Staffing agencies heading into renewal season often focus on rate alone. According to Redvo Insurance Solutions, a Fontana, California brokerage specializing in staffing workers' comp, the premium actually rests on three factors that brokers can help clients address ahead of renewal. Those factors are the class codes applied to payroll, the experience modification factor, and which carriers are willing to write the account.
"It's such a complicated industry that not many people specialize in it," said Fadi Faraj, the firm's chief executive officer, who has placed workers' comp since 2004.
Under the NCCI rating structure, premium is calculated per $100 of payroll within each classification code. A policy covering forklift operators, light industrial workers and clerical staff therefore carries a separate rate for each. Payroll booked to the wrong code is rated at the wrong number until the annual audit reconciles it, leaving the client with either an additional premium bill or a return.
That makes a payroll review by class code one of the most useful pre-renewal exercises a broker can run with a staffing client, particularly where the agency's mix of placements has shifted during the year. Higher-hazard trades such as welders and machine operators sit in higher-rated codes, which also narrows the field of carriers willing to quote.
The experience modification factor applies a multiplier to manual premium based on an agency's claims history relative to peers in the same class. A mod of 1.25 adds 25% to manual premium, while a mod of 0.85 reduces it by 15%.
Under NCCI's experience rating plan, the calculation draws on three policy years and excludes the most recent one, so an agency is priced on losses from two to four years back. The lag works both ways, and an improvement in claims performance typically takes around two renewals to show up in the mod. Clients who expect one clean year to bring immediate relief need that timeline explained early.
New agencies face a different problem. With no rated history, there is no mod to apply, and the account is priced on projected payroll by class code. Redvo says many specialty staffing programs carry minimum premiums in the tens of thousands of dollars, which a first-year agency may not generate enough payroll to reach. Professional employer organization arrangements are one route for those clients until their own payroll clears the threshold.
The third factor is market access. Carriers writing workers' comp across all industries may be unfamiliar with how warehouse and light industrial work flows through a staffing agency, while carriers running dedicated staffing programs treat the same payroll as routine. Faraj said that if a client's carriers do not specialize in staffing, even a clean account will not price as well as it should.
That matters most when a client receives a non-renewal. Redvo's view is that standard carriers tend to decline staffing accounts on loss history, while dedicated programs expect a degree of claims activity as a normal feature of the class.
"A non-renewal usually isn't the end of the road. It's a sign the account was with the wrong carrier," Faraj said. "The losses that scared off one carrier are normal business to a carrier that writes staffing."
For retail brokers without direct staffing appointments, that points to working with a specialist wholesaler or program market rather than treating a non-renewal as the end of the placement.
Agencies placing workers across several states need coverage licensed and rated in each jurisdiction, which can be written as a single program rather than separate state policies. North Dakota, Ohio, Washington and Wyoming operate monopolistic state funds, where coverage must be bought from the state and coordinated alongside the main program. Those state funds do not typically include employers' liability, so brokers should also confirm that clients with workers in those states carry stop-gap employers' liability cover.
Staffing payroll moves with client demand, so an annual payroll estimate can leave a large gap at audit. Pay-as-you-go billing replaces the upfront estimate with premium reported and paid on each payroll run. The client pays on actual payroll and faces much smaller year-end adjustments.
To secure a bindable quote rather than an estimate, underwriters will typically want the current policy, three years of loss runs, payroll broken out by class code and state, and a description of client worksites and pre-placement screening. Gathering that file early gives brokers time to market the account properly and to walk clients through all three rating factors rather than a single rate figure.
