Tag PEO master policies

Master Workers’ Comp Policies for PEOs and Staffing Companies

Workers’ Compensation coverage continues to be a big problem for startup PEOs and staffing companies. In certain states (California, for example), it is nearly impossible to find a carrier willing to take a chance on a startup operation.

“The staffing industry is particularly tough.” agent Will Tenney tells us. “Carriers that would have a look before have closed their eyes. The rising cost of claims is causing insurers to exercise extreme caution with untested staffing and PEO companies.”

The business has always been cyclic in nature, and it appears that a downturn is due.

What Changed?
The comp industry is best described as “long tailed.” Incidents and occurrences that happened 6 to 8 years ago are still showing a large effect. In states like California and New York, the policies of “employee first” are starting to show costs. The practice of “pay first, investigate later” is taking it’s toll on carrier surplus, and claims reserves are rising throughout the industry.

A spokesperson from a national carrier with a large PEO/staffing presence told us, “It’s not that PEOs and Staffing companies have a higher incidence of claims. That seems to be a level playing field. However, the process of resolving them can take longer when dealing with high deductible policies. Hence, the reserves build up and are held for a longer period of time. This makes taking on a startup PEO or staffing company a much riskier proposition to the actuaries.”

Is There an Upswing Coming?
The answer most given is “too soon to tell.” The wave of optimism sweeping the industry with a conservative administration is there, but many are waiting for that “long tail” to pull through.

What Can a Startup Do?
PEO Pros has been challenged by this dilemma. Clients have been advised to seek out a state fund / assigned risk situation to develop some history (at least three years.) This makes them much more attractive to a carrier.

Why Does Three Years History Help?
When a carrier takes the risk of underwriting a PEO or staffing firm, the potential downside can be very large. Consider a standard $250K high deductible policy. Should the PEO or staffing firm go under the carrier is then responsible for all the claims and associated expenses. Collateral helps, but doesn’t cover it all except in rare cases. The legal costs alone usually eat through collateral in a rapid fashion.

The actuaries prefer to have an established “book of business” to study, to predict performance by studying trends, and the three year (minimum) history.

Why Can’t We Grow Organically?
PEO Pros tells us: “We get asked this all the time. The startup wants to know what they can write and they will go find it. It sounds like a perfectly good business plan until you see the actuary’s side of it. They have no history, no performance metrics or industry trends to study. It is difficult to make a decision in a vacuum.”

Certainly, an established firm can continue to grow organically, but the initial approval is going to require a measurable book of business.

This is frustrating to startups. PEO Pros relates to us: “We often hear the complaints from the startup firms with words to the effect of ‘How are we supposed to start a business?’. It is frustrating to us as well, as we want to help. It is not a pleasant feeling, advising someone to go to a state fund to get three years experience first.”

What Can a Startup Do to Enhance Our Prospects?
There are a few things you can do to make your submission more attractive:

• Assemble a spreadsheet of proposed clients that have at least three years loss history
• Have company and personal financial statements ready, current and in good shape
• Senior board and staff resumes should reflect many years experience in the industry
• Avoid the tough states for now. Set up a corporation in an easier state and start there, before expanding in to California, New York, etc.
• Consult with PEO Pros about putting together a professional submission letter

If you would like to hear more about a master workers’ comp policy for your PEO or staffing firm, please call us at 407-490-2468 or use the contact form below.

Why does a PEO need an insurance agent for their master workers’ comp policy? What does an agent or agency know that they don’t?

Why not just go direct? Cut out the middle man! Doesn’t it cost more money to have an agent involved?

Sounds good but in “real life” things don’t work out that way.

Here are some myths exposed about using an agent in the PEO Master Policy process:

Myth #1: Using an agent will cost the PEO money
Sounds reasonable doesn’t it? After all, the agent gets a commission and it’s a zero sum game isn’t it?

No it’s not. Carriers pay commissions to internal sales people if there is no agent involved, since the commission is already budgeted in to program costs. Also, an agent can negotiate a better deal, not having to worry about conflict of interest problems.

We recently examined two similar, master policy with a captive type deals from the same carrier. One with an agent, one direct. Guess which deal had more profit built in for the PEO. Go ahead. Guess.

Myth #2: The agent doesn’t do anything except for initial binding and renewals.
This one may have some truth in it. These agents are called “Star Trek” agents. They “beam in” for the renewal and then “beam out” again, not to be seen again until next year’s renewal. These agents don’t hold on to clients very long.

A good agent, with a good agency, will provide support on almost a daily basis. Processing new client submissions, advising on risk management, issuing certificates, etc, are all functions of a healthy agency in the PEO / carrier relationship.

Myth #3: Agents can’t help out with problems
Who is better to act as a third party negotiator but your agent? Licensed and trained to do so, an agent, with the power of their agency (and their book of business) often has significant leverage with a carrier, and can greatly influence the outcome of disputes. Certainly it always helps to have another view point in a disagreement.

What it comes down to is who do you trust with your money? When you business is a must, who do you trust?

