Staffing Industry Spotlight: Tony D'Amicantonio, Client Advisor, Acrisure

Staffing Industry Spotlight is an interview series featuring leaders shaping the staffing industry. Presented by Ascen, an all-in-one employer of record platform for staffing agencies, this edition highlights Tony D'Amicantonio, ARM, CIC, Client Advisor at Acrisure, with over 20 years of experience in staffing insurance. Tony shares insights on essential coverages, navigating startup insurance challenges, and strategies for long-term risk management.

Francis Larson:

Tony, thank you so much for being on the Staffing Industry Spotlight series. To start, we'd love to hear about who you are and what you do.

Tony D'Amicantonio:

Thank you very much for having me, and looking forward to chatting a little bit about insurance today with you. My name is Tony D'Amicantonio. I'm a client advisor with Acrisure. We are an insurance broker and risk management consultant that specializes in the staffing industry. We've been working in the staffing industry for probably 35 years at this point, and today, we have about 170 clients across the country that we work with all things insurance and risk management to help them drive more profitability to their company with a better insurance program.

Francis Larson:

I noticed several lines of business at Acrisure, and I see you are part of the staffing segment. Have you always concentrated on staffing within the insurance sector?

Tony D'Amicantonio:

Personally, I have, yes. I've been with this group for 20 years, and all but my first year, where I made the move from a quasi-real estate insurance expert over to this group, has been nothing but staffing all day, every day. Our firm, Acrisure, does everything that you could imagine across the globe as the fifth-largest insurance broker in the world, but we are the staffing industry segment leaders in Acrisure, and my team and I, everybody that we surround ourselves with, do staffing all day every day.

Francis Larson:

We used to know you by the name “Odell”, and now it's Acrisure. That was an acquisition. Was Odell staffing-specific and then was bought by Acrisure, which is more general?

Tony D'Amicantonio:

Yeah, great question. Acrisure has an aggregator model or had an aggregator model where, since 2013, they've been out there setting records in the insurance space by doing 110 acquisitions a year. They came across our legacy firm called Odell Studner, which was a firm made up of three verticals. A third of the business was staffing specialty, the second third was that real estate specialty that initially brought me over, and then the other third was really a mixture of some areas but primarily driven by captive insurance solutions outside of the staffing space. So those three areas together were what we specialized in, and Acrisure really found the attractiveness in having a firm that had specialty associated with it as opposed to a general business broker. And so we joined in 2015, so we were really early in the infancy of Acrisure as a company, where they were a fraction of who they are today as $4.6 billion revenue company.

Francis Larson:

Given your focus on the staffing segment, could you talk about the insurance coverage that staffing agencies need?

Tony D'Amicantonio:

Sure. And I really always break that down into two separate areas. One, you've got insurance coverages that are contractually driven or contractually required. You cannot, as a staffing company, step foot onto that client's location without these coverages in place. When we look at those coverages, you're talking about workers' compensation first and foremost, and then outside of that, you're also most often looking at general liability, professional liability, hired a non-owned auto, and some form of umbrella requirement.

Everybody's used to insurance requirements and their certificate of insurance. Generally speaking, those are the coverages that we're going to see required. The next tranche of insurance coverages are ones that sometimes are risk management-driven. A company is looking around and saying, "Where's my exposure? How do I make sure the financials of my company are protected?" but at the same time, they sometimes overlap on contractual requirements. Most commonly those coverages are cyber liability, crime insurance, as well as employment practices liability.

Those are the coverages that could either be contractually required and/or just something from a risk management standpoint. After that, there's kind of the next group that is just all about risk management and protecting the company. From that perspective, you're talking about insurance like directors and officers’ liability, which a lot of people have a misconception that, hey, that's only public companies that need that. Although public companies use that coverage more often, it's actually a coverage that any business should evaluate having for protection, fiduciary liability, workplace violence. There's definitely some other coverages that exist out there that are good to at least understand how it may protect the company.

Francis Larson:

Right. So one of the things, we're an employee of record, and so we have all these insurance coverages, and one of the things that was so interesting, it's challenging to get certain types of insurance as you're a small firm, as you're starting. Can you talk about that evolution of when a firm's just starting out? Are there insurances they're going to struggle to get on a national basis?

Tony D'Amicantonio:

Yeah, absolutely, and to your point, it is an extremely difficult position to be in. I think every staffing client of ours today at one point kind of paid their dues. And what I mean by paid their dues is there are only very few options that exist to companies as a startup, and the reason why behind that is because the insurance community in general shrinks down tremendously as soon as you mentioned staffing. Staffing is one of those exposures that typically you're talking about anywhere from three to ten carriers depending upon the line of coverage that has interest in it. So that takes a global industry that has hundreds, if not thousands of insurance carriers down to three to ten.

With that, those insurance carriers can afford to be very selective, and part of that selective process is being able to use history to project the future. What I mean by that is one of the main requirements for a traditional direct insurance relationship is that you're able to evidence anywhere from three to five years of tenure and able to show your loss history for that period. By virtue of being a startup, that's the first swing and miss from the traditional insurance requirements.

The second one is a minimum premium threshold. When you're talking about workers' compensation, for instance, every one of the carriers, those 10 in the workers' comp world today that are out there have a minimum premium threshold, and typically, this varies depending upon type of staffing company and some other variables, but the typical minimum premium threshold is a hundred thousand dollars. So there comes the second swing and miss as a startup. It takes a decent amount of payroll and some heavy rated codes to get to a hundred thousand dollars right off the bat. So those two things can be a struggle.

The third area that comes into play is geography. Are we a light industrial staffing company here in Pennsylvania and we're going to stay only in Pennsylvania? Well, if that's the case, then maybe a state fund policy isn't quite as painful for you, but the reality is most staffing firms, especially anyone that's professional in nature, traditionally has a requirement of a national footprint, and that national footprint is, again, one of those areas that's reserved for needing to be able to evidence those first two items that I spoke about.

Francis Larson:

Why are staffing firms so hard to insure? Is it because of the lack of control, with a third party in the mix?

Tony D'Amicantonio:

Yeah, you're exactly right. The starting point of difficulty for insurance companies is the lack of control, and that's because we've got folks deployed at a third-party client location, and even though you might care for the safety of your employees, if your end-user client is lax on safety or is in the opposite direction and says, "You know what? We really value production over safety," then you're in trouble and so is your insurance carrier. So it really takes an insurance carrier who appoints a dedicated unit team, sometimes through a wholesaler or a third-party entity that specializes in it, to be able to comb through submissions and really drill down into that level of control that the staffing company has because, again, that's where the rubber meets the road.

There's also a fear for insurance companies that staffing companies can grow tremendously in a 12-month period without them noticing or without their ability to be able to have line of sight on that and potentially be prepared for that. In the history of staffing, sometimes that growth has been completely legitimate and something that should be celebrated, but unfortunately in this industry there's also a history of growth taking place the wrong way via something along the lines of piggybacking or something along those lines.

Francis Larson:

What's piggybacking?

Tony D'Amicantonio:

Piggybacking is when a staffing owner who's got a legitimate insurance program up and running is approached by another staffing owner who says, "Hey, I'm really struggling to get my own workers' compensation. Can I just run my employees through you?" And that person says yes, and all of a sudden maybe one staffing... It's not just one staffing company that's "running" through that insurance program, but more likely it's probably 50 staffing companies running through that program, which in a designed structure where a carrier understands that that's the business model is fine. It just so happens that there's, again, a long history in this industry of firms doing that without their carrier having clear knowledge and, again, having exponential growth that the carrier's not able to see until too late more often than not and gets torched, not from a premium standpoint, they'll collect the premium, but the losses are just out of control, and there's nothing that that carrier can do about that typically till the third year, right? Because they don't catch that until the final audit.

For that reason, I've sat with the global head of casualty of one of the three largest insurance companies in the world, who has said, "We actually like PEO more than staffing because in PEO, we've at least got technology in place that we know any given day or week where the heads that we're insuring are coming from, what kind of jobs they're doing, and where they are in the country. That technology didn't always exist for staffing companies. Today, you're starting to see some carriers get more granular with monthly reporting. Some carriers have bi-weekly reporting, but all of that is very new into the space and still isn't at the level that some of the PEO technology is out there, giving carriers comfort in exactly what they're insuring before it's too little too late.

Francis Larson:

It seems that the main issue with staffing, in general, is the uncertainty. This includes factors related to third-party clients and possibly other staffing elements that are unclear. This unpredictability makes it challenging for startup staffing companies to establish themselves due to the many unknowns involved.

I'm curious about the state funds you mentioned—are you referring to assigned risk programs? Do you ever place individuals into state-assigned risk programs at Acrisure?

