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PEO Risk Management Advisor - September 2011

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  • 1. PEO ADVISOR RISK MANAGEMENT © Praxiom Risk Management September 2011FeaturesPatriot National Insurance Group to Provide Premium Discounts for Work Comp Certified PEOsIt takes special effort to achieve certification in PEO workers’ compensation “best practices” as validated by the Certification Institute. Currently,fewer than 40 PEOs nationally enjoy this status. A review of performance statistics indicates that the workers’ compensation programs of certi-fied PEOs perform at a higher level than non-certified PEOs and also carry a lower average experience modification rate. Patriot National Insurance Group is a leading provider of workers compensation insurance and services. Patriot National has two operating subsidiaries: Guarantee Insurance Company and Pa- triot Underwriters, Inc. The Patriot National Insurance Group family of companies recognize that certified PEOs generally provide higher service levels to their clients, manage their workers’ com-pensation programs in accordance with recognized best practices, and deliver better workers’ compensation outcomes to their insurance carrierpartners. Accordingly, Patriot National is prepared to offer significant pricing and program consideration to certified PEOs. Patriot provides up to a 10% premium credit to certified PEOs, where allowed by state or program design. Patriot will use Contego Services Group for cost containment.Geographically, Patriot offers a national underwriting platform, and their workers compensation product line includes: Large Deductible Agency-owned captives Segregated cell captives Investor-owned captivesTo learn more about Patriot’s special programs available to CI Certified PEOs you may contact David Carothers at Praxiom Risk Management (888)350-7729, dcarothers@praxiom-rm.com.For more on the Workers Compensation Risk Management Certificationor to obtain the designation, contact Don Parker at the Certification Insti-tute, (501) 975-3099 or dparker@certificationinstitute.orgState Workers Comp Insurer Seeks $50M From Staffing Firm Following Fraud VerdictRoberto CenicerosThe California State Compensation Insurance Fund will seek $50 million from Select StaffingCo. Inc. following a jury finding the employer guilty of fraud, the state insurer said Friday.The jurys finding earlier this month stems from a lawsuit brought by SCIF alleging the SantaBarbara, Calif.-based temporary staffing company avoided paying tens of millions of dollars in Professional Employer 2011 Conferencepremiums by “piggybacking” on a workers compensation policy purchased by a now-defunct September 12-14, 2011professional employment organization. JW Marriott Orlando Grande LakesIn this case, “piggybacking” refers to Select Staffing allegedly gaining a lower experience modi- 4040 Central Florida Parkwayfication by making its workers employees of a PEO named Onvoi Business Solutions Inc., Orlando, FL 32837sources said.Insurers use experience modifications to calculate a policyholders losses and premiums. The www.napeo.org/PEM2011lower the experience-modification, the lower the premiums; and sources said Onvoi had anexperience-modification of about 70 while Select Staffings was closer to 300.SCIF also alleged that Select Staffing underreported its payroll.California law allowed San Francisco-based SCIF to choose among various options to calculate damages. On Thursday, a spokeswoman for thestate insurer said it chose an option that results in the $50 million it is seeking from Select Staffing.Continue Reading... © 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. 09/11
  • 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 loss sensitive, Large Deductible As we review the CI’s best practices for PEO risk management in eachor captive arrangement, and utilize positive results as a profit cen-ter. of their 5 categories, evaluate how your PEO stacks up by answering these questions:Individual Professional CertificationsIdentifying and hiring professionals with specific expertise in the Claims Managementareas of Workers Compensation, Safety, Claims, Underwriting andRisk Management can provide a significant advantage for any PEO. Immediate Contact—Do you follow written procedures for an experi-The list below outlines the most highly regarded professional desig- enced claims professional to contact the injured worker (or family)nations in the fields of insurance, safety and risk management. within 24 hours? Do the procedures include educating the injuredThe Insurance Institute of America (www.aicpcu.org) worker regarding their rights and benefits under workers’ compensa- Chartered Property Casualty Underwriter (CPCU) tion law? Associate in Risk Management (ARM) Formal Claims Reviews— Has your PEO established regular formal Associate in Claims (AIC) meetings with the WC carrier’s claims adjusters to ensure timely and Associate in Commercial Underwriting (AU) appropriate administration of claims and adjustment of reserves? What timeframe has been agreed upon? What claims criteria has Associate Advisor in Insurance (AAI) been set?The National Alliance (www.scic.com) Fraud Hotline— If justified by risk exposure and PEO size, have you Certified Risk Manager (CRM) provided a confidential fraud hotline rewarding the reporting of fraudulent claims that lead to a conviction? Does your WC carrier Certified Insurance Counselor (CIC) provide this service?Board of Certified Safety Professionals (www.bcsp.org) Claims Analysis—Have you chosen appropriate metrics to monitor Certified Safety Professional (CSP) such as Frequency Rate, Loss Rate, Lag Time, and Top 5 Loss Sources? Are these metrics utilized on both the book and client level? Do