PEO Industry Aims to Build Trust of Insurance Carriers

The professional employer organization (PEO) industry is aiming to build insurance carriersí trust and increase PEOsí opportunities to obtain workersí compensation insurance policies for workers in PEO arrangements. Forty PEOs have been certified by an independent institute for their best practices in workersí compensation risk management, and 12 others are working toward certification.

PEOs arrange workersí compensation coverage, provide risk management and manage claims for several million workers as part of their service to small to mid-sized businesses. PEOs also enable their clients to cost-effectively outsource the management of human resources, employee benefits and payroll. As a result, their clients focus on their core competencies to maintain and grow their bottom line.

As the insurance market hardened after 9-11, PEOs found it more difficult to obtain workersí compensation insurance. For this reason, the National Association of Professional Employer Organizations (NAPEO) worked aggressively with the insurance industry to lay the groundwork for a certification program to help build the carriersí confidence in PEOsí risk assessment and management.

The genius of the program is that its certified practices were developed primarily by workersí compensation carriers. They determined risk management best practices as the foundation. The PEO Workersí Compensation Risk Management Certification Program was launched in 2003 by the Certification Institute (CI), an independent nonprofit corporation promoting industry professionalism and best practices. The programís Board is composed of representatives of workersí compensation carriers, PEOs and other executives with experience in workersí compensation risk management.

Michael E. North, CIC, senior vice president, operations for Lumbermenís Underwriting Alliance, serves on the Board. He offered his perspective on the certification program. ìOne of the toughest jobs of any underwriter is to evaluate the management controls in place at any potential new account. The certification program provides assurance to the underwriter that quality standards are in place and, more importantly, are followed.î

Board Chairman Robert R. Snashall, past chairman of the New York State Workersí Compensation Board, believes the program will benefit carriers, PEOs and regulators. ìAs a former regulator, I am a strong supporter of the workersí compensation risk management practices established for the certification,î he said. ìUltimately the certification will provide a win for all participants. Certified PEOs will provide safer workplaces and better care for workers. The better workersí compensation practices of PEOs will help build carriersí underwriting comfort. And state regulators will have less need to over-regulate the PEO industry.î

The certification program will focus the dialogue between PEOs and carriers on the PEOsí risk management capabilities. ìThis certification program is a great way for the insurance industry to participate with the PEOs and make decisions based on risk management,î said Robert Meyer, principal/consulting actuary for Milliman, Inc., who serves as treasurer of the Certification Board. ìAs the insurance industry recognizes the benefit of this program, the certification process will increase in credibility and integrity.î

NAPEO actively promotes certification to its members. ìPEOs are achieving impressive results with their risk management, creating safer workplaces and reducing workersí compensation claims costs. By achieving certification, they are demonstrating the best practices that produce these results. This is the best way to build the confidence of the carriers, the business owners that work with PEOs, and the industry regulators,î said Milan P. Yager, executive vice president of NAPEO. ìWe are pleased to see the acceleration in the number of PEOs achieving certification as they demonstrate their results.î
Certification Process Is Rigorous

A PEO undergoes a rigorous examination to achieve certification. The Certification Institute independently verifies that the companyís risk management program is meeting proven insurance industry risk-management practices to reduce work-related accidents and health exposures and to control workersí compensation costs. Any PEO of any size can achieve certification if the PEO can show proof of the best practices.


Certification gives PEO client businesses assurance that their PEO has the capability to deliver important risk management results. Certification also provides workersí compensation insurance carriers with ongoing assurance that a PEO is in fact implementing industry best practices in a consistent and effective manner.

These PEOs have achieved Workersí Compensation Risk Management Best Practices Certification. Their Web sites can provide more company information. To learn more about the certification program and review the best practices, visit CertificationInstitute.org. For information on the PEO industry, visit: