7 Tips to Riding Out the Hard Insurance Market
Besides increasing rates, hard markets also diminish coverage availability. The number of insurance carriers underwriting workers' compensation policies for staffing agencies dramatically declined last year and the next 12-18 months doesn't look any more promising.
Right now, we're generally seeing increases in the 10-25 percent range. Staffing agencies must prepare and react to these changing markets conditions or risk their company's profitability, or worse yet, their ultimate survival.
7 Tips to Avoid a Hard Market Wipeout1. Track profitability by client. Identify customers who are making your insurance program unprofitable to the insurance industry, whether it's through large claims or lack of a risk management program. While it's difficult to forgo the top-line revenue, if customers aren't generating profits, mark-ups must be increased or relationships terminated.
2. Consider a separate workers' compensation program. Instead of terminating unprofitable clients, you can isolate your higher hazard customers by moving insurance coverage into a policy insured through a state fund. Rates in the state funds are typically fixed and cannot be increased by underwriters. While this may not isolate these customers losses from your experience modification, it does keep unprofitable customers from contaminating your main workers compensation program.
3. Actively manage your workers' compensation claims. Get employees back to work, close claims and keep reserves as low as possible heading into your renewal. Every $1 in claims can result in as much as $3 in premium.
4. Get involved in the underwriting process. This is a relationship where businesses and most underwriters want to know their customers. Sometimes, you can tell your story better than a broker can, so talk to the underwriters and develop a relationship with them.
5. Start the marketing process early and improve your submission quality. Your submission should be in the underwriter's hands at least 60 days ahead of your renewal date and must be more than just loss runs and estimated payrolls. If you have questions about how you're being represented to the insurance underwriters, ask to see a copy of your broker's submission.
6. Consider taking risk in your insurance program. If your premiums are in excess of $500,000, you may want to consider a loss sensitive insurance program, such as self-insurance. Pricing in these plans are typically more stable than guaranteed cost programs because you participate in risk along with the insurance carrier.
7. Work with an insurance broker that knows the staffing industry. The staffing industry is highly specialized and requires an insurance broker that understands your business, as well as the industrys unique challenges. Your broker needs to have strong relationships with the limited number of underwriters working in the industry.
Care to learn more about the rising tide of insurance premiums? Jeff Tuisl, Principal at Assurance, provides additional tips and guidance in the July issue of SI Review.
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