June 19, 2018

MEM: Voluntary State Audit Affirms MEM’s Sound Processes

Columbia, MO — The Board and management of Missouri Employers Mutual have reviewed the final report from Missouri State Auditor Tom Schweich, and the audit’s findings affirm the company’s own internal review.  

“We’re pleased this audit confirms the results of our own internal reviews: that MEM has proper controls in place,” said CEO Jim Owen. “We agreed to this one‐time, voluntary audit to demonstrate transparency and definitively answer any questions or concerns about MEM’s processes and compliance.”  

In its 17‐year history, MEM has not been subject to a state audit because it is independent from the state, it has no contracts with the state and the only state funding ever received by MEM was a start‐up loan that was repaid with interest in 1999. Although MEM is exempt from federal income taxes due to an IRS provision, MEM pays all state and local taxes and assessments.  

Auditor Schweich’s report makes two recommendations. The first recommendation is that the Missouri General Assembly determine whether MEM continues to fulfill a necessary public mission and to clarify state law in several areas, including whether MEM is subject to the Sunshine Law.  MEM continues to serve its public purpose. MEM was created as a mutual insurance company with a public purpose to improve the workers compensation system, serve small policyholders and bring safety to workplaces. For 17 years MEM has served—and still serves—this public purpose and has earned its position as market leader through a commitment to service and safety. Today, more than 12,000 Missouri businesses—more than 80% of which are small businesses—and their 1,200 insurance agencies
trust MEM as their workers compensation expert.

Missouri legislators made it clear in the creation of MEM that it was not to be a state agency to allowthe company to compete with private insurers to solve the Missouri workers compensation crisis and prevent that crisis from reoccurring. Accordingly, MEM competes with nationally recognized private insurance companies for the same business, agents and employees. MEM’s employee compensation averages in the 50th percentile of its peer companies, and its expenses and operating practices are consistent with that market.  

MEM disagrees with the Auditor’s conclusion that the company is subject to the Sunshine Law. The audit report erroneously concludes that MEM is a quasi‐governmental body under the Sunshine Law.However, MEM was created to operate under the same statutes governing other insurance companies, and does not meet the definition of quasi‐governmental body as stated in the report.

Moreover, MEM is not subject to the Sunshine Law for good reason, as its operations are carefully regulated and as transparent as competitive insurance companies can be. Under state law, MEM is subject to significant oversight, including audits by state insurance regulators and an independent auditor, the reports of which are available to the public.

The Auditor’s second recommendation is that the MEM Board of Directors establish a financial policy to clarify when a policyholder dividend should be paid. MEM originally informed the Auditor that it was considering a dividend in 2012 based on year‐end 2011 results and the opinions of its financial experts. As the Auditor recommends, MEM has established a policy that allows the company to continue to maintain reasonable policyholders’ equity (also known as surplus) while giving back to policyholders in the form of dividends and/or lower rates when financially appropriate.

Source: MEM

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