Payroll companies force us to be double agents. We have to work with them, and sometimes we have to work against them. Today, that’s what we’re going to discuss. I’m going to give you five things you need to know about when working with payroll companies. Some of them help us work with them, and some of them are wedges. Unfortunately, you use against them.
It’s no secret that we have to manage relationships to be successful in property and casualty insurance. Some of those relationships are slippery because you almost have to be a double agent, sometimes working with those people and sometimes competing against them. One of the best examples out there is payroll companies. Payroll companies compete against us tooth and nail for workers comp every single day. But then there are times where they need us to help them so that they can get deals too. That’s why it’s essential you know the best way to compete against them because you need to keep them as your friends too. Let’s talk about three wedges first. Before you get into how you work with them, let’s get the nasty savagery out of the way.
One of the number one wedges you can work with a payroll company when they’re controlling the workers’ comp is that you have proprietary tools that you can use in your agency to compete with what they offer. Payroll companies are notorious for going in and promising everything under the sun: HR services, claims support, all of this stuff, yet they very rarely execute on any of it. Why? Because small businesses typically don’t view that as vital until they need it until they’ve had a claim and until it costs them money. Going in and talking about the experience modification factor and what you can do to help a client understand it, control it, and make sure that it stays better than average is a huge wedge that you can drive. Payroll companies are not going to take the time to do that.
The second thing is, here in Florida, more favorable program terms. We can provide dividends, and the number one carrier that most payroll companies write their business within the state cannot offer dividends. Suppose you can talk to a business owner here, and your state may have something similar. You can get that business owner to understand the power of earning a percentage of their premium back based on favorable loss history. In that case, you’re very quickly showing them that they’re leaving money on the table by the ease of use with the payroll company. Right? Most of them are there because they want to be on a monthly self-audit arrangement.
Here’s a fun fact. You can leave the client with their current payroll company. If you don’t want them to leave the payroll company, but you want to control the workers’ comp because you can give them a better deal, leave them where they are! I recommend you reach out to a company like Reliable Premium Management, which has a third-party option to integrate any payroll company with any workers comp carrier. You can put those accounts on pay-as-you-go. We use them at Florida Risk Partners, and they have saved several deals for us as a result of their product.
The loss cost multipliers are the last wedge you can drive, and it’s an easy one, but it doesn’t apply to Florida. If you look at an account and that account has great loss history, a good experience mod. Still, they’re in one of the most unfavorable underwriting companies out of the selection of underwriting companies that a primary carrier has. You can go in and point out to that person that you can get them better rates inside of the same carrier by just moving them to a different underwriting company with better LCMs. This strategy is a great way to prospect, and you can find that information pretty readily out there on the internet. If you can do those three things that we’ve just talked about, those are great ways to drive wedges.
Now, if you’re going to go in and work with these payroll companies, and you must do that, you need to know a couple of things because they can be excellent referral sources for you as well. Number one, they have a limited underwriting appetite. Now, granted, they have a more expanded list of codes they can write in some cases with national carriers due to the sheer volume they put with them, but there will be class codes that they will not write. If you can write those codes with your carriers and do so profitably, you’ll have a never-ending stream of referrals coming from a payroll rep that wants to write payroll deals, and you can handle the workers’ comp. Figure out what codes you’re capable of writing that they are typically not capable of writing, and network with payroll reps around that.
The second thing is, many times, when a payroll company is out there on the streets competing for a deal, it’s not against another payroll company. It’s typically against a PEO. To pull that business away from a PEO, they need more than just the workers’ comp. They need everything that you can do on the agency side from a claims management standpoint, whether you give them a learning center online, whether you give them a living handbook, and all of the HR things. Typically, if you have any value-add, like Mineral in your agency (and Mineral is the former ThinkHR for those that didn’t know) that you can compete with the PEOs all day.
Our agency here at Florida Risk Partners has a dedicated resource that is a client liaison.  We call her a client concierge. She is the conduit between our value-added products and the end-user, which is our client, or in some cases, our prospect. Specifically, her job is to make sure that that technology is adopted. But, if you can go in and use that stuff and drive change, you’re going to have a payroll rep that is your new best friend because they can then target PEOs, take business from them, and give you the workers comp as a result.
Now, it’s not lost on me that there are many shady payroll people out there. Sorry, it’s just the way that it is. The fact is, they like to slide AORs in the onboarding process to take our accounts from us in, quite honestly, a pretty shady way. You got to know how to combat that. You need to deliver value so that when that happens, God forbid that it does, but when it does, your client can come back to you confidently, knowing that you can drive more value than any other third-party vendor. You’re a partner for them, and they view you that way. Once you embrace that thought process and you think through the five things we talked about today, you can kill it in commercial insurance using payroll vendors to do it.
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