Workers compensation is the only insurance policy in which you have control over the cost.
This is not the common story you will hear from insurance professionals. Most business owners are told workers comp rates are set by the state and there is nothing they can do.
Your cost for workers’ compensation insurance depends not just on your business’ unique risks, and employee classifications, but ultimately your ability to limit claims through safe work practices and processes.
This means not all companies in the same industry will have the same workers’ comp costs. There are several factors that can affect workers’ compensation premium rates, including:
How Is Workers’ Comp Calculated?
The amount you pay for workers’ compensation is a specific rate for every $100 of your company’s payroll.
Your premium is determined by the type of work done by your employees (classification rate), your experience modification rate (claims history), and your payroll (per $100).
The basic formula is:
Classification rate x Experience modification rate x (Payroll / 100) = Premium
- The state(s) where your employees work
- Your annual payroll
- Your industry
- The type of work done by your employees
- Your claims history
Your Experience Mod Factor is the tool you have to control your workers comp premiums.
At Rogue Risk, we specialize in helping companies take control of their Experience Mod Factor to create safer, more productive work environments and in many cases dramatically reduce workers compensation premiums.
How Much Does Workers Comp Cost?
In almost every state, employee classification rates are regulated by the state.
Typically, each worker classification, (type of job), is assigned a rate per $100 of payroll by each individual state, and then the classification rate is a multiple of that.
Here are some examples from the National Council on Compensation Insurance (NCCI) rating pages that show the significant differences between business classifications:
| Description | Class Code | Rate per $100 | Annual Pay | Cost/employee |
|---|---|---|---|---|
| Clerical/Office | 8810 | $0.12 | $28,000 | $33.60 |
| Landscaping | 0042 | $6.94 | $36,000 | $2,498.40 |
| Retail Store | 8017 | $1.33 | $30,000 | $399.00 |
| Medical Office | 8832 | $0.30 | $40,000 | $120.00 |
| Restaurant | 9082 | $1.50 | $30,000 | $450.00 |
| Painter | 5474 | $8.99 | $32,000 | $2,876.80 |
*Please note these rates do not include an Experience Modification Factor.
The rates listed above are for businesses with no loss history, meaning no losses or previous claims.
Businesses with a loss history can be charged up to five times more than the lowest rate posted by the state.
The opposite is also true for companies with a good claims history. A Experience Mod Factor below (1.0) will create a credit and reduce workers compensation premiums.
The rates listed are per employee and should be multiplied by the number of employees on the business’ payroll.
How To Get The Best Rate On Workers’ Comp Insurance
Buying workers’ compensation insurance can feel daunting.
Step One
The key to getting the best rate on your workers’ compensation insurance is working with right insurance professional.
Preferably you want to work with an independent insurance agent, like Rogue Risk, with a specialty in commercial insurance and particularly workers comp.
With each state having its own workers comp regulations, there are a lot of factors you’ll need to take into consideration.
There are nuances to a workers comp policy that simply “shopping” your insurance will not solve.
Step Two
Once you’ve found the right agent, step two is working with the right insurance carrier.
Insurance carriers are NOT all created equal. Each insurance carrier has their own appetite and attitude towards different types of business.
Step Three
The third step is to verify that all the information on your policy is correct.
Over 60% of workers comp policies have incorrect classification codes and experience mods causing companies to overpay for no reason.
Step Four
The final step to getting the best rate on your workers comp insurance is operating a safe business. This is much easier said than done, as we all know, accidents will happen.
However, putting the proper processes and procedures in place which reward a culture of safety among your employees can have a lasting impact on your claims history and ultimately the rate you pay for workers comp.
The Rub
You have control of your workers comp costs.
Don’t believe anyone who tells you different.
You just need to take the right steps to get your business in position to capture the savings you deserve.
If your current insurance professional has never addressed issues such as total cost of risk or return to work programs with you before, then I’d encourage you to reach out to us today.
- You can call or text us at 518.960.6600
- Click here to contact us via email.
I look forward to introducing you to a new way of viewing your insurance program.
Thank you,
Ryan Hanley
