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3 Workforce Dynamics Heightening Risks for Today’s Staffing Agencies

Staffing agencies face growing challenges as trends in crime, employment practice liability and auto accidents make risk management ever more complex.
By: | December 11, 2023

Keeping today’s economy running only seems to grow more complicated for leaders by the day. And perhaps the most complex factor in that equation is how to adequately staff every business — from coffee shops to warehouses and hospitals.

Even with payrolls down in some sectors, staffing agencies continue to play a vital role in finding and training workers for a range of industries.

During the course of a year, staffing companies in the U.S. hire over 14.5 million temporary and contract employees, according to the American Staffing Association.

But workplace dynamics have shifted rapidly since the onset of the coronavirus pandemic, and agencies are finding it increasingly challenging to clearly assess the risks they take on when sending workers out for assignments, as well as the risks they assume as employers.

As today’s staffing agencies grapple to deliver value, both for people seeking employment and for companies in need of capable talent, they must work with their brokers to remain vigilant as three dynamics impacting auto, EPLI and crime insurance claims heighten risk across the industry.

More People on the Road Complicates Commercial Auto Coverage

One of the most nebulous risks for today’s staffing agencies is auto coverage.

As delivery and transportation mobility services have skyrocketed over the past three years, roadways have become increasingly crowded and chaotic.

This dynamic makes it increasingly difficult to decipher whose insurance will cover what when auto accidents occur while performing a job.

When a worker is hired by a staffing agency and needs their car to carry out the assignment, one might assume they are covered by the agency’s policy. But it’s not that simple.

That’s not to mention that the auto insurance industry has itself been struggling to keep pace with the sharp uptick in auto accidents and outsized jury awards in recent years.

These dynamics at play in today’s market make it critical for staffing agencies to work closely with their brokers to fully understand all exclusions in their auto policies. Otherwise, they could be at risk for a considerable financial burden if drivers hired through their agency are involved in an auto accident. And with carriers reporting grossly imbalanced combined ratios throughout the auto insurance industry, even with rate increases, the risks are just not commensurate with the premiums that carriers can get.

As Social Tensions Mount, Employment Liability Risks Soar

Escalating social tensions over everything from politics to personal grooming preferences are broadening employment liability exposures for staffing agencies as well.

In addition to the long-standing EPLI exposures associated with discrimination on the basis of gender, race, age or religion, the frequency of litigation tied to all types of protected classes is unprecedented.

The abrupt shift to hybrid work in recent years has also made it more difficult for staffing agencies and their brokers to assess their exposures.

Whether it’s workers’ compensation claims over trips and falls at home or claims tied to the mental health strains many remote workers are experiencing due to social isolation, most insurance companies don’t have full experience in the work-from-home scenario.

Lawsuits stemming from remote-work issues are touching workers’ comp, GL and EPL policies alike.

From the discrimination angle, however, remote-work litigation trends against agencies have not been as relevant, unless it’s a matter of underperformance.

But as it becomes increasingly difficult for people to work together, staffing agencies are left paying higher premiums for EPLI coverage, which could be a major financial burden to a staffing firm that has a couple of claims.

Collaborating with Employers to Guard Against Crime Surges

As staffing companies work with their brokers to assess their auto and EPLI exposures, they’ll also need to review their crime risk mitigation efforts.

Physical theft committed by temporary staff in retail and warehouse settings, for instance, is just one area of high concern among staffing agency leaders. From ghost payroll fraud to intellectual property theft, there is crime in every aspect.

Throughout the industry, cybercrime has been a particular area of greater prevalence, where cyber insurance claims are increasing dramatically.

Because of how broadly cyber hygiene can vary from company to company, staffing agencies are increasingly seeking robust cyber insurance. And employers are also looking to safeguard themselves against cybercrimes committed by temporary employees as well.

Cyber coverage generally could be a $400 policy or a $40,000 policy for a small to mid-size firm and the coverage is varied all the way in between.

Working with Brokers and Insurers Who Know the Staffing Industry

As they continue to search for and cultivate capable talent in the face of broadening auto, EPL and crime exposures, staffing agencies must make sure they are working with brokers who keep a steady pulse on the employment industry as well as the insurance market.

A good broker will make sure staffing leaders have a true sense of the breadth of their current insurance coverage and identify vulnerabilities.

The World Wide Specialty team works to engage brokers and fully articulate the risk transfer options the company offers. As a longtime partner of the American Staffing Association, they make sure to educate the staffing industry.

Because World Wide Specialty is one of the first insurers to craft insurance coverage specifically for staffing companies, they have the most robust and comprehensive policies in the industry.

And as a division of Philadelphia Insurance Companies, World Wide’s ability to address the risk transfer and mitigation needs of staffing agencies of all sizes has only increased. This gives World Wide Specialty team a significant edge.

To learn more, visit https://www.wwspi.com/.


This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.

Philadelphia Insurance Companies (PHLY) offers product-specific resources, alliances, and service capabilities to achieve a multi-faceted approach to risk management, including safety program development, site audits, and training (including interactive web-based training). We offer a wide range of products and value-added services at financial terms to be agreed upon to help you achieve your risk management goals.

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