When it comes to safety in the workplace, you shouldn’t take any shortcuts. Same goes for workers comp insurance: not only does the right coverage protect your employees from huge medical bills and protect your business from lawsuits, but it is also required by law. This type of policy is a must, but that doesn’t mean that the premiums don’t hurt. In fact, workers comp insurance is generally at the top of the list of the most expensive types of commercial insurance, with an average rate of $85 per month compared with an average of $53 per month for general liability insurance. While some of the factors that determine your premium are beyond your control, there are some steps you can take to lower them.
How Your Premium Is Calculated
To get an idea of how to lower your workers comp premiums, let’s first take a look at how your premiums are calculated. This will give you an idea of what you can and can’t control. There are three major factors that go into the calculation:
- Rate: This is something that you don’t have much control over. The National Council on Compensation Insurance (NCCI) has a classification system that calculates a business’ rate according to the level of risk posed to employees by the job. For example, the rate for construction work is much higher than the rate for accountancy work.
- Payroll: Your total payroll is a major part of the formula for determining your premium: it is divided by 100 and then multiplied by your rate.
- Modifier: This is the final part of the equation, and can actually change based on how you operate your business. Your modifier is a number that represents how your claims/loss history compares to the average for your industry. The number 1.00 would represent an average loss history, anything above would mean that you’re worse than average and anything below would mean that your company is better than average.
Here’s an example of how all of this fits together: let’s say the rate that has been assigned to you is $0.15, your payroll is $500,000, and your modifier is 0.90. Your insurance company would do the following calculation: 0.15 X (500,000/100) X 0.9 = $675. $675 would be your final premium. Now let’s say your modifier went up just slightly above average to 1.1. That would change the whole equation, and your new premium would be $825. That’s a pretty big difference – but, the change is based on something you can work on: how safe your workplace is as well as how safe your insurance company thinks your workplace is.
Work Towards Lowering Your Modifier
Now that you know about modifiers, you can try to lower yours – and your premium – by taking certain measures at your workplace.
- Make safety a priority. Some employees might dismiss safety training or talking about safety as just common sense, and not something that needs to be focused on too much, especially if they’re not in a high-risk industry. But this couldn’t be further from the truth. No matter what type of job your employees are doing, safety training should be mandatory. If your industry is riskier, consider hiring someone to come and do a safety evaluation, and then be sure to carefully implement all of their suggestions. Safety should always come first in your workplace: remember, just a small change in your modifier can make a big difference in your premium.
- Maintain your property. Keeping a safe and accident-free workplace can mean anything from basic housekeeping to things like promptly removing snow and ice from parking lots, having your ducts cleaned regularly, and making sure to schedule routine building inspections.
- Have a return to work program. This type of program encourages workers to come back to the job as soon as they are medically able, helping you to keep your valuable employees and lower your workers comp costs. While you don’t want to rush injured employees back to work before they’re ready, you can implement a return to work program that includes a modified duty program, meaning that you can tailor their duties to their abilities. Before you bring anyone back to work, though, make sure that they have received quality medical treatment, as well as any psychological or emotional support they may need.
- Investigate accidents. If you make a mistake on the job, you make sure to figure out what went wrong and correct it, right? The same goes for workplace accidents. If one does happen, look into it as quickly and thoroughly as possible, interviewing witnesses and assessing the scene, so that you can avoid any similar incidents in the future.
- Look for state-sponsored programs. Some states offer programs to improve workplace safety; in return for taking part, you will usually get a discount on your premium. For example, your state might offer a Drug-Free Workplace Program for employers. Ask one of our agents to look into these programs to see if you can save some money on your premium.
Other Steps to Take
In addition to working on lowering your modifier by maintaining a safe workplace, you should also check to make sure that your insurance company has all of their facts about your business right. Small misclassifications and incorrect figures can make a big difference in your premium. You should review your:
- Classifications: your insurance company could be improperly classifying your business or your employees, meaning that you might be paying more than you should. For example, if you run a construction company and employee an executive assistant, your EA could be classified as a construction worker. If they are, then your rate will be higher than it should be, since construction work is much riskier than administrative work. Fixing this error could mean significant savings for you, so speak to one of our agents to help you review your classifications.
- Payroll figures: your premium will be based on your projected payroll for the policy period, and if that figure is off, then you’ll be paying more than you should for your workers comp policy. Speak to your insurer and make sure they’ve got the right numbers for your business.
Workers comp insurance can be pricey, but it is necessary – and worth it for the peace of mind it affords you and your employees. It doesn’t have to break the bank, however; you may just need to take a few simple steps to lower your employees’ risk of injury, and your premium. If you have any questions about workers comp or any other type of commercial insurance, our agents are here to help. EZ will provide you with one – and only one – agent who will go over all of your options, find you the best prices, and get you signed up, for free. Hassle-free, obligation-free, pain-free! To get started with us, simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.