I very much enjoy phone calls from clients that say “I am shopping my state fund policy”. Many times, I can help the client on the other end of the phone. That is always a great feeling. Sometimes I can not help and neither can any other agent out there. I would like to discuss some of the many factors that go into writing a work comp policy.
Many business owners are under the impression they can switch after they spend a year or so in the assigned risk or state fund. These business owners think they can automatically get out and go to a voluntary or select carrier. Unfortunately this is not always the case.
When determining if a business qualifies, we will start with what type of business you have. If you have a green or go class code chances are better. Restaurant, retail and even some artisan contractors are great classes of business to pull out of the various fund policies.
Next we need to know how long you have been in business. Sometimes it just takes a year or two of prior coverage to move carriers. Next comes the loss history of your business. We will need to know things like if your business has had any large claims in the last 3-5 years or does your business have a bigger issue like a frequency problem? A lot of little claims are sometimes less desirable to a carrier than just one large loss. That being said restaurants tend to have more of a frequency issue. A lot of small claims like cuts and slips and falls. If you have enough of those even though they are small it could land you in the state fund. However putting a formal safety program in place goes a long way for frequency issues.
A big misunderstanding that I often have to explain is when a client asks, “I have been in the pool for what seems like forever. I have never had a claim. Why can’t you move me to a select carrier who will offer better rates.” Well if you are a class like 9014 (janitorial/commercial cleaning) who only has 2 very part time employees and you only have $7000 in annual payroll then I will not be able to help you get out of the fund. There is not enough payroll and or premium for select carriers to offer a policy. There are carriers that will consider lower payroll but it is very difficult with any type of contractor classes.
The other more difficult topic is the “model” business owner with 3-5 years of prior coverage and favorable losses. They also have a less favorable class code, but with enough payroll to generate a policy premium of $7-8k annually. Many clients and even myself would think that should be an easy move, but more and more I am seeing $10k minimum premiums for yellow class codes. These are usually heavy construction class codes. Our agency has success with some of these accounts with one of our new carriers. All hope is not lost for those business owners who think they are doomed for life to the assigned risk pool.
When I finish up with these types of phone calls, the client on the other end of the phone usually feels better about their policy. It may be a policy they have to have for now, but at least they know why. The majority of business owners I talk to are very thankful when I take the time to discuss their policy, even if I can not help them. Many just want to know why the only option is a state fund policy. When I let them know that option is just for a certain time period they know what they have to look forward to after a couple of years in the assigned risk.