Dating back to the very origins of the professional employer organization (PEO) industry, there have been multiple approaches and multiple opinions as to how a PEO should procure and provide workers' compensation coverage to their client companies. In an effort to provide guidance to the various state departments of insurance on a rapidly growing industry, the National Association of Insurance Commissioners drafted a Model Employee Leasing Act in 1991. At that time, both the National Council on Compensation Insurance and the NAIC were opposed to the issuance of a master policy in the PEO's name and recommended that a new insurance platform be created for the PEO industry: the multiple coordinated policy.
As a basis for comparison, let's briefly identify the three ways in which PEOs currently procure and provide insurance for their client companies:
Master Policy This is an arrangement in which the PEO is issued an insurance policy whereby they are the only named insured. The PEO's policy is extended to cover its client companies by aggregating the clients' payroll and experience modification factors to arrive at one premium level.
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