California Workers Compensation Rates 2019

Prices are Declining for California Workers Compensation Rates in 2019 

California Workers Compensation Rates 2019 are going to cost the business community less than in 2018. The average rate of $1.63 per $100 in payroll by Jan. 1 will be approximately 72 percent lower than when rates peaked in 2015. In 2015 the recommended rate was $2.81 per $100 in payroll.  According to California Insurance Commissioner Dave Jones, “Cost savings in the workers’ compensation system have helped insurers and employers deserve to share in the cost savings through lower premiums,” This is the lowest rates for workers compensation insurance have been in the state of California in five years.

Iconic Golden Gate Bridge, atracts businesses to San Francisco. Those businesses will be paying less for California Workers Compensation Rates 2019.

What is contributing to Lower California Workers Compensation Rates 2019?

California has some of the highest rates for workers compensation insurance in the country the California Workers Compensation Bureau WCIRB has pointed to a high frequency of permanent disability claims as a reason for higher costs. Also, California has a higher than average cost of handling claims and delivering benefits. This contributes to the state having higher rates for workers compensation premium. Businesses in the state of California spent $16.2 billion on workers’ compensation just last year.

In 2019, California Workers Compensation Rates are continuing to decrease for the fifth straight year primarily because of reforms made to fight the opioid epidemic, low inflation for medical and pharmaceutical costs, and increased fraud investigations. The amount paid out for opioids in 2018 was nearly a fifth of what it was in 2013. This drop was from $15,687 to $3,204 per 100 claims, according to WCIRB, the California Workers Compensation Insurance Rating Bureau. A large part of the reason for the decrease in what the workers compensation system paid out for opioid prescriptions is because California enacted a program called CURES (Controlled Substance Utilization Review and Evaluation System). CURES is a database of Schedule II, III and IV controlled substance prescriptions dispensed in California serving the public health, regulatory oversight agencies, and law enforcement.The CURES Program requires dispensing pharmacies, clinics, or other dispensers of Schedule II through IV controlled substances to provide specified dispensing information to the Department of Justice on a weekly basis in a format approved and accepted by the DOJ. This has significantly decreased the amount of opioid abuse throughout the state and that has benefited the workers compensation system.

Iconic Hollywood, California

What can Business Owners do to continue saving on California Workers Compensation Rates 2019

California Workers Compensation Rates 2019 are decreasing for the fifth straight year. This represents a decrease of 72 percent over this time period, but businesses in California still pay more for workers comp coverage than nearly all states throughout the country. Because of these high rates, it is important to maximize savings in any way possible. Here are five ways business owners can alter the way they do business in order to save on commercial insurance.

Make sure your business is classified properly

Far too many businesses are classified improperly for purposes of workers compensation insurance. This is attributed to a number of reasons, but many times it is because a business owner rushes through the quoting process when purchasing Workmans Comp Insurance California. An insurance agent can only act upon the information they are given by the business owner when they are shopping for the best coverage to fit a business owners needs. If the business owner does not explain many intricacies of their business, the business may be classified improperly and pay more or less for coverage throughout the year. This mistake usually gets cleared during the end of term audit, but it can cause a business to owe additional premium. Even if the business over pays and is issued a refund, it means the business has tied up valuable cash flow in unnecessary premium payments throughout the year. These unnecessary payments could have been used on other more important business expenses.

Implement a Safety Program

A Safety Program can help limit the cost of workers compensation insurance in California because it will limit both the frequency and severity of claims. When you business has less claims and the claims you do have are small, the insurance carrier is more likely to offer your business a favorable rate for premium.

Start the Safety Program the day employees are hired

Safety Programs should be a part of your company culture. This should not start after a month in which a few accidents occur. Safety should be part of the training program from the moment an employee starts on the job. The more the business (especially the key employees) talk about safety, the more likely that message is to fester throughout the organization.

Add a Return-to-Work Program to your Safety Policy

A Return to Work Program can significantly impact your experience modification rating in a positive way. When an employee is hurt and not able to work they are much more likely to develop new habits outside of their daily work routine. The longer they stay off the job, the more likely the injured employee is to become long term unemployed. This can have a drastic impact on the experience modification rating of the business. Businesses that are able to get an employee back on the job, even in a limited capacity, are more likely to have those employees return to permanent work.

