Ask Your Peers  Workers Comp and Payroll Companies 

If you write workers comp on a pay as you go basis with The Hartford, Travelers and others, be prepared to have that business attacked by payroll companies like ADP and Paychex. When an insured wants these payroll companies to report their payroll directly with these insurance carriers, the payroll companies are advising the insureds that they will only do so when the payroll company is listed as the agent of record. Once they get the insureds to agree to that, you've lost that line of business with your client and you can be sure the payroll company will go after the rest of the lines that insured has. While I'm not sure the tactics used by the payroll companies is legal or not, it does sound like coercion, misdirection and may even be extortion. In some cases the payroll soliciting insurance business without an insurance license.

My last sentence had mistakes in it.

In some cases, the payroll rep is soliciting insurance business without an insurance license.

Thanks for the Heads up ,Great information !!!

Greg,

I have heard of the payroll companies going after W/C (for standard lines mostly), but this is the first I have heard of them competing for other lines like G/L, P/L, Property or Commercial Auto. Sounds like this is something you have some first-hand knowledge of? if so, please share to the extent you can.

They have been stealing all lines of cover for years, but had not been requiring that they be named agent of record just to report the workers comp./payroll to the insurance carriers. Now they are, so that's where the coercion comes into play. Otherwise, if the insured wants to stay with his agent, he has to self report the payroll. In some cases they've told my insured that we haven't gotten them the maximum credits on their insurances and over to them, they'll get them reduced rates on all their insurance.

I think it is about to get endemic shortly. Agents and brokers are going to have to let their carriers know they are not happy about this or the carriers will do just turn their head like they are now.

We refer our clients to Heartland America to do their payroll. This payroll company does not and will never do insurance, and on top of that; their rates will blow away ADP and Paychex and others. If anyone wants a contact at Heartland America, shoot me an email at [email protected] and I'll email you back contact information for the man we use.

Interesting. I wonder if any of our Workers Comp market provider members will chime in here.

Greg,
If you write a Pay as you go WC policy with Hartford, Travelers and others and they have their payroll with Paychex or ADP, the only way to remain the broker is if they use the self reporting option. You can't write a WC policy and expect the payroll companies to report the payroll so you can get paid. They need to be the agent of record to do so. I'm in Paychex's backyard. They like to put most of the business with Hartford because their systems are connected together. Here's the catch. They don't know what they are doing most of the time. They mis- classify and they usually exclude owners without telling them the consequences. They also try to put the clients in the most expensive company and they bump them up when the client isn't looking. In order to compete with the payroll companies you need to offer them the services that they will NOT get with the payroll companies and that is ADVICE. When I run up against Paychex and ADP I sell the client on another payroll company such as Heartland and then you can have them do the payroll because they don't sell insurance. There are also many other companies who don't do business with the payroll companies so try to use them instead of Hartford and Travelers.

We started our own payroll company a few years ago because this was happening, and we aggressively price it way under ADP or Paychex. Then we also added a non-solicit clause in our agreement that we have with our agency partners, so they have in writing that we won't solicit their customer. We also quote pay as you go WC with some carriers that don't care which payroll company they use, or even if they do the payroll themselves in-house with quickbooks ect. Usually what I do is quote the WC, and I give our agent an optional payroll quote that they can try and sell where we would handle the reporting, but it's not required, we just pay out extra commission if they sell our payroll quote along with the WC. Basically we offer WC and payroll as independent products, or together, but distribute them only through agents, and also we don't do any retail business, so that way our agency partners don't worry about us soliciting their clients for other lines/services.

In just now speaking with our rep at Heartland, he advised that ADP and Paychex are now moving insureds they already stole out of Hartford and other carriers and moving them into Employers who will not allow any midterm policy changes. This locks the insured into Employers and protects the payroll company's book of business as their ranks have been desimated by Heartland taken away accounts.

Go get an appointment with Employers. We did and they are competitive on the accounts they want to write. The bottom line is that the payroll companies look at WC as a commodity and you need to explain to the insured that it's not.

Perhaps, yet another reason to view PEOs for what they really are, your ally, not your adversary. We are a national broker/agent friendly firm for over 20 years and agents participate in the commissions. We also protect your turf; P & C, benefits, etc. Find out more http://www.peobrokersgroup.com or call us today toll free @ 877-810-9355 email [email protected] or download my very smart vCard @ http://www.stevebrown.123look.com

A couple of points I'd like to make:
1. Whenever you run into a payroll company (or rep) who uses the Agent of Record tactic, make sure they are licensed as insurance agents and/or brokers.
2. When I was a direct agent for an insurance provider, to compete with the payroll companies, I would ask my client to ask the payroll company for a complete breakdown of the work comp premium, and compare it with my quote. Nine times out of ten, this is when the client would learn for the first time, the undercutting of payroll, premium and see that additional fees were added to their complete work comp costs by the payroll company. The additional fee to "report the payroll" to the insurance carrier was always way out-of-whack.
3. Whether the payroll company asks for the payroll for the reporting period or the agent does, it will be the same information from the client. It isn't hard to set up every payroll report in advance and send them to the client yourself and ask that they fill it in, sign, and return it to you. I'm not suggesting that clients not use payroll companies, but convince them to allow the payroll company to do what they do best, and allow you to do what you do best.
4. When the payroll companies / insurance agents move the coverage after becoming the agent of record, mid-term, it really screws up the experience rating in terms of ARDs.

I'd like to thank everyone for your input. I am very aware of how to educate and keep my clients, but as you all know; clients are price driven. As far as Employers, that is the carrier of choice for Paychex and ADP now because they will not allow mid-term changes including BOR's. As far as expecting payroll companies to report the payroll to the comp carrier at their expense, well most every other one does and if they don't; their fee is nominal since it is just a few clicks of their CSR's computer. You are absolutely correct about unlicensed solicitation by these people. It's a travesty and the insurance departments are allowing it to happen.