This Ain't No Vegas Pool Party
Staffing Insurance and the Assigned Risk Pool
Sorry to burst your bubble, but the pool isn’t always fun and sun. If your staffing company’s Workers’ Compensation (WC) program is in a state assigned risk pool, I’m sure you’re well aware of the difficulties and headaches that ensue from this relationship. Although many states operate a little differently than others, the consensus is that the assigned risk pool is the last place you want to be (swimming) in.
Avoid the Deep End
Each state assigned risk pool operates as a non-voluntary insurance carrier. In short, if accessing your state’s fund, this means you probably have nowhere else to go to insure your WC.
The major disadvantage is that class code rates and premium increasing debits are often highest in the assigned risk pool compared to insurance carriers who operate in the voluntary marketplace. The more money you have to spend on WC premiums, the smaller your profit margins and the less competitive you’ll be when you stacking up against other staffing firms out there. Some assigned risk pools are also not that flexible with the premium down payments, which can severely injure your cash flow.
Depending on your state and whether they operate their own assigned risk pool (many states utilize an organization called NCCI who operates their state fund, while others operate on their own), you may experience difficulty in response time for simple requests or the management of your claims. Some states require a longer amount of time to produce a bindable quote.
Some states even require a physical office location with a full-time employee working on-site in order to hold a policy through the assigned risk pool (California and Louisiana are a couple of those states). This is sometimes difficult for an expanding staffing company if you do not yet have the contracts in place to justify having a physical presence in the state. If you’re insured through various assigned risk pools and plan to expand into other states, you’ll want to consult your broker on what requirements that state has and what the process looks like prior to signing any contracts with clients.
There are some instances where being in the assigned risk pool are to your advantage. Start-up and newer staffing companies often need to build credible loss history before a voluntary insurance carrier will consider insuring their company (typically 3 years’ worth). In this instance, you can develop a plan with your broker to move your program to the voluntary marketplace as soon as you have the right pieces to the puzzle lined up. More information on this can be found in our “Insuring a Start-Up Staffing Company” FAQ.
Another instance might be the majority of your business is insured through a voluntary WC carrier, but you have some class codes this carrier is unwilling to insure. You can place that payroll into an assigned risk pool policy. This will allow you have options within the voluntary marketplace, while not forcing you to discontinue business under certain class codes due to your insurance carrier not wanting to insure them.
Some states offer a competitive side of their assigned risk program. Depending on how the voluntary marketplace looks at any given point in time, there are some instances where insuring through your state’s program might make the most financial sense. This is another item you’ll want to consult your broker on, as they’ll know how your state’s program differs from what’s out there in the staffing insurance marketplace.
Know the Pool Rules
As I hinted above, there should always be some rhyme or reason as to why your company is being insured through a state’s assigned risk pool. In the majority of cases, you can best manage your cost of risk by insuring in the voluntary marketplace. Chances are your experience with managing claims will also be better.
If you have any questions on navigating the murky waters of the assigned risk pool, contact a member of the ‘A’ Team.
- Workers' Compensation E-Book
- Workers' Compensation Videos
- Pool Rules: Swim at Your Own Risk
- Staffing Case Study: Navigating from an Assigned Risk Pool
- Frequentely Asked Questions by Start-Up Businesses
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