If your business has one or more workers compensation claims, there's a chance that your premiums can go up. That's because past claims are one of two factors that determine your workers compensation insurance rates.
Workers Compensation Insurance Rates Calculation
There are two components that insurance companies use to set workers compensation rates. The first is a classification based on your industry and each workers' duties. This is standardized across businesses. If two employees are performing identical tasks for two different identical competitors, both employees will have the same classification, and both competitors will pay the same rate. The only adjustment is for any difference in salary, since the rate is multiplied by salary.
The second component is your history of filing claims. This is usually called an experience modifier because it's a number you multiply your base rate by. The modifier shows if you have below average, average, or above average risk. If your claims equal the industry average, your modifier is 1.0, and you pay the base rate. If your claims are above the industry average, your modifier increases, and so does your premium. If you have below average claims, your modifier and your premium decrease.
Can You Get Your Rates Back Down After a Claim?
Rate increases aren't permanent. Just like a claim can increase your modifier, reducing future claims can bring it back down. For example, you might place a greater emphasis on safety and training to avoid accidents. If you successfully reduce your number of accidents, your modifier will fall over time. Eventually, it's even possible that you could end up paying less for workers compensation insurance before you had the claim.
What Else Can You Do To Lower Workers Compensation Insurance Rates?
In addition to reducing claims, there are a couple of other common ways to reduce your rates. One is by reducing the size of claims by helping workers return to work sooner, even with altered duties. That way, they don't need to file for disability for as long a time. Another way to reduce your premiums is to see if your insurance provider offers discounts for participation in things like the Drug-Free Workplace program.
Also Read: The Importance of Workers' Comp to Your Employees