The workers’ compensation insurance rates in Florida have seen many rate revisions over the last couple of years. We have been tracking those changes as you can see from these articles below:

• 2008 Workers Comp Rates
• Upcoming Workers Comp Rates
• January 1st, 2009 Workers Comp Rates
• Changes in 2009 Florida Work Comp Rates
• 2009 Workers Comp Rate Increase
• April 1st, 2009 Workers Comp Rates
• Workers Comp Rates Changing Again
• July 1st, 2009 Workers Comp Rates

We are expecting another upcoming change for January 1st, 2010, because Florida Insurance Commissioner Kevin McCarty made an announcement that he has received a new rate filing from the National Council on Compensation Insurance (NCCI) for workers’ compensation insurance rates. The filing includes an overall average rate decrease of 6.8 percent statewide.

This is good news for landscaping businesses in Florida. “I am very pleased to receive another request for a reduction in workers’ compensation rates,” said Commissioner McCarty. “This is welcome news to Florida employers during these challenging economic times.”

Here is a link to the press release on the website of the Florida Office of Insurance Regulation.

As the owner of a lawn maintenance or landscaping business, you constantly make decisions involving risk. For this article, the term ‘risk’ is defined as uncertainty about outcomes that can be either negative or positive. When you made the decision to start your business, you calculated the risk involved in it. Risk is present in all activities, yet people and organizations are often unaware of risk or the significance of the financial consequences associated with accidental losses. I am sure that when you started your business, that you overlooked or were unaware of many of the risks you would face. As you begin to realize these risks, you also realize the greater importance of risk management. Risk management consists of both controlling risks and financing risks. I will introduce the topic of Risk Control in another article, but right now I want to focus on the subject of financing risks.

Risk Financing has traditionally been dividing into two types of techniques, which are retention and transfer. Retention is a risk financing technique by which losses and variability in cash flows are financed by generating funds within the organization. Transfer is a risk financing technique by which the financial responsibility for losses and variability in cash flows is shifted to another party. Most risk financing measures available are actually combinations of both retention and transfer. Therefore, a major part of the risk financing decision for every loss exposure involves determining the most appropriate retention levels. Once a level of retention has been decided, there are many transfer measures available, some of which are more suited to particular types of loss exposures than others. The most common transfer measures are obtained through purchasing insurance policies.

Before we get into the purpose of purchasing insurance policies, I would first like to touch on the major goals of risk financing. These goals must align with an organization’s overall goal to maximize value for the stockholders or the business owner. The goals of risk financing are to have enough funds to pay for losses, to manage the cost of risk, to manage cash flow availability, to maintain an appropriate level of liquidity, and to comply with legal requirements. Risk transfer through insurance helps landscaping businesses obtain many of these goals and the types of insurance that the organization needs to purchase changes as the organization grows and as their risk exposures change.

The purpose of purchasing insurance aligns with the landscaper’s overall business goals and risk management goals and insurance policies are purchased to strive towards those goals. The purpose of purchasing insurance is to gain the advantages of transferring risk. These advantages are:

• 1. Reducing exposure to large losses – This is the principle advantage of purchasing insurance. Retaining large loss exposures increases the probability that the landscaping business will incur financial distress. Financial distress can have negative effects on relationships with suppliers and customers and may ultimately lead to bankruptcy.
• 2. Reducing cash flow variability – By reducing the effect of losses associated with retaining large loss exposures, insurance helps lessen the variability of cash flows. An annual premium cost is more predictable than the exposure of large losses. More predictable cash flows makes a landscaping business a more reliability source of income for its owners and more attractive to investors, thereby potentially increasing the overall value of the business.
• 3. Gaining ancillary services with the insurance – Insurers often offer risk assessment and control services as well as claims administration and litigation services. The level of efficiency and expertise that some insurance carriers have developed in these areas often makes the risk transfer agreement very appealing to landscaping businesses that cannot provide these services efficiently. Although it is possible to obtain these ancillary services outside of transfer agreements through third-party providers, this can be expensive.
• 4. Avoiding adverse employee and public relations – By purchasing insurance and thus transferring responsibility for losses to the insurance carrier, the landscaping business also transfers responsibility for the claims administration process. Therefore, any issues with claims administration are less likely to harm the reputation of the business and consequently are less likely to generate adverse employee and public relations.

