Workers Compensation Insurance in California

What makes the Workers’ Compensation Insurance System in California unique?

California Workers' Compensation Insurance

 

California is currently the most expensive state in the country for employers workers compensation coverage. Rates throughout the state have continued to rise over the past 10 years. Much of the increased costs are caused by the rising costs of medical coverage and state laws.

State law, like in most states, requires all employers to provide workers compensation coverage to all employees of a particular company.  Failure to purchase workers comp coverage is a criminal offense in California. Employers may receive a fine of $10,000 or more and up to a year in a county jail.  It is also illegal for any employer to pay a medical bill directly to the provider. A claim form (DWC Form 1) must be filed with the insurance company for any injury requiring more than first aid care.

San Francisco, California

As you may know, California has the largest economy of any state in the United States.  This brings an extraordinary amount of businesses to the state who have an extraordinary need for commercial insurance.  Because the states mandates that employers carry workers comp coverage there is a lot of competition to quote the coverage of those businesses.  In most cases this increased competition would bring the cost of the coverage down, but not in the case of workers compensation insurance.  The main factors driving prices up in the state of California are the state regulations that many would say favor the worker over employers.

According to the Insurance Journal there are steps being taken to curb the increase in workers compensation costs throughout the state of California:

“Claim frequency, claim administration and high medical costs are typically among the drivers of high workers’ comp rates. However, the state in 2012 passed a massive workers’ comp reform law, which according to its supporters seems to be working.

California’s Workers’ Compensation Rating Bureau earlier this month submitted a pure premium rate filing to the California Department of Insurance proposing Jan. 1, 2017 advisory pure premium rates lower than the corresponding industry average.

The WCIRB submitted a rate filing that averaged $2.22 per $100 of payroll, citing in part legislative changes made this year that the bureau believes could help reduce costs. Senate Bill 1160 and Assembly Bill 1244 are both designed to remove medical providers convicted of fraud from the system and prevent them from filing liens.”

Additionally, a lot of business owners in California assume workers compensation is similar regardless of the carrier. Depending upon the industry you are in and the scope of the work you do within that industry, coverages can vary dramatically.  The cost of coverage for the same classification codes can vary significantly between carriers. This is because the appetites for certain industries and types of coverage change from year to year and carrier to carrier. For example, after Hurricane Katrina many insurance carriers were very conservative when offering homeowners or hurricane insurance throughout the coastal areas in the southeast.  This was because of the damaging amount of claims the carriers had to pay out as a result of this damaging storm.

At some independent insurance agencies, they take the work out of finding an insurance company with quality coverage and affordable rates. They do this by being able to quote you coverage from several carriers as opposed to just one or a select few.  In short, they shop the insurance so you don’t have to. Partnering with a good independent insurance agent with whom you trust and speaking candidly with them about your business can go a long way towards saving on workers compensation insurance in California.

Santa Monica, California

Workers Compensation Insurance System in Texas

Why is the Workers’ Compensation Insurance System in Texas so different than other states?

Texas Workers Comp Insurance: Find the best answers to your questions about Small Business Workers' Compensation Insurance in Texas at MyInsuranceQuestion.com

Like all 50 states, the Texas Department of Insurance Division of Workers’ Compensation (DWC) regulates the state’s workers’ compensation system.  It also certifies which employers want to self-insure.  That’s right, Texas allows some employers to not carry workers’ compensation insurance.  Now companies who do not provide workers comp coverage may be liable for medical bills and lost wages when an employee is injured on the job. There are certain standards the companies must meet in order to self-insure.

Government contractors are required to provide workers comp coverage for all employees working on a project.  On top of that, most clients require their contractors to have workers’ compensation insurance.  Employers who choose not to have workers’ compensation insurance (Nonsubscribers) must file an annual notice with the Department of Insurance and the employers who choose not to carry coverage must display notices of no-coverage in common working areas as well as give written statement to each new employee hired.

The ability to self-insure (otherwise known as opt-out) is only one part of the workers comp system that is different in the state of Texas.  It definitely adds an additional wrinkle in to the already complex workers compensation system in the state, but there are other parts of the system that have an impact on the business community in Texas.

