Does your workers comp premium keep going up? Are you having problems getting answers to questions you may have about controlling your workers comp premium increases? Here’s a few tips that may help you get a handle on rising premiums. Read on…
It’s back to basics! Work Comp 101! The premium for a workers compensation policy is developed by taking a rate by individual job classification per 100 of estimated payroll, adding a few multipliers and rate factors and poof! There’s the deposit premium an employer pays to get a policy started. At the end of the policy comes the audit where the insurance company compares the estimated payroll with what actually happened over the policy period and making adjustments to what the actual premium should have been by returning overpaid premium to the employer or by billing the employer for the short fall.
Here’s a few of the biggies to keep your eye on:
- Classification Codes – Rates are developed for each type of job classification or class code. There are somewhere around 700 different codes that are used in the proper classification of a business. The rates for different codes vary a considerable amount. For example the rate for roofing in your state may be $45/100 of payroll while the rate for carpentry may be $16/100. Having the correct classification code used on your policy is of the utmost importance and is an area we frequently consult with employers about. The use of NOC (not otherwise classified) codes on your policy can be a tip off that a better, more descriptive code may apply to your operation. Having class codes changed at audit is another tip off that an error may have occured in the pricing of your policy.
- Assignment of Payroll – Proper assignment of payroll into the correct classification code is a primary basis of correct premium development. Assignment of payroll may include correct application of inclusion and exclusion for owners of the business, corporate officers, LLC members, sole proprietors and partners; proper application of payroll separation when allowed; proper use and assignment of multiple code descriptions; proper use and assignment of the standard exception class codes. It may also include the proper use and assignment of payroll items such as overtime; sick and vacation pay; bonus, benefits and other compensation.
- Workers Compensation Claims – If your business is experience rated claims will have a direct impact on the premium you pay. Through a variety of loss sensitive factors ranging from the experience modification factor to retrospective rating plans claims play an important part of the premium calculation. Claim reviews are important. Maybe not for all employers but certainly for all who are experience rated! Claim and reserve reviews conducted by independent outside source can have a big impact on verifying the loss factors used on your policy.
So what can an employer do to help control his workers comp premium?
- Make sure the correct classification codes are being used;
- Verify the rates being used on the policy;
- Make sure payroll items, limitations and exceptions are being correctly applied;
- Keep claims under control;
- Maintain an active loss control program;
- Implement an independent claim and reserve review;
- Verify experience modification factors and other experience rating items for accuracy;
- Verify other rating elements for accuracy;
- Conduct an independent audit review for each and every audit.
When it comes to controlling the rising cost of workers comp insurance it really is back to the basics! Workers compensation insurance is a product that rides the waves. Higher medical costs lead to higher claim payments; higher wages lead to higher indemnity or loss wage payments; active litigation leads to higher rates; all lead to more out of pocket premium an employer has to pay. Sure, you can move your policy from one insurance company to the other because the new company may have lower rates. But that’s usually only a short time fix…and maybe not a fix at all. Getting back to the basics is the first place to start! And when you need help, seek out an independent work comp premium consultant!
If you have questions or need assistance with a work comp premium problem contact our office. We’d be glad to talk with you about your problem!
Hope this helps you out! Thanks!
