Going Retro With Your Workers Compensation Program
For staffing firms that generate over $350,000 in annual workers' compensation premiums and have good claims experience, this can be agreat alternative to a traditional Guaranteed Cost plan. The plan places more weight on actual loss experience and rewards insureds that have good risk management programs in place.
At the onset of the policy, the carrier will decide what the annualized premium will be based on similar factors used in a Guaranteed Cost plan. In addition, the carrier will use a specific mathematical formula to determine what the final Retro premium will be based on actual losses the insured experiences during the policy year. The formula is applied once the policy term is over...hence the name Retrospective. If claims are lower than originally anticipated, a return Retro premium or refund will be issued back to the staffing firm (subject to a minimum premium amount). If claims are higher than originally anticipated, the insured will be required to pay the carrier an additional Retro premium (subject to a maximum premium amount).
It's important to remember that the plan is designed to have a minimum and maximum premium. At a minimum, the carrier will be able to cover the administrative costs related to servicing the policy. At a maximum, the insured will be able to limit or cap the amount the carrier can collect under the policy should there be a bad claims experience.
1. Good claims experience is rewarded by a reduction in ultimate premiums paid.
2. Usually little to no collateral is required compared to other loss sensitive plans.
3. Workers' compensation risk is defined by a minimum and maximum premium.
1. Cash flow is not as favorable as a large deductible program.
2. Claim services cannot be unbundled to a third party administrator.
3. If the Insured has a bad loss experience, they are required to pay the carrier additional premium (again, subject to a maximum or capped amount).A typical premium range for this type of insurance program is anywhere from $350,000 to $1,000,000. Speak with your insurance broker to see if this is a workers' compensation program that fits your staffing company.
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