Why is the PEO Dropping My Staffing Firm?
That is a question more and more staffing executives are asking themselves. PEOs are businesses too. They purchase Work Comp insurance, but usually maintain deductibles of $500,000 to $1,000,000 per loss. Simply put, Main Street businesses purchase insurance by the ounce, Staffing firms buy it by the pound and PEOs by the ton. This purchasing power has allowed some PEOs to purchase Work Comp wholesale and then sell it retail.
There is a finite number of insurance companies who will provide these plans and one of the major providers is now canceling ALL PEO clients. The company had very good rates and very loose terms which allowed them to insure almost any PEO regardless of exposure.
PEOs are now trying to replace their own Work Comp insurance before July 1st. Simply put, if your PEO loses their insurance, so do you. The replacement policies for the PEOs will be more expensive and/or more restrictive. If you are a Staffing Firm, many underwriters view your operations as too risky and too far removed from the employee on a daily basis. When an additional layer of a PEO is included, the insurance industry refers to it as piggy-backing. ABC Insurance is asked to insure the employees of DEF Labor Leasing and those employees are then provided to GHI Staffing which are then placed at JKL Logistics who manage a warehouse for MNO Retailer...
That is why your PEO is canceling you. If the PEO faces the tough choice of dumping Staffing Firms in order to keep their doors open and still retain 90% of their revenue, the trigger will be pulled.
On the bright side, there are still options for Staffing Firms depending upon your client mix and payroll. Replacing Work Comp coverage for a Staffing Firm takes 60-90 days. We have the markets, relationships, experience and clout to keep you in business without sacrificing your margins.
Please call or email me ASAP to discuss.
Michael.Hrovat@HubInternational.com
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