Knowledge Corner

All businesses with employees are required to provide Workers Compensation insurance. This requires your company, if it’s not self-insured, to own a workers compensation policy. Despite its necessity, premium coverage costs don’t have to be too costly. If you're not following claims best practices you could end up costing your organization. 

Here are some steps you can take to lower your worker's compensation premium. 

Calculate your current worker's comp premium 

• Depending on how dangerous each individual job is WC rates may be higher. A job with a higher risk will result in higher rates. (i.e. Roofers vs Painters vs Administration),
• To determine your workers comp premium, you use this formula:
• Rate X (payroll / 100) X experience modifier = premium 
• i.e. $2.50 X $50,000 = $125,000
• $125,000/ 100 = $1,250
• $1,2,50 X .85 = $1062.50
• Premium = $1062.50
• Take notes on any key areas that can be improved or adjusted (i.e. payroll projections or experience modifier)

Understand classification systems 

• Based on the construction company's employee jobs, a WC Class Code is provided to each (typically a 4 digit number. In the state of PA, it is 3 digits).  
• The WC Class Code Rate is different for each state. For example, states that use the NCCI Rating Bureau have their WC Class Code rate based on the Insurance Carrier. This means each carrier has a different rate, which allows your Broker to shop the different insurance carriers for the best rate. If your business is incorrectly classified, it can lead to higher premium costs for your company. 
• Your Insurance Broker can review your classification to ensure there aren’t any issues.  

Check your payroll projections 

• High payroll projections can lead to higher premiums. 
• Audits can find errors in your payroll projections but an audit may not occur until after the policy has expired.
• The insurance carrier can adjust your payroll projections if you don’t have time to wait for an audit. 

Lower your Experience Modification Rate (EMR) 

With lower compensation rates expected in 2018, there has never been a better time to lower your experience modification rate. 

• Lowering your EMR is key to lowering your premium. Your EMR represents your company’s past losses.
• Rating Bureau’s universally use 1.0 as the starting point for all claims. 
• Anything over 1.0 will reflect a poor loss history. 
• Anything under 1.0 reflects a better than average loss history.

• Safety management is critical here and can have a positive impact on your EMR.  Companies can establish: 
• Safety Training
• Worksite Safety Evaluations
• Return to Work Program, etc. 

Keep track of employee training to make sure they have the necessary experience. Expensive worker's compensation insurance impacts more than just your bottom line. Worker's compensation insurance can even hurt your hiring process. 

With a firm like TSIB on your site, we can even help you to avoid workers' compensation fraud. You can download our free ebook for more information about how to lower your costs for worker's compensation. 

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