When purchasing Worker’s Compensation Insurance there are two primary factors that can change your rate. There are credits, which help lower the price you pay for coverage, and then there are debits, which bring up the price you pay. Below we will break down these differences to help you understand your comp quote and declarations page with a little more confidence. WORKERS COMP DEBITS There are a few different reasons that you will find a debit your policy or quote. The first has to do with whether or not the insurance carriers quoting actually like the aspect of the business they are writing.
In other words, there are policies that carry greater risks for the insurance company. For example carriers may believe its more profitable to cover a clerical worker than a HVAC contractor. Since every job class is captured in a similar group or NCCI class code, its easy for carriers to identify which of these groups are profitable and which are not. One of the ways that a carrier will become more comfortable offering a quote is to add a debit, thus increasing the amount you pay to potentially offset loses from injury, etc. The other big reason you may see a debit added to your manual rates is due to claims history. Some companies are better at managing injury and promoting safety. For example companies with safety programs, return to work programs, and prompt reporting of claims generally have less claims and associated costs than a company that never focuses on how to maintain a safe environment for workers. Having these types of programs in place can, conversely, help you obtain credits, which we will discuss shortly.
Simply put the more claims you have the more you are going to pay in workers compensation premium due to the debits applied on the policy. Finally another reason for debits has to do with the industry itself or the carrier that is pricing your policy. If the a carrier has had a negative financial experience from having to pay out a lot of claims over a short period of time, they may try to make up for the increased cost by assigning debits to certain classes of business. Another other factor is the insurance industry itself. Depending on how long you have been in business, you may have been through the cycle of premiums going up and down. Multiple carriers and the amount of claims drive this across the entire workers compensation marketplace.
WORKERS COMP CREDITS
simply put, credits are a discount off your policy. Here is an example on a $1,000 policy: a 15% credit would take it to the manual premium down to $850. Most carriers can offer up to a 40% discount to qualified policyholders depending on the state and the premium size. One of the keys to making sure that your business gets the maximum credits is to ensure you have a strong safety program and clean history of losses. Owner and manager experience in the industry may often play a part as well. There are also automatic discounts that you may see due to premium size of the policy.
These are called premium credits or discounts and are often mandated by NCCI in most states. This is generally set up in a tier system, such as $0-$5,000 or $5,000-$10,000 etc. In most states these volume credits are determined by NCCI and automatically given on your work comp quotes if you qualify. The best way to get credits is to provide a very detailed description about how your business operates and what your staff does.