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.

 

Tips for Home Health Care Agencies

Owning and operating a home health care agency can be complex. The clients you deal with can have a wide range of health issues you and your employees need to be familiar with. Some clients may be small and frail, but very mobile; while another client may be large and immobile. Some may have mental problems like dementia while other clients may have mobility issues like the aftermath of a stroke. With each of these clients comes a unique set of risks. These risks all determine what type of insurance you need and how much that insurance will cost. Here are three tips to help you the next time you shop for home health care workers comp.

Make sure you are classified accurately

For purposes of workers compensation insurance, governance of these programs is left up to the individual states. Most of the states partner with the National Council on Compensation Insurance (NCCI) to determine a classification code for each business and the rate of premium for each code. There are currently more than 700 different codes a business can be classified as. Each industry has multiple classification codes depending upon the scope and scale of the business. Depending upon the actions of your employees while on the job, the amount of premium is reflected through your businesses classification code.

Hire carefully

Unfortunately the home health care industry tends to have a high turnover rate. The two main reasons for this is the stress of the job and the amount of pay for most employees. In order to turn a profit, there is only so much a business owner can pay their employees in order to stay profitable. Because of this fact, it is difficult to keep the best employees around. This is a reason to hire carefully and for the long-term. Sometimes the candidate with the best resume is not as good for your business as the candidate who is the best fit for your business. Finding the best fit is different from business to business based upon the scope of the business and the market that business operates in. Taking additional time to hire the right person will almost always pay off in the long run.

Implement safety protocols

Safety programs are immensely important in the home health care industry. This industry has both a high volume of insurance claims and the claims can be high in severity. The reason for this is because many employees drive their own vehicle to a remote location and many drive to multiple locations throughout the day. The time that your employees drives from location to location makes the liability for accidents that occur the responsibility of the business. This is regardless of whether the employee is on the clock or not. It is important to consider implementing a driver safety program for your home healthcare business.

It is also important to implement safety programs  for the time your employees are in the homes with clients. Depending upon the limitations of each client, your employees should be prepared to keep themselves safe first and keep the client safe second. Let them know that they cannot help the client if they do not take care of themselves first. Because of the remote nature of this work, it is important to have weekly face to face meetings with all employees and to discuss safety protocols with them.

 

Restaurant Insurance

3 tips to find the best Restaurant Insurance. 

How much insurance do I really need? What are the correct types of insurance for my restaurant? What types of restaurant insurance can I do without? What is the bare minimum I can get away with for restaurant insurance? These are all very common question that insurance agents get asked when a restaurant owner is looking to protect their business for the first time or a seasoned business owner is looking to renew their coverage. The answer to this question is like many things; ‘It depends’. There are many variables that go in to owning and operating a restaurant and those variables bring on many risks. Not every business owner is comfortable with the same amount of risk.  Depending upon how much risk you are willing to take, here are 3 tips to help you make sure you are purchasing the amount restaurant insurance.

Are you classified correctly?

First off, the small business owner needs to make sure their business is classified properly. This applies for both workers compensation and general liability insurance. Each state has their own governing body for these coverages.  The best way to determine if you are properly classified is to ask for help from an experienced independent insurance agent. When talking with your agent, it is crucially important to be honest with them.  This is important for the time you are open, how much and what types of alcohol you serve and what exactly your employees do.  Restaurants are classified different based upon the risks they face. Being properly classified can save your business immensely.

Pay as you go option

Workers comp coverage is required by state law in 48 out of 50 states. getting this coverage in place is an enormous cost.  Pay as you go workers’ compensation is s a great option for seasonal or cash strapped businesses. Pay as you go workers’ compensation allows a business to pay premium based upon the amount of payroll as opposed to an estimate of the monthly payroll. For many businesses they can get coverage in place for as little as a few hundred dollars.

Determine the proper type of Commercial Auto Insurance

Many business owners do not think they need any type of commercial auto insurance. Just because your business does not own vehicles, doe snot mean you do not need to secure some form of commercial auto insurance. If you do own vehicles that are going to be used for business purposes you most definitely need commercial auto insurance coverage. Also, if you have employees who use their own vehicles for business purposes than the business is liable for all accidents. Hired and Non-Owned Auto Coverage is a policy that kicks in when your employees use their own vehicle or a rented vehicle not owned by the company. Regardless of how small the activity may seem, when the employee is using any vehicle to do business activity you are liable.

