Professional employer organizations (PEOs) and insurance agents have been traditional competitors because PEOs provide Workers’ Compensation and Health insurance under their master plans to client firms. But times have changed.

In the late 1990s, three PEOs were formed with plans to enter into marketing agreements with insurance agents. All three quickly grew to rank among the 10 largest PEOs in the U.S. Later, many other PEOs started to offer sales contracts to insurance agents while retaining a direct sales force. Today, most of the 25 largest PEOs will provide a sales contract to insurance agents.

Over the last five years, two significant developments have changed the landscape for the relationship of insurance agents and PEOs:

1. In 2013, the NCCI released a study authored by its chief economist, Harry Shuford, concluding that PEOs have a positive impact on the nation’s Workers’ Compensation system. This has encouraged many of insurance agents, who had previously held a negative opinion of PEOs, to look to PEOs to provide an alternative solution to various insurance needs for their clients.
2. The PEO marketplace has evolved. Five years ago most PEO sales with insurance agents involved the agent working with a PEO employee sales rep, who handled all point of sale communication with the client. The evolution of PEO sales has followed the independent insurance agent model. Today many agents look to PEO brokers to access PEO solutions for their clients.

Today there are more than 700 PEOs in the U.S. The PEO broker typically has sales contracts with many PEOs and can match up the needs of the client with the capabilities of a group of PEOs to request proposals.