My insurance options are disappearing!!!!!!!!!!!!

I am re-posting an article I wrote two years ago because the market is hardening and these items are vitally important to the future profitability of your staffing firm.

WHEN ARE MY INSURANCE OPTIONS GOING TO DISAPPEAR - posted in 2010

Interestingly enough, as an expert in the staffing industry, I don't have an answer to the question posed above. The insurance industry can be a very finicky place. There are many forces at work influencing the CEO's in their ivory tower, deciding whether or not to turn their back on the entire staffing industry. I'm not by any means a high level insurance industry executive but if history is an indicator of the future, it quite simply it comes down to these points:
* IF INSURANCE COMPANIES ARE NOT MAKING A PROFIT OR SLOWLY MOVING TOWARD UNPROFITABILITY ON THE STAFFING INDUSTRY, IT RARELY MATTERS HOW MUCH PROFIT THEY GENERATED ON YOU AS AN INDIVIDUAL CLIENT. THE INDUSTRY AS A WHOLE WILL INEVITIABLY SUFFER.
* IT' IS EASIER TO WALK AWAY FROM AN ENTIRE INDUSTRY WHEN IT GETS TO COMPEITIVE TO COMPETE, IT'S JUST EASIER TO JUST CUT AN INDUSTRY LOOSE.
* LASTLY, AND A LITTLE MORE TECHNICAL, HOW DO YOU KNOW IF YOUR INSURANCE COMPANY IS TRULY TAKING ON YOUR RISK? YOUR INSURANCE COMPANY IS BUYING INSURANCE FROM SOMEONE ELSE TO COVER LOSSES (OTHERWISE KNOW AS REINSURANCE)? WHAT IF THE REINSURANCE COMPANY FOR YOUR INSURANCE CARRIER DECIDES THEY DON'T LIKE STAFFING? WHAT HAPPENS THEN?
Some of the questions you need to ask yourself as a business owner are the following:
1. Am I prepared for the future, when insurance options start disappearing?
2. If I get a non-renewal notice, is my insurance broker qualified and strategic enough to find me an alternative? Are they being proactive?
3. Is my company a potential profitable venture for an insurance company? Do I deserve to be treated as a company that operates at the highest of standards?
4. Are my margins high enough to withstand a potential move back into the assigned risk market?
5. Am I prepared for the inevitable tightening of class code restrictions? What do I do if my insurance company starts to dictate what business I can and can't do, even if the business is immensely profitable to my organization?
These questions above are very important to focus on but I know as a business owner, your priorities are more likely leaning towards, cash flow, business growth, margin pressures and healthcare reform.
It's my recommendation to schedule some time to talk with your insurance broker and work out a 3 year plan.
A three year plan can be simple or complex but at the end of the day, it's comes down to something very simple.
WORKERS COMPENSATION CLAIMS EXPERIENCE !!!!!!
Be honest with yourself. Look at your experience and decide whether you've been lucky to have great experience (i.e. very low number of claims) or are you doing things that make your company successful. If your claims experience is poor, have you been unlucky? (99% of the time it's not because you are unlucky) or have you lost focus on the key aspects of controlling your workers compensation cost? Which are:
Who you hire!
How you pick your clients!
If a claims occurs, do you have the right process in place!
I have my own little saying on this and I call it the Theory of TWO!!!!!
What kind of people should I hire? Workers or Predators
What kind of clients can I do business with? Profitable ones or unprofitable ones
What should I do if I have a claim? Have a plan or don't have a plan

So to answer the original question. I don't know when the options are going to start disappearing. I just know it's an undeniable truth that they will, slightly behind the guarantee of death and taxes!
Talk to experts! Have a plan! Make a profit!
To see what some highly successful staffing companies decided to do 17 years ago in order to take control of thier insurance destiny, go to http://www.tempsinsurance.com/ to learn about the TSIL captive.

Do You Have the Right Insurance Broker?

