And How They Affect the PEO World
The state of the economy, the insurance markets, and access to financing affect all businesses and industries. However, because PEOs serve small and mid-size businesses, and a multitude of industries, that extra layer magnifies the effect these forces have on PEOs. In the last year, the Small Business Efficiency Act (SBEA) has entered the picture.
The PEO Index, discussed in our first feature, provides a 10-year history of how the PEO industry tracks with unemployment data and the gross domestic product (GDP). The index shows not only that PEO clients fare better than non-PEO clients, but it also shows that the same elements that drive GDP growth or contraction can be applied to the industry. Increasing government regulation dampens productivity, but again, PEOs have a positive effect on their clients in this area. While the future of the economy is uncertain, the time is ripe for PEOs to reach out to help businesses make progress in a challenging environment.
The workers’ compensation insurance market is definitely in a better place than it was three years ago, but PEOs continue to face structural challenges and increased regulatory interest. While the National Council on Compensation Insurance (NCCI) has filed rate decreases in 30 states, seven states had rate increases. Carriers are also facing dismal interest returns on their investments, leading to adjusted pricing for customers, including PEOs. Some carriers have left the market, and while other carriers have absorbed those customers, regulators are responding to the failures. However, market condition now are generally stable and PEOs have ways to manage their risks.