Wednesday, August 22, 2012

Why are insurance costs rising?

Staffing firms are constantly asking me why insurance costs are always rising, and every year the pinch is getting tighter.  Workers Comp premium increases are more painful to staffing firms because they know that their markup rates are currently set for all of their clients.  They will have to pay more money without being able to make more.  The cost also has nothing to do with the size of your client, whether it is $100 of payroll or $100,000,000 your cost will be the same percent of all the payroll at that client. 

Competition between insurance companies often provides the biggest swing in premium costs from one year to the next.  Rates from one insurer to the next can differ by 30 – 40 % at times, even if they both pay for the same exact claims.  Why such a big variable from one company to another?  Because most insurance companies avoid the staffing industry like the plague.  There are only a handful of insurance companies that actively pursue staffing firms.  In any given year, 2 or 3 companies will decide to start a staffing insurance program, while a different 2 or 3 will stop.  It is often easy to avoid the ridiculous jumps in premium by sticking with a long-term insurance program that is committed to serving the staffing industry for years to come.  But there are still other issues that cause premium increases…

Like the experience mod.  Staffing firms can have huge jumps in experience because the client base and exposure can change drastically from one year to the next.  Say you have a client that was supposed to have a very safe workplace.  After 2 months and 25 injuries, you decide to part ways because they put the temp employees in the most unsafe positions.  No matter what happens, when those claims are applied to your mod, you will see a major jump in your premium that will affect you for the next three years.  Of course claims are always getting more expensive because of…

Rising healthcare and claim costs.  The costs for even somewhat minor injuries have skyrocketed in the last few years.  Medical costs increase by 5-10% annually, and insurance companies base their premiums on the costs of paying claims.  It makes you wonder why any insurance company ever reduces their rates?  Not to mention the cost of paying lawyers to explain the workers comp system to injured employees with the promise of a large settlement.  It almost seems silly for people to give a lawyer a cut from their settlement when most states have a set schedule of benefits paid for permanent disability resulting from workers comp injury.

At the end of the day, insurance costs are always going to be increasing.  As a staffing firm, the only steps that you can take to maintain a consistent profit are to make sure that your costs are stable and your claims are lower than your competition.  Injuries do happen to everyone, but they can be managed effectively to lower your overall cost in the long run.  Don’t expect the insurance company to do all of the work for you, because they understand that your rates will increase if you have claims and they will probably just end up making more money when they do.

Visit today to learn how we are helping staffing firms make more money from the pitfalls of Workers Compensation, Health Care Law Reform, and More.

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