Staffing Case Study: Large Loss Impacts Workers’ Comp Program Options
A Midwest staffing firm had a long-term relationship with their workers’ compensation carrier, who did not normally provide insurance to staffing firms. When the agency had a large loss in 2010, their carrier required them to switch from a guaranteed cost program to a retrospective program, in addition to increasing their rates.
The staffing firm had a strong preference for a guaranteed cost program based on the consistency and predictability of cash flow. This option, however, was not offered in subsequent renewals, even as the firm’s loss ratio tracked back to being profitable.
What are the takeaways?
Your staffing company might be faced with increasing rates, a large loss or pressure to switch workers’ compensation programs from the carrier. Here’s how to properly navigate through the situation.
1. Make sure your agent approaches multiple markets – The staffing industry has unique risks that need to be classified and communicated properly to carriers. Agents with staffing experience are your best advocate and will likely have access to multiple carriers that are used to underwriting these risks and can, likely, provide better rates.
In this case, Assurance was able to use its industry depth and locate a carrier that was willing to offer a guaranteed cost program for 15% less than the current pricing.
2. Work with your agent to analyze losses – By analyzing losses, you can discover any patterns and develop a strategy to minimize future risk and/or make a compelling case to the carrier.
In this instance, we analyzed the client’s losses and broke it down by their individual clients. Upon review, we found that the agency had terminated their relationship with the client where the severe loss occurred. This was immediately communicated to potential carriers to showcase the agency’s corrective actions.
3. Develop a strong client screening process – One of the best ways to reduce the potential for large losses is by properly screening clients and conducting workplace inspections. Ensure clients are safety conscious; review their loss history and Mod; check to make sure temps are performing the job duties they were hired to do.
For this client, we highlighted their strong client selection and screening process, as well as their traditionally positive results outside of this one incident. Since the carrier was comfortable with staffing risks, they were able to see beyond the one incident and appreciate the client’s process and procedures in comparison to others in their industry.
What was the result?
The client realized a 15% ($50,000+) cost savings by moving to Assurance.
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