In the previous article, we discussed alternatives to the standard, guaranteed cost program when your company is large enough and has really good claims experience. Today, let's talk about the opposite scenario. Your company is safety-oriented, management is active, but you still manage to have your share of claims, which is driving your experience modification and Work Comp premiums higher.
Within the guaranteed cost model, when your experience modification increases, it's more or less a double whammy effect on your rate. The company will generally reduce their credits and then apply the experience modification to the rate, sending it significantly higher. It's a hard pill for insurance buyers to swallow and no agent enjoys being the bearer of this news
What I have found to be a very good alternative to the guaranteed cost program in this scenario is what's called a Professional Employer Organization or PEO. There are several PEOs out there, some much better than others. They all have the same requirements, but the services vary quite a bit, so you'll want your agent to vet out the best option for you.
What Makes the Top Tier PEOs so Appealing?
First, there is no deposit. The PEO will provide the payroll service for your company. In so doing, the need for a deposit is eliminated since the work comp gets paid at the time of each payroll run.
Second, there’s no audit. How many times has your bookkeeper dreaded these audits? No more. Since the PEO is providing the payroll service and the work comp is being paid at each and every payroll run, this eliminates the need for the audit.
Is your company at the point that you wish you had a human resources department? The top tier PEO markets provide HR support Monday through Friday. If you need guidance on hiring, firing, disciplinary actions, incentive programs, etc., you are only one phone call away from getting the answers you need.
If your company has experienced significant claims activity, this alternative can provide you with loss control and safety guidance to help you contain and mitigate future claims. This is a key service that I would strongly recommend any company to utilize as it is a new pair of eyes looking at your operation without any preconceived notions or bias. You will get honest, effective advice that you will be expected to comply with within a predetermined period of time. Generally speaking, the advice is simple and cost-effective.
Finally, you can benefit even more if your company is successful and minimizes your claims in a given year. PEOs can reap up to a 25% safety incentive at the conclusion of the policy term. All claims for the policy term will need to be closed. This can be a significant amount of money that you can use as you wish as the business owner, but many find a way to share with the employees for a job well done.
The bottom line here is that safety is the most important aspect of a growing, successful business. The overall cost of labor, which includes Workers Compensation, is likely your number one expense. Controlling that expense through a strong, top to bottom safety mentality will cultivate rewards regardless of the program you choose.
LCK Insurance Agency is one of California's most prominent independent insurance agencies. They offer commercial business insurance, employee benefits, life & health insurance, and personal insurance.
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