Communicate with your Insurance Carrier and Healthcare Provider

Communication is key when it comes to navigating the workers compensation system. This is true for the business owner, the injured worker, the insurance agent as well as the underwriter who represents the insurance carrier. The business owner has a responsibility to help the injured worker navigate the workers compensation system and get the care they deserve while not able to work. It is important to keep your agent in the loop throughout this process even though it is the responsibility of the carrier to administer the program. Keeping the agent in the loop can help in the unfortunate event that the carrier is not living up to their end of the bargain. If the agent knows about this process throughout, they can help hold the carrier accountable.

Surfing the California Coast

What are the Requirements for Workers Compensation Insurance Coverage in the State of California?

In California, all employers are required to purchase workers compensation coverage regardless of the number of employees. Sole Proprietors are not automatically included in coverage, but can elect to be included using the Acord 130 Application. Partners are automatically included on policies and they are not allowed to be exempt. Corporate Officers who happen to be the sole shareholder are excluded from coverage, but they have the ability to elect coverage if they so choose. All LLC Members who work within a business are included for coverage, but non-working LLC Members are excluded from coverage unless they elect to be covered using the Acord 130 form.

What are the Payroll Requirements for Business Owners in California?

According to California regulation, Sole Proprietors who elect to include themselves on workers comp coverage must use a minimum payroll amount of $52,000 and a maximum of $133,900 for rating purposes as of January First, 2019. Partners, Officers and LLC Members who do not excluded themselves from coverage must utilize a minimum payroll of $52,000 and a maximum of $133,900 for the purpose of rating workers comp premium.

 

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Why Do Work Comp Rates Vary From State to State?

Citizens of the United States enjoy a very high quality of life. According to a 2016 Business Insider Article, Americans enjoyed the 9th highest quality of life of any country in the world. Workers’ compensation coverage is a huge contributing factor to this quality of life. A strong workers’ compensation system provides the ‘exclusive remedy’ that helps prevent litigation between employers and employees when accidents happen on the job. When a strong Workers’ Compensation System is in place, employees are guaranteed some wage replacement while hurt and not able to work. Employees also receive payment for all medical expenses as a result of injuries that occur as a part of normal business operations. In turn, employers can rest easy knowing they will not be held liable for employee injuries, except in circumstances where the employer intended to cause the injury or was willfully negligent.

Work Comp Rates

In the United States, Workers Comp Laws are left up to the state governments. In most states, employers are required to carry workers’ compensation insurance. There are a few exceptions to that rule, but for the most part all employers are required to carry some baseline coverage to protect their injured workers.  There are many things a state government must do to administer a workers compensation system. The two main things states do that can effect price are; determine a process for assigning rates on industry class codes and provide employers with a provider of last resort (state fund or assigned risk provider).

Provider of Last Resort

Rates can be strongly impacted by the strength of the provider of last resort. This is frequently referred to as the state fund or the assigned risk provider. The assigned risk provider is offered to employers who cannot find a carrier to offer them coverage on the open market.  The business may not be able to find coverage on the open market because of their past claims history or because they operate in a high risk industry.  How well the state goes about setting up this relationship goes a long way towards determining the rates employers pay for coverage in that state.

There are three main ways states go about providing this service.

  • State provided fund
  • Public-Private Partnership
  • Partner with an outside agency

The Workers’ Compensation Fund of Utah (WCF) and The California State Compensation Insurance Fund (CSCIF) are two examples of states who provide their own fund. These two states area good comparisons to show how rates are affected by either a strong or weak state fund. In Utah, The WCF has a 57 percent market share while the next largest provider owns only a 3 percent share of the market (2). In comparison, The CSCIF controls just over 11 percent of the market compared to just under 10 percent for the next largest provider. As a result, Workmans Comp Utah has rates that are 107 percent cheaper compared to California. This is not the only contributing factor to the discrepancy in prices, but it goes to show how drastic an impact a strong state fund can have. Now in California’s defense, the Gross Domestic Product (GDP) in Utah is nearly 1.7 trillion dollars less than California (2). That is another huge factor driving up prices in California.

Another factor impacting rates on workers’ compensation insurance is how a state goes about determining rates on all the different industry classification codes. There are two ways states can go about providing this service. They can provide their own rating bureau or they can partner with an outside agency to do this in-depth work. Most states partner with the National Council on Compensation Insurance (NCCI) for determining rates on class codes. A few states have an organization that is part of the state government who determine rates.