 

 

Insurance Tips for Lawn Care and Landscaping

There are many aspects to owning a landscaping business. Many aspects that have nothing to do with the actual work itself. Whether a business owner is dealing with finding the right employees, determining the right price to charge their customers or managing the day to day operations; there are always additional responsibilities pulling the business owner in a different direction.  One aspect that frequently gets looked over is purchasing commercial insurance for your landscaping business.  Here are five tips for finding the best insurance, saving money when purchasing coverage and how best to use your policy when a disaster occurs.

Get the answers to your Lawn Care and Landscaping Insurance Questions at My Insurance Question.com

Partner with an independent agent

Independent insurance agents are unique in that they can quote you policies from many different carriers and not just one or a select few.  The appetites of the carriers change from year to year for certain coverages and especially for different industries.  Some years, your premium may go up simply because the carrier has experienced a lot of losses in your industry of the last year or couple of years. As a result they raise the prices for that classification code.  Another carrier may not have experienced the same losses and may be more hungry to quote your policy.  An independent insurance agent has the ability to force carriers to compete for your business.  In the end this helps you get better coverage at rock bottom prices.

Make sure you are in the right class code

The Lawn Care and Landscaping Industry is an industry that has numerous general liability classification codes. If you do not give enough information to your agent, they are forced to guess exactly how much risk your business takes on. It is in their best interest to always assume more risk. Assuming more risk protects the insurance agency, but may cost your business more in unnecessary premium. These mistakes usually get fixed in the end of term audit, but even when corrected you still have tied up cash in unnecessary premium throughout the year.

What coverages can I do without?

Once you have taken care of finding a good agency to partner with and you have taken the time to make sure you are classified properly, it is important to ask your agent what coverage’s does your business absolutely need and what coverage’s your business may be able to do without.  At this point it is important to remember the agent works for you.  If you are honest with the agent about how much risk you are willing to take, they should be able to give you the proper information to cover your business as you prefer.  It is important to remember that insurance agents not only interact with business owners when they are selling coverage, but also when the worst of the worst has occurred.  The agent may be offering you an extra coverage because they have interacted with a business owner in the past who had a claim occur at their business where they were not covered. Those are never easy conversations to have.  Depending upon the size and severity of the disaster having the right coverage may be the difference between your business closing the doors for a week and never opening again.

Ask for available credits and debits

The best way to find the best price on coverage is to tell your insurance agent what you value in the buying process.  Insurance agents talk with many different people from many different walks of life.  One customer may want to get through the insurance buying process as fast as possible so they can get back to running their business.  Another business owner may not mind if it takes a day and a half of their time in order to save an additional five percent.  Let the agent know early and often what you value.

What do you do when your business has a claim?

It is common for a business owner to think bad things will not happen to their business, but the most successful businesses are those who have a plan in place for when things go wrong.  Part of that plan should be having the proper insurance policy in place.  When an occurrence eventually takes place, there are several steps you as a business owner can take to speed up the process of getting your claim paid and get your business back up to normal operation.

When you do have to make an insurance claim it is important to inform both your carrier and your agency.  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 equally important to keep your agency in the loop.  In the unfortunate case the carrier is not living up to their end of the bargain, the agency can contact them on your behalf.  If you have injured workers, make sure they are going to medical facilities that are properly prepared to process the workers’ compensation system within your state.  Your carrier can help you find the proper facilities.  This can drastically limit the severity of a claim and it can allow your injured worker to get the best care quickly.  The better care they get can result in the getting back on the job quicker and with the least amount of doctors’ visits possible.  Keeping the injured worker on your side is important.  If this process runs smoothly it will make your employee happy and motivated to return to work.  It will also help your insurance carrier by limiting the amount of the claim.  THis will prevent too much damage from being done to your businesses experience modification rating.  The Experience Mod is one of the main ways carriers determine how much they will charge you for premium.

Do not be alarmed if a claim stays open for a period of time after your business has gotten over the claim.  Insurance agents do this in order to not have to open a second claim.  A second claim will also impact your experience modification rating.  The carrier does this because an injured worker may return to work and reinjure themselves.   Sometimes this can happen weeks or even months after the injured worker has returned to work.  If this causes your business to file a second claim it can have a damaging effect on your rating resulting in a higher rate on premium.

 

Work Comp Premium

How Your Workers Compensation Premium Is Calculated

 

No matter the size of your company, one of the most basic costs of doing business is insuring your employees against injury on the job.  This makes your workers compensation premium one of the most precious fixed costs any business owner can make.

