PEO Risk Management Advisor - June 2011


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PEO Risk Management Advisor - June 2011

  1. 1. PEO ADVISOR RISK MANAGEMENT © Praxiom Risk Management June 2011FeaturesCreating an Insurance Request for Proposal (RFP)- John Keller, CRM ARM CIC AAIIt doesn’t matter if you’re a public, private, or governmental entity, all companies large and small have the same options when it comes to pro-curing business insurance coverage. It boils down to one of five options:Agent/Broker of Record Appointment – Also known as AOR or BOR, this is basically a “you’re hired” letter that is provided to the agent or brokerchosen to represent the company for insurance placement. Inherent in this letter is that the incumbent agent is also getting fired at the sametime. Nothing changes regarding coverage, limits or premium, rather an AOR letter just switches the administration of the insurance coveragefrom one agent to another.Limited Broker Assignment – similar to an AOR/BOR, a limited broker assignment moves the administration of just a specific piece of the insur-ance coverage to an agent (just the workers’ compensation, and not all the other policies, for example).Request for Proposal (RFP) – formal bid process coordinated by a consultant or designee of the company. The key in the RFP process is that thecompany has control. The RFP process calls for the administrator of the RFP to put together “bid specs” that detail all the requirements for whatwill be considered a winning bid. I dedicate the balance of this article to the necessary ingredients to make an all encompassing bid package.Open Bidding – While not as formalas the RFP, an open bid processessentially allows all comers(however, it can be limited) to beinvolved in the bid process. This Ask the Advisor…process lacks formal bid specs andthe company accepting the bids is at The latest question we’ve been asked is:the mercy of the participants toevaluate and provide insurance for Our PEO has recently termed a client and now theythe needs of the company.... want to have the NCCI generate their own client experience mod (EMR). What do we have to provide and to whom?Continue reading... The Answer? Any client coming out of an employee leasing/PEOPhoning the Injured Worker First relationship will need to have their claims experienceBy Peter Rousmaniere and payroll by class and state split out from the PEOPlace an early call to the injured worker. Thats a claims commandment that is Mt. Sinai and sent to the NCCI. The PEO should facilitate thishigh. It is virtually impossible to find anyone today in workers compensation who says process by providing a 3-year payroll history by classthat claims personnel should not call the injured workers at the earliest chance. Fine, but and state. The PEO’s WC insurance carrier is respon-what is that call meant to achieve? sible for completing one, or more, of three forms forThree seasoned professionals--a claims executive, a managed-care advisor and the direc- reporting this information to the NCCI. For exposuretor of a claims unit within a large self-insured employer--weigh in on their preferred sce- in Florida, form FL1372 is completed. For Virginia,nario for the all-important first call. form VA1271 is completed, and for all other states,According to John Marr, senior vice president of the Portland, Maine-headquartered form NC2745 is completed by the carrier and sent toMaine Employers Mutual Insurance Co., the first call should happen quickly. It should not the held up to collect the initial report from the doctor or an in-depth accident reportfrom the employer. Follow these links to..."An injured worker, more often than not, is lost when a loss occurs and is looking for the Download the NC2745helping hand. If you are not the one offering the helping hand, youve lost the chance to Download the VA1271establish the pivotal relationship," he said. Download the FL1372Continue reading full article... If you have a question you’d like answered, email the editor at: © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 06/11
  2. 2. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk ManagementMeasuring PEO Performance Evaluate your PEO’s practices vs CIThis section is dedicated to those PEOs that manage their Workers certification guidelines...Compensation program through a Large Deductible or captive ar- As we review the CI’s best practices for PEO risk management in eachrangement, and utilize positive results as a profit center. of their 5 categories, evaluate how your PEO stacks up by answeringThe Total Cost of Risk (TCOR) these questions:Total Cost of Risk (TCOR) is a PEO executive’s big picture numberthat contemplates all costs and expenses associated with the risk Client Service Agreementsmanagement function of the organization. TCOR is made up ofboth direct and indirect costs: Drug-Free Workplace – Does the CSA require cooperation in estab- lishing and implementing a drug-free workplace policy? Is there Direct costs available premium credits in our state(s) of operation, and are we Insurance —premium, taxes and assessments receiving it on the policy? Retained Losses (active and passive) - known deductibles or SIRs and unknown uninsured exposures Effective Employment Date— Does the CSA provide a specific proce- Risk Management department— time or employees dedicated dure for establishing the beginning of employment for existing WSEs? to safety, claims, or insurance activities Does it delineate when future hires are deemed co-employees of the Outside service fees— TPAs, legal counsel, insurance brokers, PEO? actuaries, safety professionals Indirect Costs Termination — Does the CSA give the PEO the right to terminate a client for failure to pay PEO services? Failure to report all worked Loss of productivity— operating “one man down” time or wages? Failure to disclose nature of operations, locations, or Overtime costs—resources needed to make up for a shortage? employees? Failure to notify with material changes in operations, Hiring and training replacement costs— getting someone else workforce, or risk? Non-compliance with workplace policies regard- Opportunity costs—missing customer demands? ing employment practices, safety, return-to-work programs, or