Workers Compensation Ideas
As many business owners renew their workers compensation policies this year, they’ll probably see an increase. The insurance marketplace is beginning to see a reduction in the double-digit rate increases, but our new governor passed a little-known tax on all work comp policies. There’s a 1.5 percent Illinois Industrial Commission tax added to all workers compensation policies. Last year was terrorism coverage, and now more taxes. The reality is that neither is going away. So let’s take a look at some of the ways to help reduce costs when it comes to work comp insurance.
- Classifications. Employees have job duties that vary in the risk associated with their job and, in turn, have different classifications under their work comp policy. The rate per $100 of payroll will vary according to the loss experience under each classification. Some owners don’t take enough time to review what are the true responsibilities of each employee to make sure they’re being properly rated. This can be an expensive mistake. Many times, people are lumped into the main classification and could be broken out into a different classification, which may have a lower rate. Rarely can you split an employee’s payroll unless you have seasonal exposures, but reviewing this can reduce your premiums. Thoughtfully walk through the dialogue with your insurance advisor.
- Claims Management. Insurance company underwriters are being pushed to closely monitor the work comp marketplace. History has proven that frequency breeds severity. The thought process is that the companies that continue to have minor claims are bound to have a large one. This is even figured into the NCCI formula when calculating a company’s experience modification. One of the ways to help control this situation is to establish a strong working relationship with your work comp carrier. By instituting a deductible on your policy, you can help to eliminate the smaller claims on your record, which will have a larger impact on your overall pricing.
- Safety. Many of the insurance companies are again looking to work with your management team to help reduce workplace accidents. This can be through training for employees, creating procedures, or just making sure the correct safety devices are in place. Hiring and maintaining a quality employee is also critical to the success of your work comp experience.
- Audits. When you purchase a workers compensation policy, you’re making a deposit premium payment on the policy. The payroll figures you established at the beginning of the policy term are estimates that can change based on the operation of the business. At the end of the term, the insurance company will have a representative review your actual payroll records. This will result in either additional earned premium or a return. Preparing the audit with the help of your insurance professional is extremely important. The auditors are verifying numbers and not expected to interpret job duties. Reviewing all of the employees and their responsibilities over the course of the past year can help the audit process go a lot smoother.
This is just a small example of some helpful hints in controlling the costs of your workers compensation insurance, which could have a negative impact if left unmanaged. Again, I encourage you to spend time with your trusted insurance professional in reviewing the need for the above-mentioned services and others that pertain to your specific business. The insurance industry is rapidly changing based on market conditions. Make sure you do periodic reviews of your business in relation to the changing insurance marketplace. IBI