Our property and casualty agency has been creating strategic alliances with other large agencies to supply even more markets for business insurance, both to the traditional business owner and PEOs.

Agencies we work with include:
Stonehenge Insurance Services – PEO workers’ comp
Hourglass PC – PEO workers’ comp
Cypress Risk Management – large workers’ comp policies
Pontell Insurance – Business and personal lines
Petrucci Insurance – Business and personal lines
Corsair Insurance Agency – Doctor and Lawyer Professional Liability
Elite Insurance – Business and personal lines
I-surance, LLC – health insurance professionals

We are a provider of master policies to PEOs, Payroll and Staffing Companies for Workers’ Compensation Insurance.

Convenient Links for PEO Owners:

• Our Agency Alliances
• Latest PEO Insurance updates (master policies)

There are several viable options for PEO owners in today’s comp market, including:

• Guaranteed Cost programs
• High deductible programs
• Captive Loss Funds
• Offshore Loss Funds
• “Rent-a-captive” Segregated Portfolios

If you would like to hear more about our PEO master policy options for workers’ comp please contact us using the form below:

We understand that PEO and staffing company owners can be frustrated with the completely different set of skills required to negotiate larger policies with national carriers. For this and other reasons, they come to us for help. Our typical client is someone who realizes that it is better to be represented with an agency with custom solution expertise, rather than get stuck with an “off the shelf” program.

PEO Pros has many alliances which allow us to offer more custom choices to our clients. We work closely with Stonehenge Insurance Solutions, relying on their extensive experience in the field.

In addition to being a licensed General Agency in several states, we also function as master policy insurance wholesalers.

Products we negotiate for PEOs and staffing companies include:

1: Various policies for Workers’ Comp including:

• Master Workers’ Comp Policy
• Multiple Coordinated Workers’ Comp Policies
• Multi-State Workers’ Comp Policies
• Client-based Workers’ Comp Policies

2: Guaranteed cost, high deductible, retroactive and captive management programs
3: EPLI for clients

Should you find yourself in a situation where dealing directly with a carrier (or carriers) is not working to your satisfaction and profit, you may wish to contact us to explore the possibility of a client-agent relationship. Please use the Quick Contact form shown below or give us a call at 800.788.8343. We can’t help you if you don’t contact us.

Shown here with strategic partner Jason Irving of Urban Recruiters Staffing, PEO Pros CEO John Will Tenney has written an article for Google Knols discussing the history of PEOs and how they differ from Staffing Companies.

“We get asked this question all the time.” Tenney tells us, “It’s not a simple answer. I expect this will only be the first of a few articles discussing it. For example, with a recovering economy such as we are in today, Staffing makes a lot more sense for business owners that are cautiously expanding their business.”

Here is the link to the Knol. Your comments and reviews are welcomed.

Excerpt: “In many ways, PEOs and Staffing companies are similar, but in fact they cover the opposite ends of the HR spectrum. In this article, John Will Tenney of PEO Pros explains the history and formation of PEOs, and a little of the differences and similarities between PEOs and Staffing.”

If you are shopping for workers’ comp insurance in the medium to large policy market, it’s a sure bet that you have heard the word “captive” at least once or twice.

In this article there are two types of workers’ comp “captives” that will be discussed.

The first is a group captive. There are many varieties of this flavor. This is a situation where a number of companies pool their resources and set up a small insurance company to insure some part of their risk. They can be shared or segregated. There must be some degree of risk sharing to meet legal requirements.

Some of these are often called a “rent-a-captive.” In some cases this captive is used to reduce the costs associated with a high deductible master policy. For example, if your company has a million dollar per claim deductible (a typical high deductible), you could use a “Buy Back Deductible Captive Policy” to assist with reducing the negative effect of high reserves.

For more information on one type of “buy-back-deductible-captive” – please take a look at Kris Delano’s article. Kris works with us on these type of captives.

Another breed is called a segregated portfolio fund. This is usually held “captive” by a carrier and the risk sharing comes between the captive owners and the carrier.

Both captive plans are designed to help entities with large premium recover some of the premium, based on a good loss ratio. They are also designed to recover some of the losses from the insured (in favor of the carrier of course.) In this way they resemble retroactive plans, also known as “retros.”

In all cases, the shared risk encourages both parties to concentrate more on safety and reduced accidents for a single motive: profit.

Both plans offer some tax advantages due to the increase in tax deductible premium paid up front. If there is underwriting profit, there are options as to when to declare the profit that allow the captive owners to be more selective as to how much tax they will have to pay every year.

Also, since the reserves set for claims will be stored in the captive, and NOT in the carrier’s bank account (reserves are not tax deductible), there is another tax advantage here.

If all this is confusing, please consider consulting with a captive expert before proceeding in to one of these agreements. There are many options to consider, and many steps that require negotiation.

At PEO Pros we do not offer “retail captives.” All of our captive arrangements are negotiated individually, tailored to fit the needs of the client. It is very likely that captive clients will save money by having us negotiate the captive agreement for them.

