New businesses can struggle to find workers’ compensation insurance, among the many other challenges that start-ups already have to deal with once they open their doors.
“One of the reasons that carriers tend to have concerns about writing new ventures is the statistics behind failure rates. New venture operations tend to fail at a higher rate than existing operations,” said Matt Zender, AmTrust Financial Services‘ senior vice president of workers’ compensation strategy. “It can be difficult to get started, so when you are writing a new venture or operation, from the workers’ comp carrier’s perspective you want to make sure they’ll be in existence because if they go out of business, it can lead to difficulties in terms of getting the premium paid.”
Another problem that new ventures face in the workers’ comp space is the challenges they have in maintaining a safe workplace. According to Zender, these businesses typically have a higher loss ratio on average, in part because they have all new staff onboard.
“Those employees have to familiarize themselves with the operation and they have to familiarize themselves with how to work safely, and new employees tend to have a statistically higher incidence rate than tenured employees,” said Zender. “By nature of the fact that you’re a new venture, all of your employees are new, so it’s statistically more likely that you’re going to have workers’ comp claims.”
At the same time, new operations are juggling a laundry list of priorities. When a business is just getting off the ground, the owners are worried about bringing in customers and creating workflows. As a result, spending the time to make sure that employees work safely can be difficult to prioritize.
“It’s something that is easier for an existing firm to find the time to dedicate towards because perhaps they have the depth of experience in seeing how impactful one of their employees being out on workers’ compensation can be,” said Zender. “A new venture maybe doesn’t have that experience.”
Because new ventures tend to be smaller, these businesses need to have some best practices in place when an employee does get injured. The impact of a worker being out for a length of time means that as a percentage of their workforce, it’s probably going to be greater than that of a larger operation. If a new doughnut shop has four employees and one is out, they’re missing 25% of its workforce, which means that the owner either has to replace that position or the other people have to pick up more of that person’s workload, both of which can be a challenge.
“It’s imperative that they think as creatively as possible about whether or not they can bring their injured staff member back to work, and think about whether or not there’s something else that they can do for a period of time just to get them back into the workflow,” said Zender. “Because the longer they’re out of work, the less likely they’ll ever be able to return to work. Also, the longer they’re out of work, the greater the impact on the new firm because they’re missing that employee.”
Despite some carriers’ hesitation to write workers’ comp for new businesses, AmTrust experts are here to help.
“We [have] a broad new venture appetite more so than many other carriers,” said Zender. “We write a lot of retail operations, we certainly write a lot of new restaurants, we write new auto related risks, so new auto repair shops, and new doctors’ offices.”
Besides coverage, AmTrust also offers new ventures tons of resources to help their employees work as safely as possible.
“We start helping new ventures by simply having an interest in working with them and we also try to make sure that the rates we charge are as fair as possible,” explained Zender. “We then support that with a number of online resources, many of which are specifically geared towards emerging and new businesses, and we have additional loss control resources that we’d be more than happy to help those new businesses with.”