Tony D'Amicantonio:

Yeah, so good question. There's a difference between state funds and assigned risk. State funds are states like Texas, Colorado, with Texas Mutual and Pinnacle, that have a state-run insurance program that can either be friendly to work with or unfriendly to work with, and those examples, they're actually two of the better state funds around the country. Assigned risk are states that are NCCI states. For example, Indiana and Georgia. There are probably 38 or 40 states around the country that are NCCI states, meaning that they are states that have to take the bad with the good.

In either instance, typically a state fund can be the program of last resort. That's more associated with assigned risk because the bulk of those states just have to do that according to the insurance regulations in their states, and they don't do it very well. It's akin to going to the DMV and dealing with the process that we all love associated with getting your driver's license renewed. There's not a whole lot of high-level attention being paid to it, and if you're paying thousands or hundreds of thousands of dollars in premium, that's a scary thought.

We deploy the strategy of utilizing state funds or assigned risk when it makes sense. Sometimes, that could be an insurance carrier who, for example, isn't licensed in New York. New York's a notoriously difficult state to get licensed in, and so we've got a parent program that's up and running across the country. Then, we'll plug a hole with a New York State fund policy to make sure that that staffing company has complete coverage around the country.

It also can be utilized from a risk management standpoint. So we probably have easily 50% of our staffing client base utilizing, if they've got like a heavy risk or industrial kind of business appetite, they might utilize a second entity to go out and offload that risk to a first dollar guaranteed cost state funder assigned risk policy while keeping a parent program that's a captive or a large deductible where they're taking significant risk in the program. They might utilize a strategy like that so that on that higher stuff, they're not taking risks.

So [state funds/assigned risk] are something that we utilize. It's just one of those things that if you were a startup and you needed a national coverage footprint, once you got past a handful of state fund policies, the administrative nightmare that's in place is real, and, if you are in NCCI states and you exceed a certain premium threshold, they force you into a retro program, which is a whole different level of headache. We've run across folks in the industry who didn't even know that that was coming and just found themselves in their midstream. It can be a treacherous place to navigate if it's not done strategically.

Francis Larson:

You often discuss misconceptions that staffing agency owners have about insurance. Since you speak to many staffing agency owners throughout the day, particularly larger ones, what are some common misunderstandings they express? What do you find yourself needing to clarify for them regarding insurance?

Tony D'Amicantonio:

Sure. So I think, first and foremost, that there are products or solutions out there that will allow them to escape their losses. I think that's kind of rule number one in our industry. You can't ever escape your losses, and that's true for property and casualty as well as employee benefits. Your losses are your losses. You need to understand the most efficient way to fund them and, simultaneously, the most efficient way to buy insurance for catastrophic losses. That's really where we spend most of our time, identifying levels of retainable losses, because you can do it easier and cheaper than an insurance company up until a certain level, but no staffing company really can be prepared for the type of catastrophic losses that exist out there. So you still always need insurance. Our goal is to be able to work with our clients to have them buy the least amount of insurance possible.

It can be a hard wake-up call sometimes for staffing owners to look at it and say, "Well, what am I supposed to do with these losses? It's part of my business. It's an inherent risk that I've got. I've got no choice. I just need to keep finding a carrier that I can get at the cheapest price," and the reality is, the answer lies within the company. We are huge proponents of, if you look at the operational risk management components of your company and you start to really strip that down and invest in becoming a better staffing company, so look at how you're choosing employees, look at how you're selecting the clients that you partner with, look at what are you doing to prevent injuries on the workforce. Conversely, what are you doing when injuries come in the door? How are you mitigating those injuries?

If you start focusing on some of those core areas, intrinsically you will have better insurance premiums and programs for the long haul. But that's a tough thing to do for a staffing company, is to, one, slow down, two, invest, and three, understand that the payoff isn't instant, right? This is usually because there's a lag between insurance premiums and your loss history. So we work with staffing firms all the time that even when they like the idea of investing or digging into these operational risk management areas, they then get soured at the idea of like, "Well, what do you mean I got to wait three to five years to get a return here? I want this now," which we understand, obviously, but that's just not the way the insurance world works.

I also firmly believe that the industry has done a really poor job of getting folks into a habit of insurance being an annual event. The reality is that insurance is a long-term strategy, and it should be looked at accordingly. I know we've got effective dates and policy periods that only go a year, but if you are putting yourself in a place as an owner of reacting to an annual renewal, then you're not doing yourself any good. You need to start taking a step back, look at insurance from a five-year perspective, have a game plan that you execute that may involve different insurance programs, may involve different deductibles or retentions, a variety of different things, and understand you're going to have poor performing years, that there are losses associated with putting people in third-party locations.

