It was a very exciting and impactful week for the Professional Employer Organization (“PEO”) industry.
On Monday of last week, the newly formed Florida Association of Professional Employer Organization Insurance Task Force met with members of the National Council of Compensation (“NCCI”) to further discussions on how to best transmit data for the client companies that PEOs coemploy. Mona Carter, Senior Executive of Regulatory Services and Ed Marynowitz, Senior Director of Data Resources lead the discussion with the Task Force with emphasis on:
- Electronic data interface between insurance carriers and the NCCI. Insurance carrier executives of the Task Force are to focus on alternative methods to transmit data and present them to the NCCI at a later date
- Proof of coverage and regulatory certainty and visibility for the client companies of a PEO
- Affirmation that the PEO model is NOT one that employs a contingent workforce
The FAPEO Insurance Task Force was formed to help educate and improve matters regarding the PEO industry that impact groups like the NCCI and other insurance regulators and rule-makers. It is made up of seasoned professionals from the insurance carrier, actuarial, agency and PEO community that look forward to working with the NCCI in the future.
On Tuesday of last week, Chief Economist of the NCCI, Harry Shuford, presented the latest study on the PEO Industry at this past week’s WCI Conference. He was joined by Mona Carter on stage to present the study as well as to discuss the PEO industry from a historical perspective. The crowd burst into laughter when Harry related PEO’s helping their somewhat historically tarnished reputations of the past as “as easy as getting chewing gum out of one’s hair”. Mona spoke to the fact that the “mystical image of the PEO is 20+ years old”.
Bottom line from Mr. Shuford’s Presentation – by the numbers:
- Master policy clients of a PEO average 9.7 employees, while multiple coordinated policy clients average 6.7 employees. By contrast, the average number of employees for non-PEO policies is 19.4.
- PEO’s represent 1-2% of all payroll
- In Florida, it is 6% of the market
- Five PEO’s make up 48.8% of the overall PEO market
- PEO loss development is less for PEO’s then standard market. For large deductible clients, 1.278 at 42 months versus 1.41 for the non-PEO business
- Approximately 90% of PEO client companies are not large enough to promulgate an experience modification
- And my favorite, PEO’s have had comparable or lower loss ratios… For large deductibles and over the last six years, the industry has — 4 wins, a tie and a loss… Nicely done!
The NCCI has now published 3 PEO industry studies over the last 14 months. These are the very first studies comparing the workers’ compensation results of PEO versus the traditional workers’ compensation market.
These are groundbreaking events for a much maligned industry in our opinion. The industry allows its clients to grow their operations by allowing PEO’s to focus on things like safety and other risk management services. We can’t wait for NAPEO next week to celebrate a great year!
Download the previous NCCI PEO studies here:
August 20, 2013: NCCI Update on PEO Performance
May 16, 2013: Don’t Just Speculate, Investigate! The Story Behind the PEO Study
June 19, 2012: Professional Employer Organizations and Workers Compensation