Determining Rates on Class Codes

New York and Arkansas are two contrasting states that are a good example for how these different approaches can effect the rates on workers comp coverage. New York has its own bureau, The New York Compensation Insurance Rating Board (NYCIRB) while Arkansas outsources these duties to NCCI. As of 2014 Arkansas has rates on Workers Comp Coverage that are 90 percent cheaper than those rates in New York. Now again in defense of New York, it does have a GDP that is just under a trillion dollars more than Arkansas. That is a strong factor contributing to higher rates, but so is the fact that New York does not use NCCI to determine rates. Typically states who have their own bureau have higher rates across the board. In most cases, NCCI is better at doing this task than the states are themselves. The one exception to this is the state of Indiana. Indiana has their own state rating bureau, but enjoys some of the lowest rates on workers comp in the country.

In both of these examples the larger states have different ways of going about administering their workers compensation policies. These different ways contribute to escalating rates on workers’ compensation insurance. Now part of the reason for them doing things differently might be the vast size of the economies in these state’s. They may not be able to outsource this job for an economy in the trillions of dollars where as another state may be able to outsource more easily because their economy only amounts to 100 billion. Both of these examples do show how the strength of the state fund and how efficiently a state determines rates can drastically effect the amount employers pay for workers comp coverage.

These factors are two of many factors that can have a huge impact on rates employers pay for workers comp coverage. This is why it is immensely important to consult with an insurance industry professional when quoting a policy. It is also important to quote with agencies who have access to many different insurance carriers within your state. The more carriers your agent can get a quote from, the more likely your businesses is to get more comprehensive coverage and lower rates on premium.

Insurance Tips for your Lawn Care Business

According to the National Association of Landscape Professionals, the Lawn Care and Landscaping Industry amounts to $78 billion as of 2016.  This is an enormous part of our economy that employs nearly a million people. Because of the vast size of this industry there is a huge amount of risk being taken on by businesses both big and small.  Because of these risks there are an equally big market for the insurance industry to help these businesses to properly protect their businesses. Here are three tips for how to properly protect your lawn care business.

 

How does a lawn care business owner find the best insurance coverage for their Lawn Care Business?

There are many things that go in to finding the best insurance policies for your landscaping business and they depend on may aspects of your business.  Most of those aspects deal with factors that are unique to you and your business.  For example, one business owner may be comfortable with more risk than another. The help of an experienced independent agent can help you determine just how much risk your business faces and how best for you to protect your business from those risks.

Once you have found a good agent, it is equally important to take a little extra time to speak long and honestly about everything your business does and does not do.  There are numerous classification codes for the landscaping industry and classifying your business improperly can impact your rate on premium tremendously.

 

How can a business owner find the best price on insurance coverage?

Once a business owner has found a good insurance agent and has spoken with that agent about all the ins and outs of their business, it is important to ask for all credits and debits that your business qualifies for.  The best way to do this is to be direct.  If price is what you value than tell your agent that is what you value. Insurance agents interact with many different people from all walks of life.  Not all business owners value getting the absolute best price on coverage. If this is important to you than express that to your agent and they should be able to find the most suitable coverage.

 

What do I do when I have and claim and am forced to use the insurance policy?

It is normal for an entrepreneur to be confident.  Many of those same confident entrepreneurs have an affinity to assume bad things are not going to happen to their business. The only true way to prevent this is to take the proper steps within your power to prevent and be prepared for when disaster strikes.  A major part of that preparation is to have proper insurance in place.  Once you have the proper policies in place, it is important to take pictures of all the equipment and property you have covered.  This can prove the state of the equipment before the occurrence.

After securing the proper landscaping insurance policies and documenting the state of your covered assets, you need to have policies and procedures in place for how to report an occurrence when a disaster strikes you business.  You should have all managers on duty trained to be prepared for all bodily injury occurrences.  You should notify both your agent and the carrier when you have a claim.  Do not be upset if your agency informs you to contact your carrier.  It is the job of the carrier to process the claim, not the agency.  At the same time, it is important to keep your agency in the loop in case the carrier is not living up to their end of the bargain. Many medical facilities are not prepared to process the workers compensation system. Your carrier can help you find the proper facilities in your area to provide the best coverage to your inured employee or customer. This can drastically limit the severity of a claim and it can allow your injured worker to get the best care without the least amount of doctors’ visits possible.

