How can this happen? In most states, workers compensation insurance carriers provide their products in an open, competitive market place. That simply means that from one insurance company to another rates by code and appetite to provide coverage by classification will vary. So one insurance company may have a rate of $24/100 for the same code that another uses $21/100. And likewise one insurance company may offer coverage to employers involved in roofing operations or public safety (police) while another may not.
We have worked cases where because of the complexity of the classification of the account, quote options were limited to only a few insurance carriers. This can become a real problem. When an insurance company looks at taking on a new workers comp account there are several qualifying factors that they will consider. Here’s a few:
- Acceptable Business Operations of the Insured. As I mentioned above, not all classifications are accepted by all insurance carriers.
- Acceptable Profitability of the Account. Has this applicant’s workers compensation program been profitable for past carriers? That’s right, the insurance company is in business to make money!
- Acceptable Loss History. A peek into the history, the present and the future of an applicant’s workers compensation program. Insurance carriers want to provide coverage to those applicants who can show a solid history of profitability and control over safety as evidenced by hard copy loss runs from previous carriers.
- Acceptable EMR. Use of an account’s EMR or Experience Modification Rate as another acceptance factor is very common among all insurance carriers. Those employers with low, below 1.0, EMR’s are actively sought after while those with debit mods of 1.2 and higher are looked at very carefully and usually trigger another level of qualification.
- Other factors include; Operating Territory; Payroll and Premium Size; Specialized Coverage Needs – including LSHW and other federal programs.
As you’re beginning to see, there’s quite a few qualifying factors that an insurance company will consider before taking on a new client. But let’s get back to the question at hand.
Sometimes an employers policy may have a code included that just because of it’s very nature will preclude them from securing other more competitive quotes. When this happens it’s in the employers best interest to have code review conducted. Nothing new there. Operations within a business are fluid, they change. A code that may have been properly included in the past may no longer be appropriate or a better more descriptive code may have been developed and unknowingly now in use.
The Take Away: Have your workers compensation codes reviewed. It doesn’t hurt! Don’t wait until you have a problem.
Hope this helps you out! Thanks!
