NFIB reports, As your company grows, so will your workers’ comp premiums. They’ve jumped 11 percent between 2011 and 2013—and then increased another 7 percent in 2014, according to the National Council on Compensation Insurance.
Understanding the factors that influence your cost can help you manage and reduce your expense for both the near term and in the long run.
1. Review your classifications.
More than 650 business and job codes are used to determine premiums, each with a corresponding rate per every $100 of payroll. When they occur, “misclassifications can be costly,” says Donna Childs, owner of Prisere. Companies often select the first classification that vaguely fits a job description rather than investigate their options, she says. Review the specifics of your current classification(s) and consider if lower-rated classes may be more appropriate.
2. Look into payroll reporting and limitations.
Most states limit the amount of payroll that can be used for officers of a corporation for premium calculation, while some allow for payroll limitations for partners of partnerships. Other payroll limitations also may apply. For example, overtime pay should be provided at the normal pay rate, not at the full overtime pay rate.
3. Cash in on carrier credits.
Many states allow carriers to discount their rates on a discretionary basis. These credits are typically based on favorable risk considerations such as formal safety programs, training programs, experienced management and low turnover rates.
4. Consider a deductible.
The allowable deductible amounts have been raised in some states. Many allow for optional medical deductibles in workers’ comp policies as a cost-saving measure. A higher deductible typically translates to lower premiums. Speak with a licensed agent to determine if this is an option for you.
5. Reap the rewards of a good track record.
Some carriers offer a safety or loss ratio dividend, which is a return of some of your premium dollars after policy expiration based on favorable claims experience. Businesses that qualify for dividend programs also may be eligible for upfront rate discounts as well.
6. Pursue state discounts.
Workers’ comp is the largest insurance expense for many businesses—and “it’s the one type of premium you can control through credits and other methods,” says Dennis Slabaugh, CEO of The Risk Man.
Take advantage of any available jurisdictional pricing considerations if your company offers safety and loss control programs, drug-free workplace programs, and return-to-work and modified duty programs.