Being a commercial lines insurance agent at Viking Insurance Services, I inherently speak with a lot of business owners on a daily basis. As a commercial lines insurance agency specializing in bringing clients out of the workers compensation assigned risk pool, a lot of those business owners are in their state workers compensation risk pool. Roughly half of the clients I speak with don’t know that they are in the assigned risk pool, and/or have no idea what it is. Even fewer know the actual reason they are in the pool to begin with.
So, What is the assigned risk pool?
The IRMI (International Risk Management Institute) defines the assigned risk pool as “a method of providing insurance required by state insurance codes for those risks that are unacceptable in the normal insurance market.” In plain English that just means that it is meant to be a market of last resort for high risk policies, where the insured has not received voluntary offers directly from insurance carriers.
Depending on a number of factors, your business may not be an acceptable risk to standard carriers. Your agent may be submitting dozens of applications, and receiving declination after declination. In that event, you are fortunate to have access to workers compensation coverage through the state risk pool. Without it, you simply would not have access to coverage for work related injuries your employees may sustain.
The being said, more often than not, the clients I speak with have no business being in the assigned risk pool.
Different states, different rules
Each state has its own workers compensation risk pool. While many states use an organization called NCCI to administer their workers compensation program, there are some who administer their own program, as well as North Dakota, Ohio, Washington, Wyoming, Puerto Rico, and the U.S. Virgin Islands which are monopolistic funds.
The rules and requirements vary from state to state, especially when comparing NCCI administered states to independent and/or monopolistic states. It is always a good idea to speak with your agent if you have questions, or check with your local governing body. We have listed links at the very bottom of this page to many of the state insurance commission websites.
Why are the rates so high in the assigned risk pool?
This is a question I get asked all the time. The answer is really pretty straight forward: The assigned risk pool is meant to be a market of last resort for high risk companies, therefore the businesses who are in the assigned risk pool /SHOULD/ all be high risk operations. That being the case, the rates are meant to be commensurate with the risk the insurance companies are taking in insuring this group of high risk policies.
Rates vary from state to state, but in general it is safe to assume that the rates in the pool are the highest available for most workers compensation class codes. In fact, many standard voluntary market carriers use the assigned risk pool rates as a basis to discount their rates against.
Should you really be in the assigned risk pool?
The answer to the above question is often no. There are dozens of workers compensation insurance carriers in the United States, and all of their underwriting appetites are different. What would be a decline for many, may be what another specializes in.
For example, General Contractors are a very difficult class of business to write workers compensation for. There are very few carriers who are willing to write policies when more than 25% of the labor is subcontracted, let alone 75-85% of their labor being subcontracted as is standard with GC’s. That is not to say that you should be in the assigned risk pool though, because there are carriers who specifically write coverage for these types of operations.
Here are a few other common misconceptions on why an account is in the pool:
- Less than three years prior coverage
- High risk occupations such as roofing contractors and arborists
- History of previous claims or losses
- High employee turnover rate
The above reasons are mostly untrue. We write new businesses, with zero prior coverage, in standard voluntary markets every day. Just because you have had some claims doesn’t knock you out either. There are many carriers who will consider offering coverage for accounts with prior losses, and there are even carriers who prefer to write these harder to place risks. We also have carriers who like to write roofers, tree crews, and even cell phone tower installers. With regards to employee turnover, I am asked that question a handful of times out of hundreds of applications.
In reality, the most common reason I come across in dealing with companies who are in the assigned risk pool is that they are dealing with a captive agent. That is probably a term you have never heard before, but what is means is that they are only allowed to write business with one carrier. Examples of captive agents would be Nationwide, Allstate, State Farm, Farmers, etc. So, if you call your local captive agent and ask them to quote your business insurance, the only company they are able to offer quotes with is the one company they work for. What if that company doesn’t write workers compensation in your state, or they don’t write your class of business? You end up in the assigned risk pool.
Alternatively, independent insurance agencies are able to be contracted with various insurance companies. This gives independent agencies the ability to hunt for the best coverage, at the best price, with many different carriers. For more information on why an independent agent is the right choice for you business, check out this article.
Here are some valid reasons to be in the assigned risk pool:
- Experience modifier above a 1.3 to 1.5
- Major claim within the past two years, often in excess of $100k
- Paying employees 1099 when they should really be W2
- Low payroll or no payroll, generally below about $20K annual payroll is tough to place
Save money on your workers compensation by getting out of the pool
As I mentioned above we specialize in bringing clients out of the assigned risk pool. On average we are able to reduce the rate you are paying for your workers compensation coverage by 30-50% by obtaining coverage in the voluntary market. Despite the amount of payroll you are running, and the class code your labor falls under, the savings are almost always substantial.
In addition, the way you pay for your policy will likely change dramatically as well. With assigned risk pool policies insureds are generally required to pay either the entire annual premium or at least a 50% down payment. When coverage is secured in the voluntary market, carriers generally only require 10% down with ten equal monthly payments. There are also “pay-as-you-go “ options which require an even smaller down payment, and give the ability to report payroll on a monthly basis, paying only for what is actually used. Another perk of the latter option is that the carrier generally eliminates the annual audit since the payroll has been reporting monthly.
How to know if you are in the assigned risk pool
If you don’t know if your business is in the assigned risk pool, there are a few ways to figure it out.
First and foremost, just ask you agent! This should not be a secret, and if your agent has withheld this information from you…you need a new agent. If you are absolutely married to your agent because you have been with them for years and when you think about making a change you are left thinking “I wish I knew how to quit you,” something amazing will likely happen when you ask your agent if you are in the assigned risk pool. Nine times out of ten they are going to miraculously come back with a substantially better price for your renewal. If you would like to know WHY that is going to happen, read this little article about the _*types of insurance agents*_ out there.
The second option is to simply give us a call. Our agency, Viking Insurance Services, has access to the full list of all businesses currently in the assigned risk pool in the states we operate in. In a matter of about 5 minutes we can determine whether you are in the assigned risk pool, tell you if we think we can get you out, and give you an idea of what the rates will look like if we are successful.
The bottom line
The bottom line is that many of the businesses we speak with do not belong in the assigned risk pool and are paying significantly more than they should be for their workers compensation coverage.
We know your time is valuable, which is why we have streamlined our processes to take up as little of it as humanly possible. That said, I propose the following question: Would saving even 15% on your workers compensation premiums be worth a total of 10-15 minutes of your time?
Then what are you waiting for? Give us a call today to find out what Viking Insurance Services can do for you.
As promised, here are the links to your states insurance commission’s website:
NC Industrial Commission Information for Employers
SC Workers Compensation Commission