PEO Workers' Comp Underwriting

How PEO Workers Comp Underwriting Works

Workers comp underwriting starts with your class codes. The underwriter confirms each employee is classified correctly and assigns the filed base rate. Then the underwriter applies your experience modifier to scale that rate up or down. Next the underwriter reviews your loss runs for the past three to five years, looking at claim frequency, severity, and trend. Finally the underwriter sets your workers comp rate, which may include a markup over the pure pass-through cost.

• Class codes are confirmed and base rates are assigned
• Experience modifier is applied to scale the base rate
• Three to five years of loss runs are reviewed
• Claim frequency, severity, and trend are evaluated
• Open claims and reserves are assessed
• A markup may be added over the pure pass-through cost

Where PEO Workers Comp Savings Come From

PEOs save businesses money on workers comp through group rating and risk pooling. A PEO pools your payroll with hundreds of other businesses, which can earn group rating discounts that an individual business cannot get alone. In Florida, trades like roofing, HVAC, and plumbing can save 20 percent or more through PEO group rates. The savings come from the pooling, not from the underwriting. But the underwriting determines whether you qualify and how much you save.

Watch the Workers Comp Markup

Some PEOs pass workers comp through at cost. Others mark it up 15 to 30 percent. This markup is often the single biggest hidden cost in a PEO quote. Two PEOs with the same headline admin fee can have very different total costs because one marks up workers comp and the other does not. Always ask whether the workers comp rate is pass-through or marked up, and by how much. A broker surfaces this for you before you sign.