growthIn earlier articles we focused on workers compensation book of business performance and establishing/maintaining a strong carrier relationship.  This article will discuss growing your PEO’s workers compensation book of business in a profitable manner.

PEO workers compensation carriers allow PEOs to write a spectrum of risks.  Generally speaking, the ability for a PEO to write heavier risk exposures correlates to the amount of financial risk a PEO is willing to assume in its workers compensation program.  Guaranteed cost programs (paying a premium to the carrier to absorb all losses) usually results in allowing a PEO the least latitude in selecting potential clients.  Risk sharing programs will allow a PEO to assume more risk during the client selection process.  Typically as a PEO assumes more risk, the carrier will allow more underwriting flexibility.  In almost every program, there are “hard stops” imposed by a carrier based on the carrier’s loss experience in a certain risk class or the carrier’s reinsurance limitations.

Many carriers provide their PEO clients with an “underwriting box.”  This is intended to allow PEOs to determine, by workers compensation class code, which risks are acceptable to the carrier.  Carrier class code guidelines may fall into three categories—“approved”, “referral”, or “prohibited.”  The carrier will generally accept clients with approved class codes with evidence of a good loss history.

Class codes labeled for referral means that the carrier will require a more detailed understanding of the client’s risk exposure and loss history before granting approval to add the client to the program.  Properly presented, many clients with referral class code may gain approval.  Many times, PEOs will invest in completing a detailed risk survey and loss analysis to accompany their new client submission.

PEO sales professionals and brokers are compensated as a result of adding new clients to a PEO’s program.  Carriers and PEO risk managers are responsible for ensuring the financial integrity of the PEO’s workers compensation program.  As a result, a natural tension exists between the parties.  Sales professionals sometimes feel that carriers and risk managers are too conservative while risk managers sometimes feel that sales professionals lack discipline in identifying and presenting potential clients.

Here are several questions for self-analysis regarding how your PEO is performing in selecting the right clients for growth:

  1. Do we have a copy of our carrier’s underwriting guidelines?
  2. Has our PEO established internal underwriting guidelines?
  3. Have we communicated our client selection process, including carrier and/or PEO restrictions to our sales team?
  4. Do we have a formal submission process that includes evaluation of a prospective client’s operations and loss history
  5. Do we have the ability to conduct a complete risk assessment to support the approval of a “referral” client?
  6. On a monthly basis, how many of our submissions are on our carrier’s approved list?
  7. On a monthly basis, how many of our submissions are on our carrier’s referral list?  How many of the referral submissions are ultimately approved?
  8. On a monthly basis, how many of our submissions are on the carrier’s prohibited list?

Well run, growing PEOs have learned to balance the new client selection process to achieve growth while minimizing frustration experienced by their sales professionals, workers compensation carriers, and risk managers.  How does your PEO measure the success of its new client selection process?

Carothers-David-E150David E. Carothers, CSP, ARM is a founding partner of Praxiom Risk Management.  David is based in Tampa, FL but is retained as a strategic advisor to PEO executives nationwide.  To contact David directly you may email him at   You can also click here to connect with David on Linkedin.