When it comes to workers’ compensation insurance, do all the businesses placed in the assigned risk pool really deserve to be there? The short answer is “No”.
As most business owners know, obtaining a competitive workers’ compensation insurance policy can be challenging, particularly for new businesses, businesses that have poor claim experience or those that use an insurance broker with limited insurance company appointments. Most states have established workers’ compensation “pools” so that businesses with poor claim experience can obtain coverage while they work on improving workplace safety and reducing the number of accidents. Many companies, however, find their way to the pool for other reasons that have little to do with safety.
Why Companies Are Placed In The Assigned Risk Pool?
Of course there are exceptions including that some companies are by their nature more difficult to insure, not because of safety concerns but because a high percentage of accidents will be catastrophic. A good example is a company maintaining cell towers. While the business many have the occasional cut finger or not at-fault auto accident, the real concern for the insurer that might provide workers’ compensation insurance is the severity created by the height exposure. If a worker falls, there is a very high likelihood of death or paralysis. The solution to this issue is simple enough: instead of one insurance company taking on all the exposure, create a pool of insurance companies that spread the risk amongst them so that no one large claim has significant negative impact on their results. Such pools have been created in some states. The best solution, of course, is to avoid going into the assigned risk pool in the first place. Aside from doing all you can to keep accidents to a minimum (and finding an agent and insurer who can help you do this), I offer two important rules to follow:
For example, some insurers maintain minimum premium requirements. If your business is lucky enough to have a low workers’ compensation premium but unlucky enough to fall below your insurers’ minimum, then the pool will likely become your destination. Some insurance agents do not have access to a sufficient number of insurance companies offering a broad enough underwriting appetite to accommodate an agent’s many, varied clients. The result is that the agent places the business’s workers’ compensation insurance into the state pool as it is a relatively easy, albeit more expensive solution.
- Always report accidents immediately. When an employee is hurt on the job, avoid the temptation to diagnose the seriousness of the injury. Prompt treatment and reporting to the insurance company claims team is essential. If the claim is not serious and is reported as an incident only claim, it will not impact your experience modifier and just as important, it may identify an area that needs attention for safety improvements. Late claim reporting absolutely ensures the amounts paid will be higher by many multiples and can also lead to the injured employee seeking outside counsel which drives expenses up.
- Full disclosure is a must when applying for coverage. All too often, a business will leave out important details, whether inadvertent or intentional. Consider the example of the company that describes itself as a non-emergency transport operation when in fact they provide comprehensive 911 ambulance service. You should seek out an independent insurance agent/consultants that will take the time to understand the nature of your operations so that a comprehensive picture can be developed for the insurance company considering your business. This way everyone wins.