There has been a lot of talk lately about the workers compensation market hardening in 2012. Many states have announced that their average rates for coverage are on the rise. NCCI has indicated that carriers continue to file higher rates in most states across the country.
For some employers who have a high experience modifier due to claims, higher rates may be inevitable. However, there are a many employers with low MOD’s, or no experience modifiers, who may be able to quote coverage at lower rates than ever before. The real trick is knowing how to shop for the best workers compensation quotes for your business.
10 Ways To Get Better Workers Compensation Quotes
1. Shop Several Work Comp Carriers
Not all insurance companies are created equal. Carriers have a diverse appetite when it comes to workers compensation insurance. Most states allow insurance companies to file and use their rates which means each carrier may be more, or less, competitive depending on their interest or profitability in each industry. Shop at least 5 companies to make sure you find lower manual rates. Many smaller agencies don’t have access to many markets, so shop around.
2. Understand Your Work Comp Codes
It is important to understand your class codes to ensure your agent (and insurance company) does not classify your operation into a more expensive code. Too often, agents take the simple route and don’t properly classify all employees into the best and cheapest code. All states allow for clerical and sales people to utilize 8810 and 8742 codes at a fraction of the cost of the company’s primary operation classification. Some states also allow owners and officers to place a portion of their wages into these codes regardless of the actual work performed.
3. Ask for Policy Credits
* Most important. Workers compensation insurance is based on subjective underwriting. This means that an underwriter is allowed to reward some employers with lower rates. Most states allow insurance companies to issue policy credits and/or debits on workers compensation quotes. A typical state will allow a credit or debit up to 15% – 25% to be applied to each work comp quote. If you receive a quote with no credits applied, or a debit, Ask your agent to request a policy credit from the insurance company. Common reasons why underwriters issue policy credits include: 1. Good claims history, 2. Management/Owners experience, 3. Industry experience, and 4. Premium size.
4. Maximize Policy Discounts
Policy discounts are automatically applied to a policy as the total expected premium increases. Most states utilize a specific table for determining discounts and insurance companies will include the available discounts based on quoted premium. Discounts reward larger employers for having more employees or premium. Don’t low ball your estimated premium to reduce your deposit. Accurately estimating premium may help trigger discounts on your policy.
5. Consider Work Comp Deductible Options
Many insurance companies offer lower rates in exchange for sharing the risk and cost of claims. If your premium is above average, ask your agent to present options including a $1000, $2,500, or $10.000 deductible option. Workers compensation rates will decrease as your deductible increases. Some insurance companies will also establish a “cap” on deductible payments and will manage the medical part of claims.
6. Understand Your Loss History
An experience modifier (MOD) is issued to an employer after being in business for a number of years, provided the premium reaches a certain dollar amount. If you’ve been in business for more than 3 years and have never received an Experience Modification Worksheet from your State or NCCI, it means your premium is not large enough to establish an E-Mod.
A MOD is a neutral mechanism for creating automatic policy credits or debits for coverage based on you actual claim frequency and severity, as it relates to other employers in the same industry. If you have an experience modifier of 1.0 it means you are at the industry norm and will not receive a MOD credit or debit on your policy. Below 1.0 creates a credit- A .98 MOD equals a 2% credit. A MOD above 1.0 means a debit will be applied. A E-Mod of 1.05 means all carriers must issue an additional 5% debit on every work comp quote for your business.
7. Manage Your Experience Modifier
As with any reporting agency, mistakes happen. Check your E-Mod worksheet each year and contact NCCI, or your insurance company, if you disagree with the claims being listed on the report, or the dollar amount being indicated. It is not uncommon for MOD worksheets to include inaccurate data that may have an adverse affect on your ability to get lower workers compensation rates on your quotes.
8. Owner Exemptions
Most states allow owners and officers to exclude themselves from coverage. Sometimes the rules are different depending on whether your business is a sole-proprietorship, LLC, or corporation. It also depends on the risks associated with your industry. Many employers easily save over a thousand dollars on premium by properly excluding themselves from the policy. This is especially important in states with expensive premium for workers compensation insurance. This exemption can come in handy when you are shopping California Workers Compensation Rates. Ask your agent if you qualify to be excluded and request work comp quotes both ways to understand the difference in cost.
9. Don’t Bounce Insurance Companies
While it’s important to shop your rates and find the most affordable workers comp quotes, it’s not always a good ideal to move a policy each year. Some carriers will actually debit a comp quote if a policyholder moves around too much. Focus on the other tactics such as policy credits to achieve lower rates. The benefit of having a good relationship may likely show up after you’ve had a claim or two. Loyal policyholder may continue to benefit from affordable renewal quotes after a claim.
10. Negotiate Your Workers Comp Renewals
At the end of the day, every workers compensation quote is a multi-party negotiation. Employers provide information to agents, and agents use the information to market the risk to their insurance companies or brokers. Employers who understand and employ these tactics to negotiate with their agents will likely get better rates and more affordable quotes that the average employer.
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