1. PEO ADVISOR
RISK MANAGEMENT
© Praxiom Risk Management June 2011
Features
Creating an Insurance Request for Proposal (RFP)
- John Keller, CRM ARM CIC AAI
It 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 broker
chosen to represent the company for insurance placement. Inherent in this letter is that the incumbent agent is also getting fired at the same
time. Nothing changes regarding coverage, limits or premium, rather an AOR letter just switches the administration of the insurance coverage
from 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 the
company has control. The RFP process calls for the administrator of the RFP to put together “bid specs” that detail all the requirements for what
will 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 formal
as the RFP, an open bid process
essentially allows all comers
(however, it can be limited) to be
involved in the bid process. This Ask the Advisor…
process lacks formal bid specs and
the company accepting the bids is at The latest question we’ve been asked is:
the mercy of the participants to
evaluate and provide insurance for Our PEO has recently termed a client and now they
the 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/PEO
Phoning the Injured Worker First relationship will need to have their claims experience
By Peter Rousmaniere and payroll by class and state split out from the PEO
Place an early call to the injured worker. That's a claims commandment that is Mt. Sinai and sent to the NCCI. The PEO should facilitate this
high. It is virtually impossible to find anyone today in workers' compensation who says process by providing a 3-year payroll history by class
that 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 for
Three seasoned professionals--a claims executive, a managed-care advisor and the direc- reporting this information to the NCCI. For exposure
tor 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 to
Maine Employers Mutual Insurance Co., the first call should happen quickly. It should not
the NCCI.
be held up to collect the initial report from the doctor or an in-depth accident report
from 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 NC2745
helping hand. If you are not the one offering the helping hand, you've lost the chance to Download the VA1271
establish the pivotal relationship," he said. Download the FL1372
Continue reading full article...
If you have a question you’d like answered, email the editor at:
RiskAdvisor@praxiom-rm.com.
© 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. PEO
RISK MANAGEMENT
ADVISOR © Praxiom Risk Management
Measuring PEO Performance Evaluate your PEO’s practices vs CI
This 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 each
rangement, and utilize positive results as a profit center.
of their 5 categories, evaluate how your PEO stacks up by answering
The Total Cost of Risk (TCOR) these questions:
Total Cost of Risk (TCOR) is a PEO executive’s big picture number
that contemplates all costs and expenses associated with the risk Client Service Agreements
management function of the organization. TCOR is made up of
both 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 provide
OSHA 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 CSA
Workers Compensation Highlights require client cooperation when enforcing workplace
safety and risk management policies? Does it require
Winning a Workers’ Comp Stare Down
compliance with state, federal and OSHA requirements?
By Christina DiFonte
A truck driver received a minor abrasion to the cornea of his right Records and Worksite Inspection— Does the CSA provide the PEO
eye when drilling mud splashed under his goggles. An optometrist
and the workers’ compensation insurance carrier the right to inspect
treated him and released him to restricted duty for two days. The
driver continued to complain of pain. He received treatment and the clients’ records and worksite(s)? Does it specifically outline safety
medical 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 CSA
neuro-ophthalmologist concluded that the driver was malingering has been terminated?
and described him as "a total fake." The employer subsequently
terminated him for absenteeism.
The driver was denied unemployment benefits by an administra- For more on CI requirements visit: www.certificationinstitute.org
tive law judge. The driver then filed for workers' compensation
benefits, alleging that he was also entitled to penalties and attor-
ney's 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. PEO
RISK MANAGEMENT
ADVISOR © Praxiom Risk Management
Benchmarking
The Benchmarking section is used to outline various industries in terms of their Workers Compensation risk factors, historical claims statistics, and
key 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 hours1
Loss Rate = Total Incurred $ / payroll per $100 DART = incidents w/ Days Away, Restricted duty or job Transfer / 200,000 hours1
This month we start a look at hospitality services (places to eat, sleep, shop or work), with a review of Hotels/Motels and Non Residential Building
operators (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. 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 a
broad range of industry expertise, Praxiom Risk Management is committed to providing a wide
range 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
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