The one question all of our clients ask us at one time or another is this: “How can I be sure I pay the lowest possible premium and still receive the maximum amount of coverage?” It’s a fair question and in the case of workers’ compensation insurance, it’s harder but not impossible to answer.
Every job is assigned a class code to differentiate between the various job duties or "scope of work performed" by employees. Accident frequency, severity and other data support a particular rate (charge per $100 of remuneration) for that class. On the surface, workers’ compensation rates can seem simple and straightforward, however, looks can be deceiving. In fact, workers’ compensation rates are based on a variety of factors within a particular class code. Determining the right rate also involves more than just totaling the number of employees and the payroll associated with the work.
How Can I Get The Lowest Premiums And Consistent Coverage?
Consider the comparison between a food truck and a restaurant. Both serve prepared meals but the similarity ends there. The differences also extend far beyond the obvious fact that one moves from place to place while the other does not. The same is true for home healthcare firms. Some firms employ primarily those with only a high school education. Some do not conduct background checks, others employ only nurses who can administer drugs and participate in other rehabilitation services.
There is one area in which despite the impression of certainty, many employers experience some confusion – the defined benefits allowed in each state for any given injury. Even though rates are published and calculated as a percentage of the employee’s average weekly wage, the payout is also subject to maximums and minimums.
Even with this mix of factors, employers can take steps in conjunction with their insurance agent and insurance company to secure the lowest possible premiums and maintain consistent coverage. These include:
Make sure your payroll is reported properly and completely. For example, you need to take into account interns and subcontractors (they will need certificates of insurance) as well as full-time employees.
Be sure your business is placed in the right classification at the beginning of the policy. About 20% of businesses end up misclassified by mistake or deception. When the mistake is discovered during an audit, it usually means you paid too little and you will be responsible for a big bill at the end of the policy. No business likes surprises. If the mistake is by deception, however, the insurer will likely non-renew the policy and you may be subject to a criminal penalty as this is premium fraud. It’s a myth that if you are misclassified and there is a claim that the insurance company will not pay it. Insurers will pay a claim but they will also make sure that the claim is reclassified in the right code and collect whatever is owed.
In a previous blog post, I talked about the importance of reporting a claim immediately and cooperating fully with the insurance company after the accident report is filed. Some argue that a more confrontational approach could result in a bigger settlement. That’s another dangerous myth. Because of the defined benefits set by each state, “negotiating” usually only delays payouts and all the parties involved, the employer, injured worker and insurer become needlessly embroiled in which no one wins.
As in all business relationships, honesty is the best policy, including workers’ compensation. Find the right agent and insurer. Disclose all the details about your operation so your insurance professional can help make your business an even better risk (and keep your premiums low). At that point, you can look forward to a long-term business relationship, keep your premiums in check, and keep your employees safe from injury.