The Strategy of Risk Management
Managing risk involves dealing with uncertainty, reducing the possibility that things will go wrong, and protecting against hazards. Risk is best managed not by chance, a roll of the dice, but by a well-thought-out strategy and a methodical approach. The PEO’s strategy and approach helps lessen threats, many of which are beyond the PEO’s control.
Let’s start with the state of the insurance markets. The PEO certainly can’t control it, but it certainly can keep an eye on the markets, interpret the indicators, follow the trends, and act accordingly. The combined ratio is a key indicator for insurance carriers. High combined ratios and low investment yields year over year put stress on the workers’ comp line of business and its carriers. The Affordable Care Act (ACA) may affect the availability of health providers for work-related injuries and carriers will have to assume more of the risk associated with terrorist attacks if the Terrorism Risk Insurance Act (TRIA) is not renewed. Even so, the overall trend for workers’ comp is improving and, within this environment, PEOs still have options.