We specialize in helping our clients to understand the complexities of workers’ compensation insurance. Although specific laws vary by state, workers’ compensation insurance is generally required of companies with W-2 employees.
How Workers’ Compensation Rates are Calculated – and yes, it’s complicated!
Many states use the standards of the National Council of Compensation Insurance or NCCI to determine the rates of their workers’ compensation insurance. The NCCI, a non-governmental, private organization, uses classifications to determine the risk factors involved in particular jobs. The risk factor will be greater with occupations such as mining and construction, and generally low for clerical workers.
Premiums are usually determined through a formula which includes a number of factors including salary, benefits and other variables. A remuneration number is then arrived at. It is used in conjunction with the risk factor classification of the job to arrive at the cost of the insurance. Premiums can also be adjusted by “experience modification factors” or MODs which are standards set by the NCCI and other organizations for reducing premiums based on a company’s reputation.
The goal is to have a Sub One Modification Factor.
The initial premiums are based on a number of prognostications including the amount of wages to be paid to workers. At the end of the policy period an audit is performed to determine the actual premium amount. The results of the audit can result in either a refund or additional premiums due.
Lingering Claims and Reserves can Wreak Havoc
Workers’ compensation coverage is important to the financial well-being of your employees, ill managed claims can destroy a company’s bottom line quickly. Our Claims Management Team works very closely with our Account Managers with eagle eye precision to make sure the reporting is accurate and all claims are managed properly.
It’s a process and one you want managed by someone who knows the ropes.