I wrote a previous article about a large example of insurance fraud by a landscaper and said I would do more research about the topic. I came across this report by the Florida Department of Financial Services Division of Insurance Fraud Crime Intelligence Analyst Unit, which I recommend you read if interested in the topic of insurance fraud. It was stated in the report that for almost every type of insurance, that insurance fraud is on the rise. Insurance fraud increased significantly over the past year, indisputably as an impact of the down-turned economy. While there are several products of which exposure has been noted, the greatest measured impacts are as a result of vehicle insurance fraud, mortgage fraud, and workers’ compensation premium fraud. The Coalition Against Insurance Fraud reports that “hard-pressed businesses are finding ways to avoid paying full workers’ compensation premiums. Companies hide workers in shell companies to reduce their payroll…they misclassify workers in high-risk jobs as being low-risk (i.e., landscapers misclassified as clerical office employees).” An analysis of questionable claims submitted by more than 1,000 National Insurance Crime Bureau member companies in the first quarter of 2009 found that cases of workers’ compensation premium fraud increased 71% from reported incidents during the first quarter of last year.

In the report’s conclusion, it stated the following “And, last but not least, it is recommended that we focus efforts on the increase in workers’ compensation premium fraud; specifically we must work diligently to identify employers who are misclassifying workers’ to reduce costs, as well as employers who have elected to avoid payment of premiums altogether, and do so in partnership with the Division of Workers’ Compensation Compliance, not only as enforcers, but as educators, to increase awareness to minimize such instances by reinforcing the potential consequences.”

Insurance fraud is not a victimless crime! It is estimated that insurance fraud costs the US $80 billion dollars or more a year. Those costs get passed down to you, the consumer. The CAIF estimates that cost to be approximately $950 per family. The cost of workers’ compensation fraud is also very high for businesses. Reporting insurance fraud is easy and just a click away. If you are aware of any businesses or individuals that are committing insurance fraud, please report it the Florida’s Division of Insurance Fraud.

Earlier this afternoon, we published a press release about the BearWise Landscapers insurance program. It was a brief description to the media and general public about our program and was simply designed to increase awareness of the insurance services available to landscapers in Florida. Our website has received many visitors across the state of Florida and I have heard a lot of positive feedback about these articles and other information on the website. We specifically wanted to mention the articles and information on the website and also let the owners of landscapers know that it is quick and easy to get quotes from our agents by simply completing our online quote request form. Here is the text from the press release:

BearWiseLandscapers.com - Informative Insurance Service for Florida Landscapers

Florida Landscapers Now Have a Specialized Insurance Program to Handle Their Business Risks - BearWise Landscapers

ORLANDO, Fla.–(BUSINESS WIRE)–Black Bear Insurance Agency, Inc. is proud to announce an insurance service designed exclusively for Florida landscaping businesses. The service is called BearWise Landscapers and it specializes in the unique insurance needs of landscapers throughout the state of Florida. Drew Roberts, CPCU, ARM, leads the group of insurance agents with multiple years of experience serving the ‘green industry’.

BearWise Landscapers provides industry specific information and recommendations to landscapers about their business insurance. The standard insurance coverages recommended to landscaping businesses are general liability, commercial auto, equipment floater, and workers’ compensation. Depending on size and exposures, a number of other insurance coverages can be added to reduce businesses risk.

In addition to the specialized information available on the website www.BearWiseLandscapers.com, landscaping businesses may also request comparative quotes online from over 30 insurance carriers.

This focused approach to providing insurance to Florida landscapers, gives the agents at BearWise Landscapers the ability to analyze the rates and coverage options offered by those insurance companies that underwrite landscapers. It also allows landscapers of any size to receive quality customer service form professional insurance agents with specialized knowledge of their insurance needs. Visit www.BearWiseLandscapers.com for more information.

About Black Bear Insurance Agency, Inc.

Black Bear Insurance Agency is located north of Orlando in Longwood, Florida. As an independent agency, the insurance agents at Black Bear have access to multiple insurance carriers. The agency specializes in handling commercial insurance programs for Florida businesses. For more information, visit www.BlackBearAgency.com or call toll free 1-866-296-2327. BearWise Landscapers is a division of Black Bear Insurance Agency, Inc.

