Staffing companies have increasingly utilized corridor, slider, and clash deductible programs to reduce premium costs while effectively managing additional risks. These programs provide companies with the ability to control expenses by predicting and planning for their maximum out-of-pocket costs for claims that exceed the initial deductible layer.

Corridor deductible

A corridor deductible is applied to aggregate all claims exceeding the first deductible layer within a single policy term, rather than just focusing on the largest claim. When considering a corridor deductible, it’s important to evaluate:

  • Historical loss stratification
  • Premium offset for assuming greater retained risk
  • Additional collateral requirements if any
  • State and classification code mix
  • Strength of the insured’s balance sheet

Slider deductible

A slider deductible program offers significant financial benefits by adjusting the deductible amount for the largest claim in a policy year. This adjustment provides potential savings for the insured. For instance, suppose an insured has a $500,000 retention and a slider deductible up to $750,000. They face four claims valued at $50,000, $75,000, $400,000, and $850,000. In this case:

  • The insured would pay 100% of the $50,000, $75,000, and $400,000 claims as they are under the $500,000 deductible.
  • For the largest claim of $850,000, the insured’s responsibility would be capped at $750,000 due to the slider deductible.

The benefits of a slider deductible include reducing the financial burden of the largest claim, offering better predictability and potential savings in claim management.

Clash deductible

A clash deductible is used when multiple lines of business (LOB) are quoted together. It typically involves a higher deductible than quoted for each LOB. The clash deductible combines the deductibles across all lines in the event of related occurences, thereby reducing the insured’s aggregate risk and providing additional protection for the carrier in the event of a single loss incident.

For example, individual lines such as Workers’ Compensation (WC) and Auto Liability (AL) may have a $150,000 deductible. However, under a clash deductible arrangement, a combined deductible of $250,000 would apply to all related claims. It is important to note that clash deductibles generally apply only to WC and AL, not General Liability (GL).

The benefits of a clash deductible include:

  • Reduced aggregate risk: By combining deductibles across multiple lines, the insured can mitigate the total risk exposure from a single incident.
  • Enhanced protection: This structure provides greater protection for the insurance carrier, which can result in more favorable premium terms for the insured.
  • Cost Efficiency: Implementing a clash deductible can lead to lower overall premiums, as the carrier’s risk is managed more effectively across multiple lines of coverage.

Corridor, slider, and clash deductible programs offer staffing companies the opportunity to reduce premium costs while effectively managing additional risk. By understanding the benefits and evaluating each program, agencies can make informed decisions to control expenses.

Contact us to work with a Marsh McLennan Agency (MMA) advisor to determine if one of these programs is right your business.

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