Keeping the injured worker on your side is important to getting them to return to work and limiting the severity of the workers’ comp claim.  If this process runs smoothly it will make your employee happy and motivated to return to work and it will help your insurance carrier to limit the amount of the claim and prevent too much damage to your businesses experience modification rating.

 

 

Talk with your agent.

In today’s business world, time is of the essence for all business owners. When purchasing something for their business, many business owners want it done fast and cheap. They may have an inclination to rush through the buying purchase or to only focus on price. In many instances this may be wise, because their time is more valuable running the business than trying to save on buying whatever is needed for that business. When it comes to purchasing commercial insurance this is not a good idea. In this instances it is crucial for business owners to take the necessary time to have a long honest conversation with their insurance agent.

In conversations I have with agents in the insurance field, they all say rushing through the buying process is a mistake far too many business owners make. This is where a little time on the front end may cost the business owner some time away from their business, but on the back side it can save their business hundreds if not thousands of dollars when a claim does occur. During these conversations the agents are typically trying to get as much information as possible about the daily operations of your business. They understand business owners may be shopping around to more than one agency and that their time is valuable, but rushing through this process can cause your business to be under-insured or to pay too much in premium.

These problems frequently come about because business owners do not inform their agent what exactly the business does and what the business does not do as a part of their daily operations. Insurance companies are in the business of analyzing risk. It is in their best interests to assume more risk rather than less. They can only assume the risks of your business based on the information you provide them with. If you do not provide them with the enough information they frequently will assume more risk, which costs more in premium.

In most industries there are numerous industry classification codes. In most states these classification codes are determined by the National Council on Compensation Insurance (NCCI).  These classification codes separate businesses by the type of work they do or do not partake in. Take landscaping as a prime example. There are at least a half a dozen class codes for lawn care and landscaping based upon the daily operations of your business. The two most common NCCI classification codes for the landscaping industry are 9102 and 0042. 9102 is designated for lawn care or maintenance of existing lawns, where 0042 is designed for businesses that install lawns and beds. The second class code is more dangerous and has a higher premium. If you rush your agent through the quoting process, they may place you in the wrong classification code. This can cause your business to end up paying far more in premium than is necessary. These mistakes frequently get fixed during the end of term audit, but even when they do your business has still paid more in premium than was necessary. That means there is cash-flow your business could use tied up in unnecessary insurance premium.

On top of tying up cash in premium, another problem exists that a good insurance agent can help your business with. The problem they can help your business with is to understand what exactly is and is not covered under your different insurance policies. This can help you fill in coverage where gaps might exist. This is where an agent can help you determine if you need a coverage like Business Loss of Income Coverage or Data Breach Insurance. 

Business loss of income coverage is a policy that is a type of commercial property insurance coverage that kicks in when a business suffers additional loss of income suffered when damage to its premises causes a slowdown or suspension of its operations.  The damage has to be the result of a covered loss. Take for instance if your building experiences a fire. Your commercial property insurance will cover to repair the damaged building, but it will not cover your business for lost revenue while you have to be closed for repairs. This is where business loss of insurance coverage kicks in. Many businesses who fail to secure this coverage do not survive when an occurrence happens.

Data breach is another coverage that is becoming more and more necessary. Many business owners feel they are too small or do not deal with computers or customer information enough to need this coverage. Take a commercial cleaning company for example. They have 5-15 employees and clean 5 office buildings and one retail store at night while the businesses are closed. Their employees only use a cell phone and never interact with a computer. Their business owner thinks they would never need something as advanced as data breach coverage. But what if you clean the offices of a bank and an employee of the bank leaves  a post-it note on their desk with the username and password for the internal system. If one of your employees finds this they could get into the system and access the financial records of the banks customers. That is a need for data breach coverage. Two of the largest data breaches in history, Target and Home Depot, were started by hackers first accessing a small business who was a partner of the larger business that got hacked. You do not have to be a big company nor do you have to store lots of personal information in order to be a target for criminals.

All of these and other problems can easily be prevented by taking the time in the first place to speak long and honestly with your independent insurance agent. They can help you understand what risks your business because not only do they interact with business all the time when they are purchasing insurance, but they also frequently interact with business owners when the unfortunate accident occurs. From that experience they can help you prepare for when dooms day comes for your business. If you take this time to properly protect your business it can be the difference between closing your doors for a short time and closing your doors forever.