I came across the following article in The St. Petersburg Times. It is by Yvonne Swanson and I thought you would enjoy it since it discusses competition from “door knockers” with unlicensed businesses. The landscaping business is tough enough to manage without this type of competition. I think the author of this article does a good job of explaining the benefits of going with a professional landscaper.

It was early on a Sunday morning when the young, scruffy fellow knocked on Greg Charles’ front door. Spotting lots of trees in the St. Petersburg yard, he came calling with a chain saw and a story about how all those big trees needed cutting.

Some homeowners would have listened to the sales pitch, forked out the money and watched those limbs fall. But the man had knocked on the wrong door.

Greg Charles is a local legend when it comes to trees and other plants. He has taught thousands of people the ABC’s of the landscape field at Pinellas Technical Education Centers, where he’s run the horticulture program for more than three decades.

Unlike other professional industries, most of the services offered by lawn, tree and garden businesses don’t require licensing based on skill and expertise. In fact, anyone with a business license and a lawn mower, chain saw or other equipment can call themselves a landscape professional.

Hiring a company or individual who comes knocking on your door can be dangerous, experts warn. Improper tree work, as well as poor pruning of shrubs and other plants, can spread disease and kill plants. These “door knockers” may offer a sweet deal, but it could result in thousands of dollars in damage if trees and mature plantings are lost.

Summer is high season for these self-proclaimed landscapers, who prey on homeowner fears of tree-related damage that could come with tropical storms and hurricanes.

“All these fly-by-nights are going around now telling people they need hurricane cuts and thinning out the center of their trees, which makes it more susceptible to storm damage,” Charles says. “You have so many people wanting business that they are going out butchering trees. If we get a significant blow, we’ll see those trees go down.”

Homeowners can protect their properties and pocketbooks by hiring a certified professional or member company of the Florida Nursery, Growers & Landscape Association. The group, which has 2,400 member companies, has certified more than 1,000 individuals statewide, according to Merry Mott, its director of industry certifications.
Certified professionals must pass extensive exams and complete continuing education on such topics as plant care, pest identification, water quality and conservation, fertilization, landscape installation, irrigation repair and landscape maintenance.

Charles and his colleagues are on a crusade to educate the public about the industry and the importance of hiring qualified people for the job.

In these tough economic times, many homeowners are tempted by cheap prices, but as with most services, you get what you pay for. “You take the low bid, and guess what? Most of the time when you try to cut corners, you get bit in the butt,” says Charles.

One thing I wish the article discussed is the importance of hiring a landscaping business that has insurance. Many of these “door knockers” do not carry insurance policies on their business and any damage they cause would not be covered. The injured party could try to sue the person that provided the landscaping services, but more than likely they wouldn’t have any assets worth repaying the damages. As a landscaping business, you should always mention the importance to the client that you carry appropriate limits of insurance coverage. This can be as simple as giving the client a copy of your certificate of insurance and making a brief comment on the importance of hiring a landscaping business with insurance.

I found a recent article about an owner of a landscaping business in Maryland that was accused of falsifying payroll records to pay less on insurance and taxes. According to the article, the landscaper failed to report pay to 39 workers and overtime pay during a three-year period. This resulted in the landscaping business underpaying their workers’ compensation carrier by 51,850 dollars. It also caused the business to not withhold 40,400 dollars in state income tax and underpay the Executive Office of Labor and Workforce Development’s Division of Unemployment Assistance an additional 32,800 dollars.

This tax and insurance fraud was discovered by an auditor for the landscaper’s workers’ compensation insurance carrier. The auditor discovered corporate tax returns that were filed by the owner for nearly 400,000 dollars in payment to subcontractors that were not disclosed during the audit. This was coupled with an insurance claim by one of the 39 employees that were not listed on the payroll. The Insurance Fraud Bureau of Massachusetts then began their investigation of the company.

The owner of the landscaping business has been charged with 10 counts of unemployment fraud, 31 counts of failure to withhold state income tax, three counts of workers’ compensation fraud, and three counts of larceny. I know from experience that this is not a solitary example of insurance fraud and that this happens very frequently. I will do more research and write another article in the next few days about the impact that insurance fraud has on insurance premiums paid by your business.