Why do I have options?

The greatest thing about life in the United States is that we get to make choices. Just imagine going through life and not only did you only have one choice, but that choice is the worst thing for you. That choice doesn't even want you, but they are just forced to take you.

What I'm describing above is the life of a temporary staffing company only 5 years ago. The insurance industry turned their back on the entire staffing industry and there was a crisis. A tremendous percentage of staffing companies were left scrambling for insurance and were forced to buy insurance from the various assigned risk pools throughout the country.

Keep in mind there were the lucky few that didn't get shunned by their carrier. Some states have competitive insurance options of last resort and it wasn't all that bad. There were the smart few which moved into a situation and partnered with other high quality staffing companies that gave them control of their insurance destiny. Also, there are the larger staffing companies that have the ability to take on a majority of their business risk and don't need the insurance industry to take it on for them. Lastly, there are staffing companies that did some things which completely put the staffing industry in further despair by breaking the law.

So why just 5 years later, do so many staffing organizations have options for insurance. Quite simply, many insurance companies, for some reason are not afraid to write the business. Those reasons are varied and constantly shifting and in the future can changed very quickly.

A quick history lesson for small to mid size staffing companies:

Options for "traditional" workers compensation insurance in the Year 2005

- State Pool or Assigned Risk Pool

- 1 traditional carrier with a minimum premium of $100,0000

- 2 Alternative Market options also with minimum premiums of $100,000

- maybe some local carriers with special relationships and that was it

Options for traditional workers compensation insurance in the Year 2010

- State Pool or Assigned Risk

- at least 10, "B+ rated carriers or better, through the country with minimum premiums of around $50,000

- various other non-rated insurance companies

- At a minimum 5 alternative market options with various levels of premium minimums.

WOW! Now that's a shift in carrier mentality. Somebody out there had decided that the staffing industry in 2005 was a money loser!!!! Now in 2010, the staffing industry looks like a tremendous money maker!!!! What changed?

Some things to contemplate:

Did the entire staffing industry clean up it's act and do everything possible to control losses? I think this is true for many companies. It's no secret that workers compensation cost will put you out of business, so many staffing companies took the initiative and found help.

Did insurance carriers get smarter? I think this is true as well. Carriers are very aware of the pitfalls of writing the staffing business or at least I hope they are:

- Misclassification of codes

- Under Reporting Payroll

- Piggybacking

Insurance companies are now doing things to minimize the effect of the above. Doing mid-term or quarterly audits of payroll. Asking for client lists of the staffing company to identify and match class code to client. Pay-as-you-go insurance is all the rage right now and historically unknown carriers have figured out how to market and sell this product to the staffing industry and it's been highly successful.

Piggybacking isn't a big issue at this time because there are so many options for insurance. If you don't know what Piggybacking is, here is a simple explanation:

Staffing Company X has a great insurance program with great rates. Staffing Company Z is in the assigned risk and can't compete at the rates in the assigned risk pool and has a terrible experience mod. Staffing Company X and Staffing Company Z get together and talk. Staffing Company Z decides to run their payroll through Staffing Company X, and in essecence takes avantage of the low rates and Staffing Company X charges a premium for that ability. This is an insurance company's worst nightmare. Not also has Staffing Company X violated the carrier's trust but they are also in essence acting like an insurance company and taking on risk without thinking about it.

So what's my point? BE PREPARED!!!!!!!

1. Do the right thing and carriers will have a more difficult time turning their back on you.

2. Payrolls are down but they will inevitably rise!!!!!

3. Workers Compensation rates could be at the bottom and they will rise!

4. Options are abundant but they will dwindle.

So... focus on what's important.

1. Write profitable business

2. Keep your mark up's high as possible

3. Prepare for the inevitable

4. Talk with staffing insurance experts and have a 3 year plan!

If you need any help talking about preparing for the future, please give me a call and I will be glad to assist. Just click below and type in your phone number. Google will connect you!