It doesn’t take a genius to understand that a given set of assumptions will eventually lead to a perspective about any topic. Workers compensation issues are no different. Perspective, opinion and mindsets all influence how a given individual feels about workers compensation problems and what they feel the outcome should be. Let’s talk about mindsets of employers, insurance agents and insurance companies and how they influence perspective!
The Employer – also known as the insured or policyholder. This player is the consumer. They are the ones who pony up the cash to buy a workers compensation policy. They may not understand why they need to pay such high prices for something they don’t understand or possibly even see the benefit in having. They just know they’re forced to buy a policy by some kind of state statute or state law that says they’re subject to the workers compensation laws of their given state. They usually know if they don’t meet their obligation under the law then they may be fined, significant amounts, and even charged with some kind of misdemeanor or even felony, if they are a habitual abuser of the system. So there you have it, the employer is basically forced to buy a workers compensation policy.
There’s a difference between large employers and small employers. Large companies come at the workers compensation issue from a different mindset. You’ll typically find in a large company professional human resource people and professional risk managers whose jobs are to manage, along with other things, their companies workers compensation program. Small employers are entrepreneurs. In small shops you will usually find the business owner him or herself is tasked with all of the same duties that in a large company may be performed by a series of departments or individual employees. Regardless the size, there are certain tasks and duties that are similar and carry over. Some of those are:
- To determine the need and verify that the company is subject to state workers compensation laws.
- To consider options for meeting their obligation under the law. Yes, there are options. Options may include to self insure, or to become associated with some type of association plan, or to secure coverage through the standard market (to buy a policy.)
- To actually go through the process of choosing an insurance broker, agent and agency to provide and service the workers compensation policy.
- To actually secure a workers compensation policy.
- To evaluate associated costs and to maintain that policy within their established budget.
For an employer it is extremely important to maintain control over costs! An employer, regardless of size or organizational make up, is going to always be concerned with securing a workers compensation policy at the most economical level (cheapest price) that still provides them with the broadest coverage and service (that still does the job the policy is supposed to do!)
An employers mindset will often be influenced by these thoughts:
- “I may not want to but I have to have a policy. (It’s probably the law.)”
- “I don’t want to incur the related expense but if I have to then I need to find the most economical cost for my policy that I can. (Cheapest)”
- “I need to keep as much control over the entire process of securing coverage that I can.” (If I could do it myself I would! That’s the way I would probably be!)
The Insurance Agent – a broker or agent. This is the person an employer relies on to provide a quote for coverage and to help place that coverage with the insurance company. An agent is the first line eyes and ears of an insurance company. An agent’s job is to place coverage for their client, the employer. Agents are often stuck in the middle, wedged somewhere between the wants and desires of his client, the employer, and the products and pricing available from the insurance company. And sometimes that may not be a very good place to be! So what’s the agent do and where do they fit and how does their mindset fit into this whole process of securing coverage. Here’s a few points to ponder:
- The agents job is to sell a policy. (Not meant to be a bad thing! Selling stuff makes the world go round!)
- The agent gathers information from the employer that is to be provided to the insurance company for rating and underwriting the employer as a potential client which typically includes:
- A description of the employers operation and job processes. (How do you classify this employer?)
- Payroll and other remuneration details. (It’s not all about payroll!)
- Information about the structure of the employers business. (Entity type, etc)
- And…other things.
- The agent may advise the employer on how their business should be classified and what codes should be used. (Most of the time an ok thing to do.)
- The agent takes the information provided by the employer and secures quotes from different workers compensation insurance carriers. (This is called marketing!)
- The agent provides quotes received to the employer and assists them in choosing the best insurance company for the employers identified needs. (One part of an agents job is to educate their client.)
While this process is going on, the agent or broker’s mindset may be influenced by these thoughts:
- “Knowing now what this employer does, what insurance company will I be able to secure a quote from.” (Not all insurance carriers will provide workers compensation insurance to all employers!)
- “Out of the insurance companies that will quote this risk, who will provide me with the best priced option while meeting special needs this client may require?” (Does the insurance company like what they see and can they provide a high quality product?)
- “Does this employer have a steady track record of being insured or has coverage lapsed?” (Will, can this client meet the expectations the insurance company may have? ..Yep, insurance carriers really do have expectations too!)
- “Will this client be a good client?” (Will they require a lot of service? Will they require a lot of certificates to be issued? Will they pay their bills? Will they be a profitable account?)
The Insurance Company – the organization that provides a workers compensation policy or coverage to their policyholder, the employer. There are a lot of insurance companies out there! They come in multitude of different sizes and shapes! There are those who specialize in single lines of coverage, like workers compensation and there are those who are generalists, who provide a broad range of coverage over multiple lines of business (other kinds of insurance; property, liability, umbrella, etc.) Regardless of what insurance company an agent and their client use to secure workers compensation coverage there are certain processes that all insurance carriers will go through. Some of those are:
- Does this employer qualify for our company? (It’s called underwriting. For many companies these days it’s more about how the employer fits within their “model of the perfect client.”)
- What kind of client will this employer be? (Do they have a good credit history? Have they had payment problems in the past?)
- Will they be a profitable account? (Will our company make money on this client? Or will we have to pay out more in claims than we earn in premium?)
- Are they a safe company? (What does the employer do to control claims? Do they have a good track record? Are they well organized?)
- At what pricing level do we need to be to write this account? (Can we insure this client at the premium level we need to make money? Do we have to give away the farm to get them as a client? Or should we walk away?)
- Are they properly classified? (Has the client been upfront in describing their operations? Has the agent provided accurate information so we can make a decision?)
What about an insurance company mindset? Is it possible that a company can have a mindset? Sure they can! What about these:
- “Are our products designed for this segment of the market place? (Some insurance companies specialize in large corporation insurance products. These products may or may not be what the client needs.)
- “Is our company in a growth mode?” (Carriers in a growth mode will have a mindset to broaden their normal acceptability standards. Perhaps even taking the type of risk they shouldn’t.)
- “Are we customer centric?” (Do we have the programs, payment plans and other support departments to provide this client with the type of service they need?)
- “How is our industry doing?” (Are other workers compensation insurance companies doing better than we are? How do we compare with the norm? Will taking this risk have a negative impact on our results?)
Employer, policyholder, insurance agent or broker and insurance company all have different perspectives when it comes to workers compensation coverage process and issues. There’s also no doubt that individual mindsets influence those perspectives.
Hope this helps you out and thanks for reading!