Please use the form below if you would like more information on a captive situation.

Are you a start up PEO that can’t find a master policy?
Don’t panic.

We can help!

PEO Pros has a special department that handles start up PEOs, Staffing and Payroll companies.

In particular we help with Workers’ Comp, General Liability, EPLI and in some cases Health Insurance.

We have experience with start up companies, so much that the carriers have come to rely on us to help the transition from start up to going concern.

Have you heard these or something similar?

• “We don’t do start ups”
• “We require a minimum book of business”
• “Come back and see us when you have 3 or more years experience”

Sound familiar? Don’t despair. We can help.

Use the form below to get in touch with us.

Are you an employer who would like to have one point of contact to deal with all of your insurance problems? Are you tired of having to “look up” which agent handles that particular issue?

Would it make sense to you to have one point of contact to deal with all those headaches? Would it make your life easier to make one phone call and let someone else handle it? We like to call it the “SEP” solution, where it becomes Somebody Else’s Problem.

PEO Pros, and our alliance partners, can help you in these areas:

• Business Owner Packages (BOPs)
• Workers’ Compensation
• General Liability
• Professional Liability
• Employment Practices Liability (EPLI)
• Group and Individual Health Plans
• etc

Health Insurance in the Future. What is this going to mean to my business?
Many employers are asking themselves:
Is this new health bill going to cost me a lot of money?
It is important that you get the facts on how it will affect you. Smart employers are asking experts:

• What options are available?
• Is my business compliant with the new bill?
• Are my employees going to be covered?
• Will I avoid expensive fines?

We have experts available to review your situation. Can we help in all cases? Probably not. Can we help you? Why not contact us and find out?

Sometimes it’s possible to get a better health plan or group benefits through a PEO. Sometimes it’s not. Would you like to be aware of the options available to you?

Our agents are well versed in the confusing world of health options.

It’s very possible you can benefit by having us as a professional partner in this area.

Convenient Links for Business Insurance:

• General Liability Insurance
• Workers’ Compensation Insurance

This article is an outline of a talk that our CEO gives to various groups. Please contact us if you are interested in such a talk

Myth # 7: “I don’t need to be on my payroll – I can take distributions.”
Our CPAs have always advised us that even though Subchapter S corps and LLCs allow “distributions” to owners, the IRS expects you to run a payroll and use those distributions for special or unusual circumstances. A failure to run a payroll regularly can “raise a flag” on your return, which may make you subject to an audit.

Myth # 6: “If I have Workers’ Comp insurance claims don’t affect me.”
While it is true that in most cases the full burden of the claim falls upon the insurance company, it is important to remember that an “experience modifier” follows your corporation or business entity throughout its lifetime. Excessive claims can raise this modifier, which will correspondingly raise your workers’ comp premium.

Myth # 5: “A payroll service will relieve me of the worry of paying payroll taxes.”
Some payroll services, especially PEOs, who legally become the employer of record, can certainly mitigate the liability associated with payroll taxes. With a standard payroll service however, it is your FEIN that goes on the return and hence you will be audited if there is a problem. It is true that a reputable payroll service will “stand by your side” at the audit but you will still have some, if not all, of the responsibility. In a PEO situation the lion’s share of the liability rests with the PEO since it is their FEIN that is on the return.

Myth # 4: “Unemployment Claims do not cost me time or money.”
This gets monitored much the same way workers’ comp claims do. The state will keep a record of your claim history and can adjust your rate up or down on an annual basis. Certainly managing your employees properly and terminating them according to correct procedures will reduce your unemployment rate exposure.

Myth # 3: “We have our posters up so we are in compliance.”
Oh really? How old are those posters? Have you checked with all the state, federal and local authorities? Wouldn’t it be nice to have someone do that for you?

Myth # 2: “I’m exempt from Workers’ Comp because I don’t have enough employees.”
This is a great misunderstanding. NO ONE is exempt from Workers’ Comp in the United States of America. If an employee is injured on the job it falls under the Workers’ Compensation Act and the employer is responsible for all medical, legal, and administrative expenses involved with the claim, as well as paying lost wages from time out of work, typically two-thirds of the normal wage.

In most states, you may apply for an Insurance Exemption, which allows you to be self-insured. This depends on the number of employees. In Florida it is 3 or fewer employees besides the owners, or 1 employee in the construction field. You may be “exempt” from having an insurance policy but you still are subject to workers’ comp.

Myth # 1: “I don’t have employees, all my people are 1099 contractors.”
There is no doubt that many people in a contracting situation legally and are truly 1099 contractors. However, this is one of the most widely abused categories in the employment arena today. The 1099 is meant for those people that are truly independent, NOT just a way to avoid paying taxes.

Myth # .5: “I can do it without professional help.”
Good luck with that 🙂

We hope you will view us as a resource. You probably don’t need our services now, but you want the firetruck to know how to get to your house! Some of you might have even “smelled some smoke” while we were talking …