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.

BrickStreet raising workers’ comp for VFDs

BrickStreet raising workers’ comp for VFDs

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When are my insurance options going to disappear?

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.

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!

A New Year for the Staffing Industry

It's been another tough year for the staffing industry but things are starting to look a little brighter. I registered with Google Alerts and it seems like each day I'm getting an alert regarding various temporary staffing companies seeing an uptick in business. Most companies are cautiously optimistic and are looking forward to a sustainable swing toward the upside and as an insurance broker that specializes in the staffing industry I hope for that as well.

I have felt the pain of a continued reduction in payroll and sales of my clients. I've also witnessed a continued reduction in profit margin of many clients. Those declines are mostly due to the competitive pressures applied by the national staffing organizations growing top line revenue and bringing on new business by reducing mark ups. They are also taking advantage of customers that historically paid for value and now need to look only at price in this very tough economy. National staffing companies are looking to catch the upswing in the staffing business when things turn around and are playing a law of large numbers game. They are relying on volume of business not quality of business. Remember the word VOLUME!!

As an insurance broker, I would like to draw a quick comparison and draw some parallels between what national staffing companies are doing and what I'm viewing in the world of insurance for the staffing industry.

This post is a matter of my own opinion but it should be an eye opener to those regional staffing companies competing against the large nationals. As your sales have decreased at a record pace, you may have noticed that your ability to purchase workers compensation insurance at competitive rates hasn't been at this level in almost 10 years. The reason for this highly competitive market is VOLUME underwriting. The temporary staffing industry generates a tremendous amount of premium volume in a long tail line of insurance. If carriers can scoop up as much premium as possible in a short amount of time, they can take tremendous advantage of the investment marketplace. Has anyone else seen almost a 20% return on their investment portfolio this year. Guess who else did? Insurance companies did and they are investing your premium dollars at a furious pace. So ask yourself, what happens when insurance companies can't earn investment income because all of the money they made is going out the door for claims and also going into surplus to pay for future claims because they under charged you for your insurance? Makes you think doesn't it?

The questions you need to ask yourself are:

WHY?

1. Why do I have so many options for Workers Compensation?

2. Why didn't I have these options as recently as 3 years ago for the 2nd largest cost that I have outside of payroll?

3. Why does an insurance company think they can make money on my business now, and they didn't think they could just 3 years ago?

WHEN

1. When are these options going to disappear?

2. When is the cost of workers compensation going to seriously threaten my business again?

3. When do I prepare a strategy to prepare for the eventual upturn in insurance costs?

HOW?

1. How do I make sure I'm aware of the limited options available to me in the future

2. How do I make sure workers compensation isn't a threat to my business?

3. How do I set a 3 year plan for my insurance now that business is turning around?

Continue to follow this blog and I will address these questions and more throughout the year, in order to prepare your organization for the eventual increase in payroll, sales and workers compensation costs.

I hope you enjoy my efforts and I will be updating this blog on a weekly basis. You can reach me at any time by clicking below.

Let's get this year off to a great start and grow the way every business wants to!

Quickly and profitably!