you monitor monthly changes in claim count, status, and paidWorkers Compensation Highlights and incurred amount? Do you maintain a descrip-Franchisees: Independent Contractors or Employees? tion of losses in excess of $25,000?By Jon Coppelman of Lynch Ryan Return-to-Work—Has your PEO established up-front and communi-We have been tracking the fate of the FedEx business model cated in writing the requirement to comply with light duty and returnin state courts as it collides with increasingly stringent defi- to work (RTW) programs? Have you communicated job descriptionsnitions of "employee." FedEx operates under a sophisticated and compensation for the RTW to all employees?and ingenious contract designed to transform their driversinto "independent contractors." Its been a tough haul. For Reporting Requirements—Do you require and monitor compliance ofthe most part, FedEx has been losing the argument in timely reporting of all claims to the WC carrier? Do you obtain notifi-courts, state by state, and then delaying any ultimate reso- cation of client claims within 1 day? Are all claims reported to thelution by filing appeals. Today we examine a similar business carrier within 3 business days?model: cleaning operations that are classified as franchises.Coverall North America is one of the largest franchise clean- Managed Care Providers—Where allowed by law, has the PEO com-ing operations in the world, with 9,000 franchise owners, 50 municated to all clients the appropriate network medical providers?support centers and 50,000 customers. Franchise owners Has the PEO established appropriate PPO or managed care penetra-are trained by Coverall, wear Coverall uniforms, use Coverall tion rates? Are you monitoring medical savings realized by the use ofmandated supplies and receive payment for their work PPO or managed care networks?through Coverall. fees plus any other incurred expenses. For more on CI requirements visit: www.certificationinstitute.orgContinue Reading... © 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. 09/11
  • 3. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk ManagementBenchmarkingThe Benchmarking section is used to outline various industries in terms of their Workers Compensation risk factors, historicalclaims statistics, and key loss sources. Benchmarking statistics are obtained from a variety of credible sources including the largestWC insurance companies in the U.S. and The Bureau of Labor and Statistics. The statistics used are aggregated from all states andaveraged over a 2 year rolling period. All stats below are from claims incurred between 1/1/09—12/31/10.This month we continue our look at hospitality services, with a review of SIC 5511—New/Used Car Dealers. New/Used Car Dealers SIC 5511 - Top 5 Loss Sources % Total Incurred Industry SIC: 5511 - Car Dealers As of: 4/30/2011 All Other Slip/Fall - Period: 1/1/09 - 12/31/2010 Elevated 20% Material Average Incurred $4,528 4% Handling Average Paid $3,511 38% % claims > $10,000 8.2% % Incurred >$10,000 81.9% Struck Vehicles % claims >$25,000 4.2% By/Against 9% Slip/Fall - Same % Incurred >$25,000 68.0% 8% Level 21% 0 -3 4 - 10 11+ First Report Mean Median Days Days Days Timeliness 9.76 3.0 56.9% 27.3% 15.8% Loss Sources Average Inc. % Inc % Claims Key Metrics - SIC 55xx Material Handling $ 9,361 38.5% 18.6% Frequency Rate 1.09 Slip/Fall - Same Level $ 4,555 20.8% 20.7% Loss Rate $0.48 Vehicles $ 6,866 8.6% 5.7% NAIC 441110 Struck By/Against $ 1,160 7.6% 29.6% BLS Stat 2006 2007 2008 2009 Slip/Fall - Elevated $ 4,903 4.5% 4.2% Recordable 4.3 4.7 4.2 3.9 All Other 20.1% 21.3% DART 1.6 1.8 1.6 1.5Rate 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 hours11—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. 09/11
  • 4. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk ManagementBenchmarkingThe Benchmarking section is used to outline various industries in terms of their Workers Compensation risk factors, historicalclaims statistics, and key loss sources. Benchmarking statistics are obtained from a variety of credible sources including the largestWC insurance companies in the U.S. and The Bureau of Labor and Statistics. The statistics used are aggregated from all states andaveraged over a 2 year rolling period. All stats below are from claims incurred between 1/1/09—12/31/10.This month we continue our look at hospitality services, with a review of SIC 5571—Motorcycle Dealers. Motorcycle Dealers SIC 5571 - Top 5 Loss Sources % Total Incurred Repeated Industry SIC :5571 - Motorcycle Dealers Trauma As of :4/30/2011 All Other 8% Period :1/1/09 - 12/31/2010 10% Slip/Fall - Same Average Incurred $6,891 Level Average Paid $3,506 Struck 30% % claims > $10,000 10.5% By/Against % Incurred >$10,000 86.8% 15% % claims >$25,000 6.0.% Material % Incurred >$25,000 77.2% Vehicles Handling 16% 21% 0 -3 4 - 10 11+ First Report Mean Median Days Days Days Timeliness 18.61 3.0 53.6% 21.7% 24.7% Key Metrics - SIC 55xx Frequency Rate 1.09 Loss Sources Average Inc. % Inc % Claims Loss Rate $0.48 Slip/Fall - Same Level $ 15,913 30.3% 13.1% Material Handling $ 5,436 21.3% 27.0% NAIC 441220 Vehicles $ 7,826 15.7% 13.9% BLS Stat 2006 2007 2008 2009 Struck By/Against $ 4,999 15.2% 21.0% Recordable NA 3.2 3.1 2.6 Repeated Trauma $ 48,587 7.9% 1.1% DART NA 1.6 1.2 1.2 All Other 9.6% 24.0%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 hours11—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. 09/11
  • 5. 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 operators 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: RiskAdvisor@praxiom-rm.com. Loss Control Claims Management Performance Metrics RM Information Systems Policy Administration Carrier Relationships Industry Certifications © 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. 09/11