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Help…my Workers’ Comp insurance is through the roof!

May 22, 2009
Dennis edited color

Dennis Dressel - Owner & Managing Partner, Founders Insurance Group

Workers’ Comp rates are always a hot topic when I’m working with a new client – often, they pay high premiums because no one has ever counseled them on how the rates are calculated. I’m going to outline and demystify workers comp for you in a few paragraphs. In reality it is much more complicated but it is important you have a basic understanding of how it works. The critical part to receiving the best pricing is having an agent that thoroughly understands the system.

The entity that oversees all Workers’ Comp insurers is the National Council on Compensation Insurance (NCCI). They have established literally hundreds of different job classifications. Each job classification carries its own rate based on previous loss history of workers in that class. The base premium is determined by multiplying this rate times per $100 of payroll. For example, a carpenter may have a rate of $12.00 per $100 of payroll. So the employer will pay $12.00 for every $100 of payroll. Rates range from about $.25 for clerical workers to $50.00 for roofers! And every insurance company has their own rates.

Some workers don’t fall neatly into one classification or may perform jobs that fall into more than one classification. A knowledgeable agent can be sure workers are properly classified and show employers how the set-up payroll records so the classifications can be split. This can save a bundle of money!

Okay, that was the easy part to understand. After the base premium is calculated there are many modifications to it such as:

  • Experience Modification – A credit or debit applied to policies where the premium is over a certain level, usually $7,500, based of your previous 3 years of losses. Agents should verify the accuracy of the info that the NCCI uses to calculate this. We recently found an error in one of our client’s Experience Modification calculations that resulted in the factor going from a 46% debit to a 10% credit. It pays to check!
  • Discretionary credit – Insurance companies usually can apply up to 25% additional credit for their better risks. This is an area where a good agent can negotiate a lower premium for you.
  • Managed Care – Insurance companies allow additional credit if you agree to direct your injured workers to a pre-designated clinic. This retains control of the treatment of the injury.
  • Light duty – You can mitigate your losses by setting-up a light duty, return to work program. This will lessen the payments by the insurance company resulting in a lower Experience Modification plus you get your worker back sooner.
  • Job Applicants – Do background checks, get references – unfortunately there are people who abuse the system, are above normal risk takers and tend not to follow safety rules. Don’t hire them – they will somewhere down the road increase your Experience Modification.
  • Safety Programs – Loss control experts from the insurance companies will assist you in designing and implementing a safety program. Make sure your staff knows your safety protocol and follows it. Don’t forget clerical staff – ergonomically correct chairs and work stations, will help avoid back, neck and wrist injuries.

Call us at Founders – we have a team of experts that can walk you through the process, analyze your current practices and counsel you on how to get that beautiful Experience Modification!

Dennis Dressel

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2 Comments leave one →
  1. May 23, 2009 3:10 am

    Yeah, It’s better to calculate the premium for them, I am ready to help.

  2. May 26, 2009 12:29 pm

    Nice job, Dennis.Very informative & to the point!Joyce P.S. Nice photo,too

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