Workers’ compensation is a type of insurance individual states require businesses meeting certain criteria to carry. Laws requiring work comp insurance were created around the time of the industrial age to guarantee wage continuation and medical benefits to employees injured at work regardless of fault, in exchange for civil immunity for the employer.
Workers’ compensation is a single line of insurance or business considered part of the Property Casualty group of coverage’s encompassing general liability, property, auto and others lines. Workers’ compensation insurance may be purchased as part of a package or “mono-line,” as an individual policy.
There are choices involved and decisions to be made in purchasing workers’ compensation coverage, just as when you purchase your own auto policy and select a deductible.
Generally, in purchasing a guaranteed cost policy, your premium remains at the price quoted regardless of the cost of the losses. Because premiums are in part based on payroll multiplied by a rate, premium audits are conducted generating either additional premium or a premium refund. Other than that, the price paid in the end should be the price your agent/broker negotiated and quoted. Although the insurance company funds losses and bears the lion’s share of the risk, it’s in an insured’s best interests to reduce claim frequency and severity to minimize loss costs. Loss experience is another facet of premium calculation and out of control losses drive premium costs up.
Depending on the financial strength of your company and your appetite for risk, there are also programs available allowing a company to participate in the losses financially. These programs include deductibles and retro’s (retrospective rating). These vehicles allow a company to participate to a large degree financially to control their insurance and claim costs and essentially bear much of the risk themselves. These programs may make good sense for organizations with sophisticated loss prevention and strong claim management or oversight in place.
While workers’ compensation policies may be generic in meeting your statutory requirements, claims and loss control services vary greatly and differentiate one company from another. Choose wisely. The effectiveness of these areas will reduce loss costs and even prevent losses from occurring which in turn reduce your premium.
Evaluate the financial strength of your company, the loss prevention and claim management programs in place and importantly, the appetite for risk at your organization to decide whether a guaranteed cost or shared risk program is the way to go. Also be sure to evaluate the financial strength of the insurance carriers under consideration.
WC Books: http://www.reduceyourworkerscomp.com/workers-comp-books-manuals.php
TD Calculator: www.reduceyourworkerscomp.com/transitional-duty-cost-calculator.php
WC Calculator: http://www.reduceyourworkerscomp.com/calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers’ comp issues.
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