Beacon Mutual is issuing payments to certain eligible policyholders pursuant to an agreement (Consent Order) reached with the Department of Business Regulation (DBR) in July, 2007.

Certain Beacon policyholders are eligible for a payment if they held an insurance policy for at least six months with an effective date from October 1, 2005 through September 30, 2006 (applicable period). However, not all policyholders who had policies in effect during this period will receive a distribution payment.

The agreement and distribution resolves issues raised by the DBR's market conduct report by making payments to certain eligible policyholders. Payments are being made from a pool of funds determined by taking the difference between total premiums paid by eligible policyholders during the applicable period using 1998 rates, and the premium that would have been paid had Beacon adopted rating changes approved by the DBR in 2005. Individual payments made to eligible policyholders are allocated from the pool based upon their policy premium. The payments are then reduced by any distributions already received (e.g. policyholder dividends, shared earnings, and/or scheduled credits), and any delinquent balance due to Beacon.

Not all policyholders who had policies in effect during the applicable period will receive a distribution payment. However, Beacon will send a letter to all policyholders explaining the distribution process and whether the policyholder is eligible for a payment.

There are a number of reasons some policyholders will not receive a payment. For example, a policyholder who received dividends, shared earnings and/or scheduled credits greater than their share of the distribution would not be entitled to a payment. If you did not have a policy in effect during the applicable period you would not be entitled to a distribution payment. If you had a delinquent balance with Beacon, greater than your distribution payment, you would not receive a check.

Approximately 9,400 of the 14,316 policyholders insured during the period in question will meet the criteria for a payment.

Policyholder payments will vary, but to help put it in perspective, over 6300 policyholders will receive checks less than $249.

The distribution will total approximately $5.6 million.

The Consent Order refers to the “Policyholders Pool” as approximately $7 million. This approximation was based upon information available at the time the Consent Order was issued and estimated future outcomes. The amount of the final distribution was less primarily because actual payments and credits to policyholders were greater than initially expected. In addition, in accordance with the Consent Order, policyholder distributions were offset against any delinquent balances due to Beacon.

All checks will be mailed to eligible policyholders by April 30th.

You should consult your tax preparer or accountant on this matter.

The payment process only relates to Beacon policyholders whose insurance policies had an effective date from October 1, 2005, through September 30, 2006 (applicable period) and remained in full force for at least six months of the policy period. If you became a Beacon policyholder after the applicable period you would not be eligible for a payment.

If you meet the requirements of the distribution criteria, you would be eligible for a payment, even if you are no longer a Beacon policyholder or are no longer in operation.

After a comprehensive review of the Beacon by the DBR, it was determined that a one time payment to policyholders based upon the criteria and time period selected was appropriate. The one time payment relates to the findings of DBR’s Market Conduct Exam. Beacon may issue dividend payments to policyholders in the future, as it has in the past, but these types of payments would not relate to the DBR’s Market Conduct Examination process.

Each policyholder payment was calculated on an individual basis utilizing the formula developed by the DBR. Policyholder payments will vary based on each policyholders circumstances. Please refer to Question 3 for additional information on policyholder payments.

Beacon has worked diligently with the DBR to ensure that every policyholder who meets the eligibility criteria receives a properly calculated payment. Beacon utilized the criteria and distribution formula that was developed and approved by the DBR. Once finalized, the DBR conducted an audit of the results to ensure that the eligibility criteria and payment calculations were determined in accordance with the DBR’s specifications. If you have questions specifically related to your policy, please feel free to contact one of our representatives at 825-2846 or you may email your inquiry to distribution@beaconmutual.com.

Beacon will continue to fulfill its mission to offer Rhode Island businesses cost effective workers’ compensation insurance with unmatched loss prevention and claims services.

In 2005, Beacon prepared and filed its own rate filing instead of adopting the rating changes filed by a national workers’ compensation rating agency known as the National Council on Compensation Insurance (NCCI) and approved by the DBR. Beacon eventually withdrew its 2005 filing and adopted the DBR rates in October 2006.

Beacon has adopted rates approved by the DBR for the past two consecutive years saving policyholders over $16 million in premiums. Beacon will continue to support rate changes that will ensure the long-term stability of the workers’ compensation system in Rhode Island.

No. This distribution will not be considered in any determination of rates by the NCCI or Beacon. Therefore, this distribution will not affect Beacon’s rates and policyholders will not experience a rate increase due to this process.

Beacon remains a financially sound and strong institution and will continue to offer cost effective workers’ compensation insurance to Rhode Island businesses.

The Market Conduct Examination process will officially come to a conclusion when Beacon fully implements, to the DBR’s satisfaction, all of the 79 recommendations contained in the DBR’s Market Conduct Examination Report issued on April 20, 2007. To date, Beacon has successfully implemented 75 of the recommendations ahead of schedule. The issuance of the payments concludes the policyholder distribution process. When Beacon successfully completes the obligations pursuant to the Consent Order it will have satisfied all of the issues raised in DBR’s Market Conduct Exam.

If you have further inquiries, please feel free to submit your inquiry via email at distribution@beaconmutual.com or you may contact one of our representatives at 825-2846.