Workers’ Compensation Insurance is required by law in 48 out of 50 states. It is a fixed cost many aspiring entrepreneurs forget about, and a cost many business owners take for granted. Many entrepreneurs just think Workers’ Compensation Insurance is the type of cost that is not worth their time and effort to hunt for savings. They feel the savings they might get are not as valuable as the time they spend running their business. In some cases, this might be true, but for many business owners this is not always the case. Many times it is very much worth their while to shop their policy around on a yearly basis. In many cases just a few simple steps can save the business hundreds if not thousands of dollars on their premium. Here are five suggestions to keep in mind when looking for your next Workers’ Compensation Policy.
Have a well-documented safety program in place.
Safety programs do not take that much time and effort, but they can help dramatically lower your premium when you renew your workers comp policy. This is especially important if you have had a claim against your policy. If you have had a claim or several claims within a year there is a higher likelihood that the carrier will raise your premium or drop your company altogether. If you have a documented safety program, a motor vehicle driving program and a return to work program for injured workers; an agent can defend your business to the carrier much better. If some or all of these programs are in place, the agent can show that you are taking the proper steps to prevent and limit claims in the future. The claim may look like it is more of an outlier and less of a pattern.
Ask for credits and discounts.
There are specific credits for workers’ compensation insurance that each carrier and each state have. It is important for entrepreneurs to bring this up to their agent. Agents are in a different situation trying to please both the business owner needing insurance and the carrier providing insurance. They are forced to determine quickly what is most important to you the client. Some clients want to make sure they are fully insured in every possible way not matter the cost. Other customers want the bare minimum policy at the lowest cost to their business. If you are rushing the process or not speaking open and honestly with your agent than they might interpret your priorities incorrectly. If you mention to them that you have taken advantage of some credits or discounts in the past they will know to actively seek these out for you.
Make sure you are in the proper classification code
Make sure you are in the proper Workers’ Compensation Classification Code. Most states use the classification system of the National Council on Compensation Insurance. There are more than 700 individual codes. For this reason, it is imperative that you work with your insurance agent and carrier to ensure you are classified correctly. A good example of this is in the landscaping industry. There are two class codes for lawn care and landscaping, 9102 and 0042. The class code 9102 is designated for lawn care or maintenance of existing lawns. The 0042 class code is designated to design and installations of lawns and beds. The 0042 class code carries more risk and costs more in premium. Not being properly classified in this case can cost your company more in premium.
Challenge your experience modifier
Your experience Modifier is the adjustment of annual premium based on previous losses experienced. Usually it only includes three years of loss experience, not including the previous year. For example, if a policy expired on July 1, 2010, the data included on the experience modification would comprise the period from July 1, 2006 to July 1, 2009. One common reason this ratio might be higher than expected is if a claim is left open. Your insurance carrier must leave the claim open even after your injured employee has returned to work. Sometime this claim may stay open for several months. They do this in case an injured worker has a recurring injury that requires more attention. While the claim remains open they must set aside a certain amount (Sometimes as much as $50,000-$100,000) for potential losses against your company. If the claim only resulted in a cost of $1500 and the worker has returned to work for two months than bringing this to the attention of your agent and the carrier can drastically effect the ratio. Closing this claim could change what you pay in premium. Depending on the size of your business this can be several hundred if not thousands of dollars.
Check your limits
Sometimes it might be necessary to lower the limits of an existing policy. A good agent can help you determine just how much risk your business faces and whether or not you can safely lower the limits of your existing policy. This can be especially important if there has been a change in the revenue of your company or in the number of employees you employ. Having a long honest conversation with your agent can help them know what exactly your business does and how to properly insure your business without causing you to take on too much cost.
Mitchel Sharp is a Marketing Associate for Workers Compensation Shop.com. He has extensive knowledge of all forms of commercial insurance with particular expertise in Workers’ Compensation