Texas Workers Comp Market

The market is very competitive for workers compensation coverage and premium rates are well below the national average the national median rates, at around 87% for 2014.  Part of this good rate on premium is due to the strong economy in the state of texas, but also because of the strength of competition in the work comp market that drives down price.

Rates vary considerably between insurance companies and employers are advised to shop their workers comp coverage periodically.  Small business owners can do this by calling multiple carriers themselves or they can shop with an independent agency who can quote from multiple carriers. The ability to quote from many carriers can help your independent agent ensure they find a carrier with the best price for your classification code.

On top of good rates because of strong competition for workers comp Texas offers several exclusions that are unique to the state of Texas.

Coverage Exclusions in Texas

Injuries that are excluded under the Texas Workers Compensation Act:

  1. Intentional or self-inflicted injuries
  2. Result from horseplay or voluntary drug or alcohol intoxication
  3. Inflicted by someone else for personal reasons unrelated to the job
  4. Result from voluntary participation in off-duty recreational, social, or sports events
  5. Result from “acts of God” (like floods or hurricanes), unless the job has a particularly high risk of such injuries.

Due Diligence Insurance Questions

Due Diligence Insurance Questions for Small Business Owners.

9 Key Insurance Due Diligence Questions every Small Business Owners should be asking their Insurance Agent.

 

Does the insurance cover all the risks my business faces’?

First and foremost, any insurance due diligence review should determine whether the small business bought the right policies in the first place.  This is not always as easy as it seems and this is why it is crucial to consult the guidance of an experienced independent insurance agent.  You should speak long and honestly with them about the actions you do and do not partake in on a daily basis.  They can help you identify risks you did not know your business faces.

Who is insured?

As a business owner, make sure to do your due diligence and install a proper driver safety program for your business. It is important to understand what and who is and is not covered under your specific insurance policies.  This can determine how you operate your business on a daily basis.  For instance, if you have a commercial auto insurance policy and it only covers people specifically reported on the policy than you need to be aware of this if you hire new employees mid term.  Commercial auto policies can be sold on a different basis and each carrier has their own policies for who is and who is not covered under the policy.  Do your due diligence and by consulting with your agent so that you are clear who and what is covered under the policy.

Does the policy have any unusual exclusions?

There are many exclusions that apply to most insurance policies.  Most exclusions have a reason and it is important to know what they are and how they apply to your business. When an incident occurs is not the time to be concerned about exclusions.  Most business owners are busy people. When purchasing commercial insurance they are usually strapped for time.  Most business owners wonder why an insurance agent has to know so much information about your business just to give you a quote for coverage on your business.  There are several reasons for this.  Some of them deal with regulations, but if you have a good agent they are attempting to protect your business properly.  It is human nature to think a salesman is offerring you something simply to make more money for themselves, but insurance agents deal with claims on a daily basis.  They deal with clients on a weekly basis who have had something terrible happen to their business and more often than not they have to explain to business owners why their insurance coverage does not cover the claim.  Taking additional time when purchasing coverage can prevent your business from having to bear the cost of an incident when a claim occurs.

 

Are there flexible payment options?

Pay as You Go Workers Comp Insurance Coverage is one option that can help businesses pay for their coverage monthly based on payroll instead of in one lump sum.  Pay as You Go Workers’ Compensation benefits businesses by freeing up cash for more immediate business needs, by preventing over or under paying and by drastically lowering the likelihood of a mid-term audit by your insurance carrier.  This is especially helpful for cash strapped or seasonal businesses.

Am I classified properly for workers’ compensation?

This is extremely important for your business cash flow. Especially, if you operate in an industry with several different areas of operation.  If you do, you need to ensure the agent classifies your business properly.  They are in the business of analyzing risk.  If you do not tell them all of your risks, then it is in their best interest to assume your business is taking on more risk.  If you do not give your agent enough information they may place your business in a riskier classification code.  This can have an enormous impact on what you pay for general liability and workers compensation insurance.   Taking just a few extra minutes to explain exactly what your business does and does not do, can save you immensely when it comes to premium.

