In this session, Kurt Murray, Principal at Assurance Agency, and Rachael Rodakowski, Account Executive at Assurance Agency, discuss how to measure individual customer profitability encompassing all costs of operating a staffing business. This will predominantly integrate the highly variable workers compensation component of the agency's cost structure. During the session, they demonstrate how to determine actual workers compensation claims and compare those to expected claims in order to measure and benchmark customer's performance against standard metrics. Integral to this is incorporating the Temps Works software platform and report capabilities in order to track and measure results.

1. Workers’ Compensation
& Client Profitability
Presented by: Kurt Murray & Rachael Rodakowski

2. Assurance by the Numbers
• Top 50 U.S. brokerage (privately held)
• 500 employees and growing
• 6,000+ clients nationwide
• 3 office locations: Schaumburg, IL, Chicago, IL and Mid-
Atlantic (D.C.)
• $1Billion+ in insurance premiums placed
• 98% client recommendation ratio
• 100+ awards for workplace culture, leadership and overall
excellence

3. Staffing Practice Overview
• Size
• 600+ clients nationwide
• $250MM+ total premiums place
• Reach
• 40+ local, regional and national workers’ comp carriers
• 15+ industry trade associations
• Smarts
• 25 years as a staffing & PEO practice
• 50 staffing & PEO focused insurance professionals
• 35 insurance designations

5. Workers’ Compensation &
Client Profitability

6. Overview
• Importance of client screening
• Tracking client loss results
• Types of client profitability analysis
• Tempworks’ capabilities in relation to the study
• Review Actual Studies:
• Expected vs. Actual Loss Analysis
• Client Profitability Analysis
• How is this used? Why is it important?

7. Client Screening Methods to Measure
Safety / Loss History
• Experience Modification Rate
• OSHA Logs & OSHA website
• Site Inspection
• Review of Client Safety Program
• Review of Accident Investigation Procedures
• Review of Training Program and use of PPE

8. Importance of Client Screening
• You want employees working in a safe environment
protected from injuries
• The higher your claims are, the higher the cost of your
workers’ compensation – Guaranteed Cost or Loss Sensitive
• Claims drive work comp pricing
• Even with state rate increases/decreases your pricing will revolve
around your loss pick (expected losses based on past results)
• Work Comp is the 2nd largest expense after payroll
• Cost of coverage significantly impacts your bottom line

9. Tracking Claims by Client
• Actions to take with a customer with poor claim performance:
• Rehabilitate Client
• Terminate Client
• Increase Markup – what is your true cost of this client
considering their claims history and what does the markup
need to be to support their losses?
• Do Nothing

10. Client Analysis Reports
• Expected vs. Actual Loss Results
• Compares client’s actual claim results to their expected results
using historical payroll and industry wide (client) loss costs
• Client Profitability
• Illustrates the total cost of a client vs. the markup

11. Information Needed to Complete the
Study
• Report of claims by client
• Payroll by client by class code by state – 3-5 years preferred
• Markup by client by code (if more than one code for a client)
• FICA, FUTA, SUTA rates
• SG&A

12. Tempworks Integration
• Entering claims and associating them to a client
• Claim by client report
• Payroll report for each policy year by client and code
• Markup report by client and class code
• Tax rates by client and state

13. Expected vs. Actual Loss
Analysis

14. Expected vs. Actual Loss Analysis

15. Expected vs. Actual Loss Analysis – Components

16. Expected vs. Actual Loss Analysis
• Payroll – subject payroll per policy term
• Losses – incurred losses currently valued
• LDF – state/client specific loss development factor. Accounts
for loss development, IBNR, re-opened claims, etc.
• Loss Rate – developed claims per $100 payroll
• Loss Cost – industry wide expected cost per $100 payroll
based on historical data
• Expected Losses – payroll divided by 100 multiplied by the
loss cost

17. Expected vs. Actual Loss Analysis - Example
 Vegan Direct is running at
less than half the
expected losses – good
performer
 Discount Shoes is running
40% above expected
losses – marginal
performer
 Well Right is running
significantly over expected
losses – poor performer –
needs further analysis

18. Expected vs. Actual Loss Analysis – 3 Year Total
 It’s important to look at the
overall total when evaluating
the action to take

19. Expected vs. Actual Loss Analysis – Loss Sensitive

20. Expected vs. Actual Loss Analysis – Loss Sensitive
• 3 Year Loss Rate – from table above
• 17-18 Fixed Cost – per insured’s loss sensitive program
parameters (this is agreed upon at inception per $100
payroll)
• Total Actual Cost – actual 3 year loss rate + fixed cost
• Work Comp Net Rate – guaranteed cost rate, insured used
this for pricing purposes
• This analysis only includes work comp costs. It does NOT
factor in the staffing company’s employment taxes, SG&A,
ACA cost, and profit

21. Expected vs. Actual Loss Analysis – Guaranteed Cost

22. Expected vs. Actual Loss Analysis –
Guaranteed Cost
• Your final cost is still the “net rate”
• Analysis is still useful to determine loss leaders, clients that
need rehabilitation, etc.
• Losses will impact mod and eventual cost of insurance

23. Customer Profitability Analysis

24. Client Profitability Analysis – Loss Sensitive

25. Client Profitability Analysis – Loss Sensitive
• Uses the Actual Work Comp Cost from the prior analysis
• Adds in Taxes, ACA, SG&A
• Compares “all in cost” to the markup to determine profit

26. Client Profitability Analysis – Loss Sensitive
Example
 3 Clients with the same class code
 Well Right has performed worse
than expected and is overall
unprofitable
 Health RX has performed worse
than expected but is overall
profitable due to the high markup
 Maple Mfg. has performed better
than expected but is only
marginally profitable

27. Client Profitability – Guaranteed Cost

28. Client Profitability – Guaranteed Cost
• Uses current work comp “net rate” instead of actual client
work comp cost
• Provides protection on poor performing clients but you lose
the benefit of lower cost on clean accounts

29. Alternate Variations – taking a look at
losses/profitability by:
• Branch Office
• Division
• State
• Region
• Class code / niche
• Exposure / specific job duty

30. Top 10 Value of Client Profitability Analysis
1. Determine individual customer profitability
2. Analyze the adequacy of your markups
3. Raise awareness of your financial wellbeing with specific customers
4. Identify poor performance at a particular customer, branch, state, etc.
5. Better able to identify trends and fluctuations in customer performance
6. Determine what relationships are worth retaining
7. Determine where to direct safety and training efforts
8. Establish a baseline and track results of safety initiatives
9. Use as a negotiation basis for requesting a higher markup
10. Use as a performance measure/compensation component for internal employees – by salesperson,
branch, etc.
11. Determine where to direct growth

31. Questions?
Contact Information
Kurt Murray, Principal
kmurray@assuranceagency.com
847.463.7154
Rachael Rodakowski, Account Executive
rrodakowski@assuranceagency.com
847.463.7358