The Cost of Workers Compensation for many employers can be high,
so managing that cost is critically important. In this article, I’m going to lay out some basics but encourage you to contact me if something here sparks your interest or a question.
Workers compensation insurance is a statutory form of coverage and is required in just about every employment setting. If you’re an employer and have workers (whether they are W-2 or 1099 earners) you must have workers comp in almost all settings.
I’ll focus my discussion on workers comp insurance in NYC since that is where most of my business is.
It doesn’t really matter if you have a professional office with 50 employees or a contracting firm with only 5 employees, managing the underlying drivers of cost of workers compensation is important.
You can’t do much about the rates that are set by the NY Compensation Rating Board, so we must look at the other contributing cost factors. So, what is the biggest cost factor for workers compensation insurance and the premiums you pay?
The number of claims and the cost of those claims your company has over the past 4 or 5 years will have a direct bearing on your workers compensation costs in several ways.
The first is fundamentally how competitive the marketplace is willing to be with your workers comp policy. You can’t expect to get the best rates if you’re not a best in class account and have above average claims activity. Clients who not only have great claims experience (meaning much lower than average) AND can demonstrate a process for controlling risk win out every time over clients with moderate or poor claims experience. Or, those with no risk control plan.
Controlling claims is paramount. As a risk solutions and insurance provider in New York, we help firms of all sizes and industries identify trends and problems they have with claims. We then formulate solutions to minimize the frequency and cost of claims.
The other area that claims impact the cost of workers compensation policy is your experience rating modifier sometimes call “the mod”. The experience rating mod can be a debit or credit factor applied to your final premium and it’s based on three of the prior four years of losses and payroll.
Lower than expected losses will give you a credit factor – higher than the expected will produce a debit factor.
This is just another reason why risk management is so important for small and medium firms. Risk management and insurance New City go hand in hand.
For more information on how to control and reduce the cost of workers compensation for your firm, please contact me by clicking the button below.