How Workers’ Comp Premiums are calculated:

Workers compensation premium is calculated according to how employees are classified (with regards to the specific type of work they perform) and the rate assigned to each employee classification. The premium rate itself is expressed as dollars and cents per $100 dollars of payroll for each class code. In most states, the NCCI determines the classification rate and experience modification factor (MOD).

National Council on Compensation Insurance (NCCI) Classification Codes are one factor that determines workers compensation premium.

Factors that Go into Setting Workers Compensation Premium:

  • Size of the employer’s payroll
  • Employee job classifications
  • Company’s claims experience

Premiums for work comp insurance are calculated by the formula below…

Payroll (per $100) X Classification Rate X Experience Modifier = Premium

How Your Payroll Affects Your Workers’ Comp Rate

The basis for an employer’s workers’ compensation premium is your payroll. For each $100 dollars of your payroll, there is a specific rate, which is determined by the classification codes of your employees. If you can keep detailed records for what employees are doing on multiple jobs or in different aspects of their job, you may be able to break out that portion of payroll and potentially save on premium.

Another huge thing to keep in mind is sub-contracted labor and 1099 employees. Many business owners make the mistake or think that if they have employees in this manner it does not affect their premium. If you are paying an employee as a 1099 instead of a W2 and they do not have their own work comp coverage then you are responsible for paying premium on those payroll dollars. There is not a week that goes by that I do not field this question or see this situation and I always have to educate business owners on it. The same thing applies to sub contracted labor. If you are not collecting certificates of insurance and verifying, they actually have coverage then you are responsible for the premium as well. Our goal is to help you understand everything possible that could end up costing you money at audit time. We do not want you to have a huge audit balance just as much as you do, so we do our best to let you know everything on the front side of getting a policy in place.

How Your Employer Classification Affects Your Insurance Rate

Businesses are separated into groups according to the type of work they do. The classification system identifies which type of work presents more risk to the employees performing these tasks.

How Your Experience Modification Factor Affects Your Premium

Your experience modifier – typically referred to as your Ex Mod – is a numeric representation of your company’s claim experience. Ex Mods are based on how your business compares to others in your industry with similarly classified employees. An average Ex Mod starts at 1.00. Employers with fewer and less severe accidents than average have a MOD of less than 1.00. This will generally take a few years of consecutive coverage to be effected one way or the other.

Commonly Misclassified Workers Compensation Class Codes

One of the most misunderstood and difficult parts of setting up a workers compensation insurance policy is classifying the type of work being done by each employee. With over 700 classifications there are a lot to choose from and some of the wording on the classification descriptions can be misleading. In most states, the classifications are written by the National Council on Compensation Insurance (NCCI). These class codes are one of the most important parts of the workers compensation policy, because they are one of the two driving factors in price or premium.  The other factor determining what a business pays is the amount of payroll for the employees of that business. If the employees are not classified properly, there is a chance that upon an end of term audit for a significant difference in rate between the classifications.  This can cause either a large increase in premium owed, or a refund because too much has been paid into the policy. Here are some examples of my experiences with some classification codes that are commonly misused. Hopefully this will help you as a business owner more effectively classify your business with the proper workers comp codes.  

Class Codes 5606

Contractor – Project Manager – Construction Executive – Construction Manager or Construction Superintendent

In my opinion, this classification is one of the most misused of all 700 codes. This classification is designed for an employee who is in charge of a construction project, but the employee does not take part in any of the physical work whatsoever. They also cannot have direct contact with the employees doing the work. They must be talking with the foreman who then will line out the work to be done by the employees on the job site.  This position is mostly work being done in the office, but occasionally will include going to the job sites to check in with the foreman’s.

Carpenter doing woodworking

Class Codes 5437

Carpentry – Installation of Cabinets or Interior Trim

Carpentry is one of the commonly mis-classified class codes when it comes to general contractors.  General contractors cannot separate out this classification from other work being done.  Even if the other work was done weeks prior, the contractor still cannot use this classification. It will default to the classification that has the highest risk for the work done at the job site. The higher risk typically has a higher rate of premium. This particular classification is designed to be used by an artisan (specialty) contractor. This is someone whose scope of work is only doing the installation of cabinets or trim inside of the structure. This person is not doing any other type of work on the building. It is a very specific classification and the rate for this type of work is much less than all the other construction classifications. For this reason, if a business is using this classification and it is incorrect the business will owe a very large amount at the end of the term after an audit.