Selecting an insurance broker is one of the first and most important decisions a staffing company must make, yet one which doesn’t happen correctly many times.  How many of you deal with a family member, friend, someone local, a client or a broker who simply called on you and got the business because no one else could help or they were just the lowest cost?

What’s unbelievable to me is that for the majority of my 10 years of insuring staffing companies, the “local broker” is still my main competition.  It’s usually a “generalist” who doesn’t really understand nor have the expertise to properly handle the intricate and extensive needs of a staffing company but knows the owner, CEO, CFO or risk manager.  This is the broker that “googles” temporary staffing and insurance and starts from there.  That may be acceptable if you’re a typical manufacturer or distributor, but not a staffing company.

You should judge this process no differently than how you want your clients to evaluate you versus your competition.  Staffing companies have focused on value to combat the margin pressures they’re under.  The insurance industry works the same way.  We’ve got huge margin pressure (Average compensation commissions are only 5%!).   So, we know you need to sell your services on value, not price.  Are you prepared to do the same with your insurance relationships?

Let’s take a closer look at the broker selection process and the three options that are available to you.  They are:
1. Insurance Bidding
2. Pre-qualified Broker or Agent Bidding
3. Selecting a Broker through Pre-qualification

1. INSURANCE BIDDING:
 Bid specs or copies of policies are sent with or without premiums to all interested brokers
 Brokers to respond by designated date
 Proposals are reviewed based on “apples to apples” and selection based on the lowest price
 The Problems with the Insurance Bidding Process:
 Encourages response from unqualified brokers
 Lacks emphasis on client services
 Confuses insurance company underwriters
 Causes buying decisions to come down to price
 Lacks emphasis on a team approach – the team approach usually gets better results over time

2. PRE-QUALIFIED BROKER BIDDING:
 Allows all brokers and agents interested in bidding to respond to the request
 Brokers can complete a questionnaire about their capabilities and the carriers they would select
 Two to four brokers are then selected and market assigned
The Problems with the Pre-qualified Broker Bidding  Process:
 Doesn’t identify a broker’s service team
 Doesn’t require service levels to be spelled out
 Doesn’t identify or use many qualified insurers
 There’s no way to know if the broker’s team is compatible with your management and culture

3. SELECTING A BROKER THROUGH PRE-QUALIFICATION
 Choose one or a maximum of two brokers to approach the marketplace
 Start well in advance of renewal date and visit brokers’ offices to speak with staff who would be involved in your account
 Don’t focus strictly on communications skills.  The broker may be effective in dealing with you, but how do they communicate with the insurance carriers?
 Check references
 Don’t pick the best individual or firm, pick the best team.  Team members must know your industry and operations
Benefits to Selecting a Broker through the Pre-Qualification Process:
This process gives the best brokers an opportunity to establish or demonstrate:
 Professionalism
 Value-added service
 Compatibility with your management team
 Their niche or specialty areas of expertise that relate specifically to your needs
 Their position on fees and commissions
 Creativity and innovation in program development

WHAT YOU SHOULD DO TO GET THE BEST RESULTS:
1. Help the broker gain a thorough understanding of your risk management process and operations.  Let them review your policies and procedures, and insist they speak with your company’s management, including the owner
2. Maintain accurate records
3. Participate in the development of marketing strategies to the carriers
4. Establish realistic time frames
5. Communicate on what’s going right and wrong

So, invest your time and resources to make certain that your broker selection process gives you real value added and make your insurance program better than your competitiors.

It's been quite a long time since I posted. The workers compensation market for the staffing industry over the last few years has remained surprisingly strong until now. Please take this as a warning. Your carrier is looking closely at your account. They are contemplating on whether to offer you renewal terms this year. If you've had some claims this year, you might be getting a letter in the mail stating that you've hit a certain loss ratio and you're being non-renewed.

My post of 2 years ago is coming true, just a little later than anticipated. Talk to your broker, partner with your carrier and hold on tight, it's going to be a bumpy next couple of years.

 Feel free to click below if you have any questions. Leave me a message and I will gladly return your call.