Does my business need Cyber Coverage.

Anyone that hosts a website that interacts with the public at large is a candidate for cyber liability insurance.  If you conduct even a portion of your business online or ask customers to trust you or a third-party vendor with their information, you should seriously consider purchasing cyber insurance.  The risk may be small that you ever incur a breach, but when a breach does occur many business never survive without this coverage.

 

NCCI Workers compensation class code 9014

Let’s break down NCCI workers comp class code 9014

Find the best answers to your Janitorial business question ( class code 9014 ) at MyInsuranceQuestion.com

NCCI class code 9014, like most workers comp class codes, includes many different operations.  NCCI stand for the National Council on Compensation Insurance.  It is the main governing body for workers comp codes.  These classification codes generally include a variety of operations.  The classification manual from NCCI is written to include specific operations.  Over time, additional operations are added to each individual classification code.

Commercial janitorial services is the primary operation contemplated by NCCI class code 9014. Janitorial services are specifically defined as keeping a building clean.  The businesses do this by routine dusting; mopping, vacuuming, waxing, or polishing floors.  The janitorial businesses also empty trash; clean and wash interior walls; clean, sanitize, and deodorize restrooms.   Office cleaning companies are the easiest operations to get insured (at the most favorable pricing).  It is reasonably easy to get favorable workers comp insurance for commercial janitorial companies.  Especially commercial janitorial companies that clean at retail and other light commercial spaces. It is difficult to get workers compensation insurance for commercial janitorial companies which specialize in cleaning at industrial settings.  Industrial settings frequently lead to the business having to purchase coverage from the state’s assigned risk provider.

Favorable workers comp insurance is be more difficult to get for certain operations.  For typical commercial janitorial companies, the NCCI class code 9014 allows for maintenance and minor repair work. Most insurance carriers will allow up to 10% of operations to fall into this arena. Floor waxing is another operation which underwriters consider. Some carriers allow as much as 25% of the business activity to be floor waxing.  If it is this amount or less the carrier will still quote accounts. Power washing is disfavored, and most carriers will decline to quote companies offering power washing.  Although it is an operation included in code 9014, at least if performed at ground level.

Code 9014 allows for residential cleaning if it is less than 50% of operations. A different NCCI class code is used for primarily cleaning companies.  That code is  0917. However, the majority of workers comp carriers will decline any account which does any residential cleaning as it is a less controlled work environment.   With that said, at least in some states, The Hartford will still quote commercial janitorial companies with some level of residential cleaning.  Having several years in business is generally an eligibility requirement in this case.

Insurance carriers favor interior operations over exterior operations.  A small amount of exterior operations can be allowed, but work from heights or power washing usually lead to declines from insurance carriers.  NCCI class code 9014 allows for ground level window cleaning.  Class code 9170 must be used for businesses that partake in any window washing above ground level.  This is much more difficult to get quoted by insurance carriers.

Other operations which are included in NCCI workers comp code 9014 include:

  • Exterminators
    • Some carriers will offer coverage to these businesses, but many will not.  If there is any live animal trapping provided in services almost all of the insurance carriers will refuse to provide workers comp insurance.
  • Chimney Cleaning
    • This function is acceptable to most insurance carriers if the service is performed using the vacuum suction method at ground level.  If the service includes work at heights for any employees, it becomes much more difficult to find a carrier who will quote workers comp coverage.
  • Residential boiler cleaning
    • This type of service frequently involves using vacuum suction equipment.  Any work involving boilers is difficult to get quoted by nearly all insurance carriers.
  • Swimming pool maintenance
    • A few carriers will quote swimming pool maintenance companies.  When the swimming pool maintenance company adds construction to their list of business operations, it becomes much more difficult to find a carrier willing to quote the business.
  • Pet waste removal services
    • Pet waste removal businesses need to have sufficient payroll to find many carriers willing to quote coverage.  There is a small possibility to get this quoted by carriers on the voluntary market.

There are many different operations that can be included in NCCI class code 9014.  Especially for purposes of workers comp.