6 ways to save when shopping for Workers’ Comp Insurance

Workers’ Compensation is one type of insurance that is required by law in nearly every state in the country. Because of this it is imperative that all business owners take advantage of every way they can to save on this required coverage. There are a few things business owners can change about their daily operations that can have a noticeable effect on what they pay for worker’s compensation insurance.

Keep a well-documented safety program.

Keeping a well-documented safety program includes a return to work program for injured workers and a detailed driver safety program if you have workers who will be driving as part of their normal work related duties. Safety programs do not have to take a lot of time away from your normal business routine to help you save your business money. It can be as little as a 15-minute huddle once a week. The meetings do need to be regular, but they can be weekly, bimonthly, monthly, whatever you determine is best for your business.  Attendance should be recorded as well as the subjects covered at each meeting. A well-documented safety program can really benefit your company when you do have an injury. If you have a well-documented safety program in place than your agent can speak with your insurance carrier and defend your business as one that is taking the needed steps to limit claims. If you have these programs in place the agent can more easily show the injury as more of an outlier and not a sign of trouble ahead.

 

Make sure you are in the proper classification code

Being placed in the wrong classification code happens more frequently than one might imagine. This can change what you pay in premium both positive and negative. There is an audit at the end of every term so this can cause unexpected costs at the end of the year for many businesses. Landscaping is a good example of an industry that has two classification codes that are much different in price. The two main classification codes for landscaping are 9102 & 0042. 9102 is for businesses that maintain already existing lawns and garden beds. 0042 is for businesses that design and install lawns and beds. This is a more dangerous undertaking and costs more in premium. If you are not crystal clear with your agent what your business does on a daily basis, they may assume you are in a riskier classification code. This can cause your business to pay more in premium than it has to. This can be a problem even if you pay too little because an audit is run at the end of every term and if you are than classified correctly, any premium that is owed will then be due. 

 

Actively ask your agent for approved credits and discounts.

Credits and discounts are available for many industries. They are offered by the state and the individual carriers to help business owners save on premium. Your agent has to ask for them in order to get the full amount of discount possibly available. If you bring this to their attention as a priority early in your interaction with them they will know to actively seek the best price. Insurance Agents have to deal with many business owners on a daily basis and the priorities of each business owner may be very different. Many business owners value their time above anything else. These business owners may rather pay a little more in order to just have the process over. If price is an important determining factor in your choice to buy commercial insurance, then let your agent know this up front. That way they can actively seek out every credit or discount available. 

 

Price shop, but do it carefully. 

You should always shop your policy around to make sure you are getting a competitive rate.  This is the first thing to do when you want to save on commercial insurance.  Switching for a moderate discount is not advised. This becomes important when your business inevitably has a claim. Your business will have a claim at some point in time. If you are a customer that has been with the carrier for several years, they are less likely to raise your rate on decline coverage of you altogether. If you are a business that switches carriers every year for a modest decline in price than you are much more likely to be dropped from coverage when a claim does occur. If you are dropped from coverage and cannot find insurance from another carrier than you are forced in to what is called the state fund. Policies in the state fund are much more expensive and depending upon your state once you are in the state fund you must remain there for 2-4 years. 

 

Have an informative website.

A website is beneficial to your business in more ways than just marketing. When you are applying for commercial insurance your agent is going to ask several questions about your daily operations. They are going to investigate it and so is the underwriter of the insurance carrier you are getting a quote from. If you tell them, you only do one type of business and your website shows you are doing something else than you better be prepared to explain what you do or do not do on a daily basis. On the contrary if you have a website that confirms what you have told your agent it will strengthen your relationship with them. This will help when and if you have a claim and need them to help you explain what happened to your insurance carrier. 

Consider changing the limits to your policy

The limits of your policy are important to protect your business, but they are not set in stone. They are not the same for every business owner either. Some business owners want to protect their business fully. Even protect it beyond what could imaginably happen to their business. Other Business owners are quite comfortable taking on more risk. If you are one of those business owners than lowering your limits is one way to lower what you pay in premium. Now most carriers will have a minimum amount you have to take, but if you are above those limits it may be worth your while to speak with your insurance agent about the pros and cons of lowering those limits. As long as you are making an informed decision and you know the risks you are taking lowering the limits of your policy can be an effective way to save on premium.