When your Work Comp insurance is renewing, you often worry how their decision is going to impact your margins? What will happen to your bill rate? Will you be told to drop clients?
If your company generates less than a $1,000,000 in payroll, your carrier will rely on what they know about your operations. Have you had losses or not? Have your payments been on time? What is your experience modification? Where do you operate geographically? These items are all taken into account, credits and debits are given and THE LAST STEP is seeing what premium is required.
If your payroll is over $1,000,000, the process runs almost backwards. Larger staffing firms don't have the issue of having claims or not. Claims will occur. The question is how many and what will they look like. Your underwriter will compare the historical losses to your payroll (not necessarily your premiums). They will analyze how many losses you have for every $1,000,000 in gross payroll. They will also determine your average historical average claim and adjust this for medical cost inflation. Using your new projected payroll, the underwriter will forecast your projected losses. (aka Loss Pick).
Now that the underwriter has your Loss Pick they determine how much money they need to pay those losses for you over time. In hard markets they will price to a final loss ratio of 40-50%. In softer markets, they will price to as high as a 70% loss ratio. Now that the final desired premium is known, the underwriter backs into the required net rates to reach the premium. In this case the premium determines the rate, where with smaller operations the rates determine the premium.
Our software mimics the above process so we can do much of the work for the underwriter. Once we know what your premium should be, we then seek an insurance company willing to insure our client under those terms. We are able to show our client what their premium should be and not sit around on pins and needles waiting for a surprise from an underwriter. Using this process, we have seen insurance companies consistently offer terms within hundreds of dollars of our projection and recommendation.
If you would like to take control of your margins and not leave them up to the whims of the insurance industry, give me a call or email today.
951.779.8656 Office
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