Social costs—reputation? Social standing? timely injury reporting? Notice of Termination— Does the CSA includes a provision to provideOSHA estimates Indirect Costs can be anywhere from 2x—20x di- all worksite employees with a written notice of ter-rect costs, depending on the industry! mination in the event of a client termination? Client Cooperation and Compliance—Does the CSAWorkers Compensation Highlights require client cooperation when enforcing workplace safety and risk management policies? Does it requireWinning a Workers’ Comp Stare Down compliance with state, federal and OSHA requirements?By Christina DiFonteA truck driver received a minor abrasion to the cornea of his right Records and Worksite Inspection— Does the CSA provide the PEOeye when drilling mud splashed under his goggles. An optometrist and the workers’ compensation insurance carrier the right to inspecttreated him and released him to restricted duty for two days. Thedriver continued to complain of pain. He received treatment and the clients’ records and worksite(s)? Does it specifically outline safetymedical releases to return to full duty from several doctors, but inspections? Does the CSA allow for inspection of records and work-the driver failed to return to work for more than one month. A site(s) for up to a year after the end of the WC policy even if the CSAneuro-ophthalmologist concluded that the driver was malingering has been terminated?and described him as "a total fake." The employer subsequentlyterminated him for absenteeism.The driver was denied unemployment benefits by an administra- For more on CI requirements visit: www.certificationinstitute.orgtive law judge. The driver then filed for workers compensationbenefits, alleging that he was also entitled to penalties and attor-neys fees.The employer did not contest that the driver sustained a work-related abrasion to his eye. The employer argued…Continue reading the full article... © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 06/11
  3. 3. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk ManagementBenchmarkingThe Benchmarking section is used to outline various industries in terms of their Workers Compensation risk factors, historical claims statistics, andkey loss sources. Benchmarking statistics are obtained from a variety of credible sources including the largest WC insurance companies in the U.S.and The Bureau of Labor and Statistics. The statistics used are aggregated from all states and averaged over a 5 year rolling period. All stats be-low are from claims incurred between 1/1/06—12/31/10.Rate Definitions:Frequency Rate = # non $0 claims / payroll per $1M Recordable = # OSHA recordable incidents / 200,000 hours1Loss Rate = Total Incurred $ / payroll per $100 DART = incidents w/ Days Away, Restricted duty or job Transfer / 200,000 hours1This month we start a look at hospitality services (places to eat, sleep, shop or work), with a review of Hotels/Motels and Non Residential Buildingoperators (Property Management). Industry SIC:7011 - Hotels Loss Sources Average Inc. % Inc % Claims As of:4/30/2011 Slip/Fall - Same Level $ 6,434 35.6% 23.1% Period:1/1/06 - 12/31/2010 Material Handling $ 6,134 26.4% 18.0% Average Incurred $4,167 Struck By/Against $ 1,717 10.7% 26.0% Average Paid $2,856 Slip/Fall - Elevated $ 7,728 8.6% 4.6% % claims > $10,000 8.1% Repeated Trauma $ 9,652 4.4% 1.9% % Incurred >$10,000 82.6% All Other 14.3% 26.4% % claims >$25,000 4.3% SIC 7011 - Top 5 Loss Sources % Total Incurred % Incurred >$25,000 68.3% Repeated Trauma All Other 14% 4% NAIC 721110 Slip/Fall - Slip/Fall - Same Level Key Metrics - SIC 70xx BLS Stat 2006 2007 2008 2009 Elevated 36% 9% Frequency Rate 2.02 Recordable 6.1 5.7 6 5.2 Material Loss Rate $0.74 DART 3.2 3.1 2.7 2.7 Handling Struck 26% By/Against 11% Industry SIC:6512 - Property Mgmt Loss Sources Average Inc. % Inc % Claims As of:4/30/2011 Material Handling $ 8,207 30.1% 17.3% Period:1/1/06 - 12/31/2010 Slip/Fall - Same Level $ 6,899 29.7% 20.3% Average Incurred $4,716 Struck By/Against $ 2,542 14.3% 26.6% Average Paid $3,446 Slip/Fall - Elevated $ 7,082 8.6% 5.7% % claims > $10,000 8.3% Repeated Trauma $ 6,958 3.4% 2.4% % Incurred >$10,000 83.4% All Other 13.9% 27.7% % claims >$25,000 4.9% SIC 6512 - Top 5 Loss Sources % Total Incurred Repeated % Incurred >$25,000 71.1% Trauma All Other 14% 3% NAIC 531120 Slip/Fall - Material Handling Elevated Key Metrics - SIC 65xx BLS Stat 2006 2007 2008 2009 9% 30% Frequency Rate 1.2 Recordable 2.7 1.6 2.1 3.5 Slip/Fall - Struck Same Level Loss Rate $0.59 DART 1.3 0.5 1.0 1.7 By/Against 30% 14%1—200,000 hours represents the amount of time worked by 100 WSE in one year © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 06/11
  4. 4. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk Management Stay Connected... If you haven’t already joined, there is now a group on LinkedIn dedicated to PEO Risk Management. All PEO Executives and Risk Managers are encouraged to join and participate in the online discussions. Or, you can simply follow the news posts that relate to PEO, Risk Management, and Workers Compensation. Click here to go to the PEO Risk Management group on LinkedIn and join.With PEO Risk Management professionals averaging 20 years of experience and encompassing abroad range of industry expertise, Praxiom Risk Management is committed to providing a widerange of resources to help PEOs mitigate risk and grow their Workers Compensation profit center.This PEO RM Advisor is a monthly e-newsletter designed to keep PEO executives and Risk Manage-ment professionals informed of relevant topics in the area of PEO risk management. Sharing infor-mation and best practice through e-newsletters is one of the many ways we help support PEO or-ganizations risk management efforts.If you would like to contribute industry specific content or articles for publication in the areas be-low, you may submit them to the Editor at: Loss Control Claims Management Performance Metrics RM Information Systems Policy Administration Carrier Relationships Industry Certifications Up Next… We’ll continue benchmarking the hospitality industry with an in depth look into the WC results of: 5812—Restaurants © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 06/11