What is a workers compensation manual premium?
There’s a lot of confusion out there when it comes to terms and their definitions as used in the rating process of a workers compensation policy. Commonly known as rating elements, many individual items are compiled and then applied into a states workers compensation rating algorithm which results in the estimated annual premium. The premium paid by an insured employer.
The formula for Manual Premium is: Manual Rate x Estimated Annual Payroll or Remuneration.
- Manual Rate is the specific rate per $100 of payroll or remuneration for any individual workers compensation classification code.
- Estimate Annual Payroll is the projected annual payroll for any individual workers compensation classification code.
As a side note, supplementary disease loading along with US Longshore & Harbor Workers exposure for non-F class loading may also be included.
Here’s an example: Let’s say you are the owner of a small grocery store, your workers compensation classification code is 8006 (Store: Grocery – Retail), the rate for 8006 with your workers compensation insurance company is $3.14/100 of payroll and your projected payroll is $100,000. Your manual premium would be $100,000 x $3.14 /100 or $3,140.
Once your manual premium is calculated additional rating elements will be added. These may include premium discounts, surcharges, schedule rating factors, merit rating factors, experience modification factors and once applied to the manual premium will develop the estimated annual premium.
So while the Manual Premium is not the premium you pay, it is the starting point for all calculations in the rating algorithm.
If you need help with a Manual Premium problem, have a workers compensation audit problem or want to ask us a question, contact our office at your convenience! We’d be glad to assist!
Hope this helps you out! Thanks!