured employees. It was called “The Grand Bargain”. It balanced the interests of injured employees with those of their employers.
If you remember, though, Maine’s system fell terribly out of balance in the early 1990s. Injuries were far too frequent. Conflicts were endless. Private insurance companies turned in their licenses. The cost of workers’ compensation insurance in Maine was more than twice the national average.
With the system near collapse, then-Governor John R. McKernan, Jr. worked with the legislature to lead the state out of crisis. They formed a bi-partisan Blue Ribbon Commission that recommended changes in the law as well as the formation of MEMIC – a private company that would guarantee that all Maine employers could get workers’ compensation insurance coverage. But, to succeed, MEMIC would have to be more than a guaranteed market. It would have to champion a change in behavior.
Being a mutual insurance company was essential. All policyholders would have to share in the risks and rewards of the new company. If the company lost money, all policyholders would have to kick in extra to pay the bills. On the other hand, if the company made a profit, the board of directors could declare a dividend for all policyholders.
Also, as a private mutual company, there would be no taxpayer money for the start-up and there would be no government guarantees for the losses. MEMIC was on its own.
With money in the bank and a law that was balanced, the most important challenge was to reduce the number and severity of workforce injuries and help those who were injured to regain their health and return to work. For the past 26 years, we have been helping our policyholders adopt safe work practices and helped get injured workers healthy and back to work. It’s working very well.
Since 1998, MEMIC has been returning money to its policyholders.
MEMIC has paid more than $2.5 billion in workers’ compensation benefits to support injured workers since it paid its first claim in 1993. Equally as important, though, injuries in Maine have been reduced by more than 50 percent and the cost of insurance has dropped by 60 percent. Workforce safety, injury management, less conflict and the use of technology have contributed to our reputation for helping employers outperform expectations.
That’s a big part of how we make a profit and why this year, MEMIC is distributing a $17 million dividend to Maine policyholders. That money goes back into the Maine economy, right where it belongs. This year’s dividend brings the total returned amount to more than $333 million.
Now in our 30th year protecting the people, productivity and profits of our policyholders, MEMIC can proudly proclaim that – even given the intractable challenges of a multi-year pandemic, despite early predictions of our demise, and in the face of any economic climate – we will always remain, as this video suggests, “better together.”
MEMIC Announces $17M Dividend for 2022; 11th Straight Year of Double-Digit Distribution