But you should find a program that over a long haul, and this is true of workers' compensation, it's true of employee benefits, you need to find a program where you're going to get rewarded for the good years, because that's exactly what insurance carriers do. They're going to bank on the fact that if, say we look on a ten-year spectrum, we're going to win from a profitability standpoint seven out of ten years, maybe eight out of ten years, statistically speaking. So we're going to lose those other couple years, and we're going to have to pay for our losses because we can't escape the losses, but if you set yourself up to win more often than you're losing in the long term, that's how you drive profitability to your staffing firm.

Educating staffing owners on that is tough because it's not their fault they've been trained the wrong way for so long, and it's so hard, especially right now, in the industry to not just look at something that's a quickie fix that might save dollars for this year. We get that, and we just want to make sure that in our role as advisors, we are educating our clients on the fact that, yes, you have that option of taking the short-term gain, but let's also talk about the long-term and let's talk about what might feel like a tough investment today but in reality, you're setting yourself up for success going forward.

Francis Larson:

Can you discuss professional liability, general liability, and Employment Practices Liability Insurance (EPLI)? How do these compare to workers' compensation in terms of potential issues?

Tony D'Amicantonio:

There are a couple of different areas to go there, but the best place to start is threats to staffing companies today. Workers' comp is workers' comp. The reality from both a frequency and a severity standpoint is employment practices liability, and cyber liability are threats that every staffing company has today, and it's not a matter of if; it's a matter of when. I mean, at this point, the number of claims that we're having on the cyber side is astronomical. It's such a frequent event right now, and we don't see that going away anytime soon.

The big shift in our minds was not that long ago. 10 years ago, a cyber policy was a new concept, and we were driving the message that you need to purchase a cyber policy to protect yourself. That's still true, but the only change has been, over the last few years, since the bad guys have gotten more sophisticated and better, you can't just put your head on a pillow knowing you have a cyber policy. You need to invest in your IT security on an annual basis and make sure that you are doing things from the infrastructure standpoint that are going to mitigate the chances of somebody getting in. Because once somebody gets in, yeah, we've got an insurance policy to help respond for that financial event that takes place, but the reality is how significantly one of these bad actors can handicap a company, from shutting them down from days, if not longer, to completely destroying client relationships because of things that they're able to do and manipulating invoices and whatnot. It's probably the most important area outside of workers' compensation today for staffing owners to focus on.

And nipping right on its heels are the employment practices liability claims. This is an area that the insurance community as a whole has just looked at as a loser from a profitability standpoint, meaning they cannot possibly charge enough to capture all of the employment practices liability claims that are out there. So, what you've seen is an evolution of deductibles and retentions. Not that long ago, a 5,000, $10,000 retention was feasible in the space. Umbrella policies, believe it or not, used to sit over employment practices liability policies. All those things have gone by the wayside, where today the starting point for a staffing company retention under EPLI is $25,000, and I would say most of your established staffing companies that have a little bit of mass to them are most likely at 50,000 retention, if not higher.

Francis Larson:

Can you talk about that quickly? What does that mean practically if somebody has a $25,000 retention? Does that mean they're not even telling the EPLI carrier that there's an issue, and they're just handling it up until 25 grand?

Tony D'Amicantonio:

Great question. It’s a common misconception to think, "All right, great. Well, if I'm on the hook for the first 25, then I'm going to do what I deem best to handle that, and then I'll wait until something blows up, and I'll hand it over to the insurance carrier." That's the easiest way to get your claim denied by your insurance carrier because there is a provision that says that as soon as somebody has knowledge of an event, they immediately report it to their carrier so they're not left in a prejudiced position. If you're out there handling your own claim for three months and then all of sudden things go south and you try to hand it off the insurance carrier, their stance is, "Whoa, we wouldn't have done what you did. Now we're in a bad spot. We can't possibly win this. Declined." That is the easiest way to get a claim denied.

So, I think when we talk through claims reporting with our clients, there are a couple of different factors that come into play. One, is it a claims-made policy, like most employment practices policies are, or is it occurrence-based? Because if it's claims-made, you almost always want to get it in. When I say get it in, there are different ways of reporting a claim. You can submit a claim, you can report it for record only, which protects you from that knowledge threshold that I spoke about but doesn't start a claim file, or you could hold onto a claim.

