Money doesn’t just appear out of thin air! I know that may come as a surprise for a lot of folks. But if you run a business you immediately know what I’m talking about. Let’s use the word “margins.” There’s usually a thin line between being profitable, breaking even and being in the hole! And if there’s one thing I can tell you it’s that a business owner will know where they fall on that scale. And a workers compensation rate increase can have a troublesome effect on the bottom line of a business.
Workers compensation insurance companies take rate increases for a variety of reasons. Here’s a few:
- Poor performing book of business.
- Identified underperforming specific classes of business.
- Overall higher claim costs.
- Increased claim costs for certain classes of business.
- Changes in legal environment.
- Changes in judicial environment.
- Changes in the market place.
- Competition with other insurance carriers.
When they take increases it’s usually by individual class code. All insurance companies have “rate committees” tasked with the job of monitoring and making rate change recommendations. These committees are usually made up of a mixture of company employees and will include folks from underwriting, claims, actuarial, legal and management. For a large, national insurance company you may find they’ve broken their rate committees down into regions who come together to form their national rate committee. Regardless the who what or how, you can be sure that every insurance company out there who writes workers compensation insurance keeps a close eye on performance. They’re always at the ready to make adjustments to individual rates in order to meet their individual company goals of market share and profit.
An insurance company will usually make rate changes once a year by making some kind of announcement. Most of the time those announcements will go out their agents contracted to sell their products to the public. Sometimes you’ll see a company make public announcements when the spin is placed on reducing rates. Yes, I did say spin. You may see in the news where an insurance company has announced they are taking a 5% overall workers compensation rate reduction! Yay! Sounds great right? But be careful. Remember I mentioned how a company will make changes to individual rates. Let me translate. Some rates go up…some rates go down…and the overall rate change may be down. But we’ve seen it many times where the more common class codes take significant increases only to be offset by the lower less common classes with the ultimate result being an overall rate reduction. When in fact the significant increases taken in the common class codes make a great impact on those employers bottom line! Yep…spin.
So whats all this mean to an employer? It means that workers compensation rates change. They’re dynamic. They fluctuate depending on some of the factors mentioned above.
An employer must keep their eye on the ball! Most employers can manage around a 5% to 10% increase in just about anything if they have the time to plan it out. If you are an employer work with your insurance agent. It’s a great place to start. Rate changes don’t happen over night. They are planned and the announcement of rate increases or decreases usually comes many months before the actual changes go into effect. Your agent should know this and work with you to give you a heads up!
What can an employer do? Do what you should have been doing all along!
- Monitor your class codes to make sure they are correct – If you have questions about codes and classes work with your agent or ask for help from an independent work comp consultant.
- Review your workers compensation audits – Mistakes are made! Make sure your audit is correct.
- Review your EMR or Experience Modification Rate – Don’t be caught by errors in your mod calculations.
- Review your claims – Claims drive the costs of any workers comp program. Have your claims reviewed.
- Implement a Safety Program – Stop claims before they happen! It’s the best thing for everyone.
There you go. Expect rate changes. Plan for them. Do what you should be doing anyway!
Hope this somehow helps you out! Thanks for Reading