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Worker's Compensation - The Company Killer - Virology Hub


During the 17th and 18th Centuries, smallpox was the most serious infectious disease in The West and accounted for a substantial proportion of deaths, especially among town dwellers. The mortality rate varied regionally, with 10% in Europe and 90% in America. It is difficult to imagine that smallpox was once one of the most feared diseases in ancient and modern history.

After an extensive and successful eradication program, there has not been a single reported case of smallpox infection in over twenty years. But the threat of this deadly disease exists again because of the small amounts of vaccine available. A preventive vaccination program to protect individuals such as emergency and health care personnel is not an option at this time.

Much like the smallpox disease that was once thought to be eliminated, the worker's compensation market has again become a threat as a "company killer" after nearly being eradicated in the mid to late 90's. Since 1998, almost every insurance broker and company owner was certain that the insurance market would never be as hard as it was in the late 80's and 90's. Never again would companies be faced with shutting down their operations because their premiums consumed all of their profits and more. All the signs of resurgence were there but, much like the blips on the radar at Pearl Harbor, they were ignored. Few prepared themselves for what was to come, and the effect has been the death of many companies and the irreparable damage to others' bottom line. As of this writing, I am aware of twenty-one staffing firms that have closed their doors due to the high cost of insurance premiums. Some companies are limping along trying to survive in hopes that the market will ease and the negative status of their profit and loss statements will once again be positive. It is very unlikely that we will see the soft market of the middle to late 90's for at least another two years and probably longer than that. Many of these companies will fall.

So what can a company do to survive this terrible ordeal? The choices are limited. A company could increase prices to pass the cost on to the consumer. In most cases this will not work. Clients can not afford to bear the additional cost of your premium because the economy is also affecting their bottom line. Companies familiar with using temporary staffing firms know how competitive the industry is and they would probably move their business to another supplier that was not impacted by heavy premium increases or they would stop using temporary staffing altogether. Larger national staffing firms will benefit because they are self-insured, as would those companies that chose to move to alternative insurance programs a few years ago. These programs usually require a great deal of upfront collateralization that most companies can not afford today. Those that had the foresight to secure this type of program when profits were high and funds were available have now satisfied their collateral requirements and, from an insurance perspective, are benefiting from this hard market.

Other survivors are those companies with premiums of $ 1,000,000 or more. Although they maintain high retention levels of $ 250,000 to $ 500,000, the excess premium costs are reasonable. This is mainly due to the limited exposure to the carrier.

Like in any catastrophe, some will not survive. Others may survive but the scars will remain forever. For those that are willing to put forth the effort, there are steps that can be taken to help survive this plague. When treating a serious medical problem, experts or specialists are used in the healing process. It is very important that you consider using worker's compensation professionals to assist you to determine which treatment or combination of treatments will work for you in this process.

In a recent submission of a medium-sized staffing company, thirteen major carriers were approached and nine immediately declined because they will not consider staffing companies. Whether this is due to insurance treaties with their re-insurers or their impression that the staffing industry is high-risk, it is an unavoidable fact. With only four carriers considering the submission, a company's "snapshot" or insurance desirability must be exceptional. It is extremely important that you identify your insurance desirability prior to submitting your application. Following, you will find the article, "Do You Know Your Company's Insurance Desirability?" The article explains the items that go into the desirability quotient. Once you have determined your desirability quotient you can begin to take steps to improve it.

After you have the best desirability quotient that you can obtain it is time to go to market. But where you go in the market and who takes you there can be just as important as your desirability quotient. Your first question should be "Does my broker really know my business and are they motivated to get me the best possible quote without consideration of commission?" This is not asked to undermine brokers. During the soft market, brokers took a beating. What you must determine is if are they trying to make it up this year with your account. It is strongly recommended that you have a third party that does not benefit from the premium commission review the process.

Next, you need to determine the type of program that a) will be offered to you by carriers and b) does not contain hidden costs that will seriously impact your finances in years to come.

Carriers today generally offer only a few programs to insureds based on the insureds' financial status. It is important to know which of these offers is a good offer. Also there are some programs that appear to be a good buy today, but could have devastating effects on your company in future years. In the following article, we will identify the various types of insurance programs and the advantages and disadvantages of each. We will also include participation requirements of the programs.

Finally, it is extremely important that you have, maintain, and control an effective risk management and safety program. This program must be known and understood by all of your staff members and there must be clear and precise evidence that is used consistently as a common everyday practice. Owning a manual, attending or conducting a seminar or having only one or two individuals familiar with your program will not be sufficient to satisfy the underwriter's concerns for exposure. Carriers have become more alert to the signs of a "surface only" risk management program and will be quick to deny an application or will quote very high if they feel your program is inadequate.

Time is of the essence. If your renewal for this year has not yet occurred, it is very important that you begin the process as early as possible. It is highly recommended that you start at least 90 days in advance of renewal but preferably 120 days. Obtain a projection of your future premium and begin setting aside additional funds. It is unlikely that you will receive a premium reduction, so be prepared. If you have already renewed and your premium increases are killing your profits, get help now. With the right approach, you may be able to take steps to qualify for a more affordable program mid-term by making a few adjustments. The worst action is no action. This plague will not go away soon. Do something today!



Source by Ed Parker