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The Importance of a financially sound workers' compensation Provider

Jan 29, 2016 | By Ralph Mencia, President / CEO, Pride Risk Solutions, Inc.

Pride Risk Solutions, Inc. (PRS) is a program/marketing management firm for SouthEast Personnel Leasing, Inc. (SPLI). SPLI is a Professional Employer Organization (PEO), founded in 1986 and headquartered in the Tampa Bay area.  PRS is tasked with the marketing of SPLI’s high hazard workers’ compensation coverage program. 

SPLI enjoys a highly respected reputation among its peers and competitors due to their success in carving a niche in the volatile high hazard workers’ compensation coverage market.  A testament to their success has been the vision of its CEO John Porreca, his ability to create the processes and protocols to successfully underwrite business in high-risk environments where many companies have failed.  Today the company enjoys the spoils of owning its own A[2] rated insurance carrier, Lion Insurance Company, and SPLI is their only client.  This affords the company the ability to write the sorts of high hazard type risks they cover through a PEO arrangement.  Owning the carrier and being its only client, provides SPLI a consistent and stable environment for workers compensation coverage year after year.  This is definitely an advantage over many of SPLI’s competitors, as those companies must renegotiate their coverage every year.  SPLI’s competitors are at the mercy of the carrier that can change their risk appetite on a whim.  A decision that can handcuff a PEO and its business strategy.

At present SPLI generates approximately 2.5 billion in annual revenue.  They are able to cover clients for workers’ compensation in 21[1] states, 19[1] through Lion Insurance Company, the carrier they own.  In California and New York they utilize State National Insurance Company through a fronting arrangement.

Far too often, insureds going into a PEO relationship perform little due diligence to confirm the PEO they are contracting has the financial wherewithal necessary for longevity.  Why does that matter?  When an insured goes into a co-employment relationship with a PEO, they turn over all employee administrative responsibilities to that PEO.  Some examples of these responsibilities are their employees’ payroll, the payment of payroll taxes and the workers compensation insurance.  In some instances the PEO even offers health insurance to the insureds employees.  So if you are with a financially sound PEO then you can sleep at night knowing that your company and your employees are in good hands and you are not in harms way. 

Unfortunately, like any industry there are companies that lack fiduciary responsibility and those are the ones that more often than not go out of business. The PEO industry is no different, as it has had its share of bad apples.  However, when a PEO goes out of business, not only are the clients affected but the clients’ employees are impacted as well. 

More often than one would like to believe, clients of PEOs that go out of business come to find out that the PEO was not up to date on tax payments, workers compensation payments to their carrier and that employee health plans are no longer in force.  In many states there is case law that puts the onus on the client of the PEO to fulfill the tax deficiency as well as deal with the ramifications of a lapse in workers’ compensation and health insurance coverage.  The reality is that this could have all been avoided if the client had done their due diligence.

SPLI’s financially responsible culture has afforded the company the opportunity and luxury of owning its own A[2] rated workers’ compensation carrier, Lion Insurance Company.  Since the two companies are owned and managed by the same individual, that financial stability and culture runs through the veins of both companies.  It is the foundation for the overall stability and longevity that they have enjoyed and will carry them into the future.  Prospective clients performing their due diligence on SPLI can very easily obtain the necessary information to provide them the comfort they need to make a sound decision for their company and employees.  All they need to do is access the AM Best website and research Lion Insurance which will verify that they are an A[2] rated insurance company.

Yes, this article is biased as it pertains to SPLI but I do hope it serves the purpose to send a message to any company, or as important insurance agents & brokers, to do their homework.  You will be protecting your clients best interests.

[1] - Revised 9/1/17
[2] - Revised 11/17/17