Protect Your Clients and Your E&O
July 24, 2019 | By Ralph Mencia, President, Pride Risk Solutions, Inc.
Don’t put your clients or your E&O at risk! Choosing a reputable Professional Employer Organization (PEO) for your clients is paramount.
As PEOs become more mainstream, great caution should be considered when deciding which PEO to entrust. According to the National Association of Professional Employer Organizations (NAPEO), over 175,000 small to mid-sized employers utilize the services of a PEO to obtain affordable workers’ compensation coverage and to gain access to “Fortune 500 type” employee benefits.
Unfortunately, all too often when clients have obtained services from a PEO that has gone out of business, they discover that the PEO was not up to date on tax payments, payments to their workers’ compensation carrier and that employee health plans are no longer in force.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 broker and/or client had done their due diligence.
Vetting Potential PEOs
Price and perceived service offerings should not be your only drivers to contracting your client with a specific PEO. A good deal of effort should be taken with the consideration and vetting before endorsing the services of a PEO.
What to look for:
- Financial Stability- If the PEO you are considering is privately owned ask for audited financials. If they refuse, this should be a sign of concern.
- Experience- This is important because many PEOs are at the mercy of outside resources to provide the coverages being offered to their clients. For example, the PEOs workers’ compensation and major medical carrier relationships. Take notice of how long the PEO you’re considering has maintained these outside relationships. Look for PEOs with long standing relationships with their outside providers as this shows stability.
- Infrastructure- What sort of infrastructure does the PEO candidate possess, will it maximize the impact on the service to the client’s company and their employees.
- Interests- Is the PEO and your client’s interests aligned, will it maximize the impact on savings and offerings to the client.
What Sets Us Apart
Southeast Personnel Leasing, Inc. (SPLI), a PEO, enjoys a highly respected reputation (over 30 years) 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 President & CEO John Porreca, his ability to create a highly effective business model that underwrites business in high-risk environments where many companies have failed.
Today the company enjoys the spoils of owning its own workers’ compensation insurance carrier, Lion Insurance Company. After many years of being at the mercy of outside carrier relationships, in 2005, Mr. Porreca had the vision and opportunity to purchase a small carrier (Lion). Today, Lion Insurance Company, has approximately $100 million in surplus, and a valuable and much deserved A (Excellent) rating by A.M. Best. His vison is truly at the center of what has made this company so successful. This sort of consistency in the PEO space is rare.
In an effort to impact SPLI clients and provide meaningful care for potentially injured workers, Mr. Porreca created a Third-Party Administrator (TPA), Packard Claims; a worker’s compensation claims handling company. Here is where SPLI clients’ interests are so aligned. Packard’s goal is simple, provide meaningful care for injured workers as quickly and effectively as possible, while mitigating cost through the effectiveness of micromanaging claims. This one aspect can and does provide quantifiable results that lead right to the clients’ bottom line through reduced experience modifiers, which is a key driver for the cost of workers’ compensation.
SPLI’s financially responsible culture is the foundation that has afforded the company the opportunity and luxury of owning its own A (Excellent) rated workers’ compensation carrier and TPA. 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.
Partnering with a PEO can provide many benefits to your clients, however not choosing wisely poses a potential catastrophic risk to your clients not to mention the exposure to E&O claims.