Understanding what type of policy structure is in place is probably the most important part there. Understanding your deductible level, maybe not be for a claims-made policy but for an occurrence-based policy, for something like physical damage. We've got some damage to a client's facility and it's 5,000 bucks. I've got a $5,000 deductible. Well, does it make sense to report to your policy because you're really at the same level? You're just going to establish a loss history that you're better off not having, especially in certain insurance marketplaces. We know that in some marketplaces, like right now, the liability marketplace is as tough as it's been in a decade, if not longer. You're better not to have any kind of marks from a loss standpoint next to your name because that's going to make the pricing that you're securing even more difficult at renewal, and that's if you're able to get a renewal because right now, insurance carriers are being selective about the risk they retain.

So that's probably the first part of your question. I think the second one, if we talk about types of claims that exist out there outside of workers' compensation, we always take all of our staff through a staffing training curriculum where we've got 15 different classes identified to teach them about the industry, not about insurance because they're all insurance professionals, but really about the industry and how does insurance apply to the industry. We always use the same claim example that I think is so great: "Can you tell us what coverages respond if one of your clients is placing a temporary employee in a light industrial atmosphere as a forklift driver? That forklift driver is driving too fast, they clip a client employee as they're speeding down the warehouse there, they run into a racking system, destroy the racking system, the forklift flips, and they hurt themselves, and the client warehouse shuts down for eight hours."

You have six different things that can respond to that example, and again, it's kind of a convenient example to use because of that. But when you start to peel that back, maybe to the point of your question there, we've got, first and foremost, the easy one is we've got employees hurt. That's workers' compensation, right?

Francis Larson:

Easy.

Tony D'Amicantonio:

We also have a client employee that's hurt. That is third-party bodily injury, so that becomes a GL claim. We have client property in the forklift and the racking system that's hurt. That is also a GL claim under third-party property damage. We've got a professional liability claim in the sense that your client turns to you and says, "Hey, your guy just shut down my warehouse for eight hours. I suffered a financial loss of a hundred thousand dollars because I wasn't able to be operating." Well, there's a loss of third-party financial income that can be a professional liability claim. All that, and you're hoping that you don't also get a professional liability suit saying that this guy should have never been in a forklift driving position anyway based on his previous employment history, which, by the way, your recruiter failed to do the appropriate job in evaluating his history, right?

So maybe a little bit of a trade example, but one that, again, touches on so many different areas that, at least in the light industrial world, are commonplace. Hopefully, you don't get all six of those in the same claim, but individually, we see every one of those on a very regular basis.

Francis Larson:

That's such a great example that illustrates the issues with staffing. You've got all these different parties, lots of insurances that are going to be involved.

Wrapping up, what are some final words about how staffing agencies can improve their insurance posture?

Tony D'Amicantonio:

Think when you're looking at startups specifically; an employer of record agency is honestly one of the best places to start. I'm not just saying that because I'm talking to the CEO of an employer of record company, but strategically, that makes so much sense, not just on the insurance side, but it is the one place today that I can tell a startup staffing owner who comes to me that I can guarantee they're going to have that national platform that they're looking for. There are a whole lot of other benefits that go into that, but that's the only place I can guarantee them that they're going to have that national platform.

Depending upon the type of staffing they're doing and some of the other stories that they might be able to tell, there's potential in the ASO world that sometimes you can find somebody who will take a flyer on the startup, but that is far from guaranteed. It is most likely one of those situations where if they're not willing to look at a partnership with an employer of record agency, they're stuck in that state fund/ assigned risk policy kind of purgatory for a minimum of three years.

However, they can start looking within the business to position themselves in the best position possible after those three years. Who are we hiring from an employee selection standpoint? What kind of clients are we going after? To start a business, we have to get gas in the tank, so it's hard to be truly very selective at that point, but as those first three to five years evolve, you need to take a look at your client roster and say, "Are they the right clients for me? Are they doing this correctly, or are we just an offload of risk for them?" Because that certainly sets you up for danger at some point along the line. You also need to understand how to prevent claims and how to handle them when they come in. They are likely the four most important aspects of operational risk management for a staffing company aiming for success.

Francis Larson:

Tony, thank you so much. You provided great content about insurance in the staffing industry!

Tony D'Amicantonio:

Yeah, well, thank you for having me, Francis. Really appreciate it.