Clerical Office Employee | Class Code 8810

Class Codes 8810 

Clerical Office Employees NOC

Clerical employees are typically one of the least expensive class codes. This is for a good reason because the chances of someone sitting behind a computer being injured is very small. Since it is the least expensive classification, it is common that business owners try to classify as many of their employees as they possibly can with this code in an attempt to reduce cost. The biggest requirement for this classification is that there has to be physical separation of the clerical employee from the other work being done at the location. This separation can be a wall or even a reception desk. The other caveat of this classification is that you typically cannot use this in conjunction with any other classifications. People within the insurance industry refer to this as a standard exception class code. The standard exception class code  means the employee cannot be doing any other class of work. You cannot have an employee who is classified as 5437 (trim carpenter) and then have the same employee come back into the office to be assigned class code 8810, which is a less risky class code. Some states may have certain instances where they allow this code to be split. Missouri is one such state that allows an owner to assign 10% of their payroll to the 8810 class and the remaining to the governing code. It is important to check the regulations of the state you are operating in to make sure.

Standard Exception Class Codes

As referred to with the clerical classification (8810) they cannot be used in conjunction with any other classification. There are three of these class codes that are commonly misused in this manner, 8742 (outside sales), 8810 (clerical), 7380 (delivery). Make sure that if you are using these classifications the employee is not participating in any other aspect of work being done in the company that should be classified elsewhere.

 

Conclusion on Class Codes

The biggest take away from this is a business owner should verify all the classifications the agent is using on the policy of their business. The insurance agent is in the business of analyzing risk. It is in their best interest to always assume more risk. This is because it is a lot easier for the agent to explain that a business over paid. This is easier than explaining that a business under paid and now they owe additional premium. Plus the insurance agent can only operate off of the information you give them about your business. No one knows your business better than you. For this reason, it is important to take an adequate amount of time to talk with your agent. Talk with them about all of the ins and outs of your business. This will help them properly protect your business.

It is equally important that part of your conversation with your agent is to talk through the class codes.  Take time to make sure the class codes are being properly assigned. You can always look up class codes online as a consumer through several different sites. Most agents will be more than happy to explain why they used a particular classification. Classifications can sometimes be very tricky and it can even vary by how a particular insurance carrier views the work being done. A little research and questioning to make sure things are set up properly can end up saving you a lot of hassle. It will also save you money upon the end of term audit. For this reason, it is important to establish a comfortable working relationship with your insurance agent.

How Competitive Workers Compensation Rates Develop

Workers compensation rates are developed by claims and premium paid within each industry, per state over a period of multiple years.  In most sections of the U.S., each State sets a minimum and maximum rate for each industry code.  Within the minimum and maximum rates established by the state competitive insurance companies are able to file their rates for each industry depending on how competitive they want to be.  Depending on the characteristics of a particular business, insurance companies could be willing to discount or increase their rates.  Each state also sets a minimum and maximum amount of credit or debit an insurance company can use when quoting.  When researching rates, lower rates indicate an industry that is less likely to suffer a claim and higher rated industry codes indicate a higher risk of a claim.  The lower hazard industries have more options therefore more competition than the higher hazard industries.  More competition typically means those industry types are going to pay considerably less than a higher risk industry with only a few options willing to quote.

Identify the areas that cause the greatest concern for workplace injuries.  Business owners in all industries can increase their chances of paying the lowest workers compensation rates by implementing proper policy and procedures to prevent claims.  Which policy and procedures to implement will not be the same for all industries.  A restaurant would have different exposures that could cause a claim than a remodeling contractor.  When quoting your business, make sure you highlight the areas that your business has implemented that prevents claims.  Brag about the areas that make your business different than other businesses in the same industry.  In my opinion, most business owners and agents are focused on which insurance company has the lowest rate.  Instead, the business owner and agent needs to tell the story of that business and the components of that business that make it attractive to insure.  Just because an insurance company has one of the lowest rates for a particular industry doesn’t mean they are the most competitive option.  Insurance companies that are willing to apply credits/discounts based on business practices to prevent claims will typically be the most competitive options.  If your agent is not asking about your business practices, they are not properly selling to their underwriters to get the best possible pricing.  Below is a short list of ways a business owner can help reduce their workers’ compensation costs.  These are the things that insurance company underwriters want to know about in order to properly price their quote.

  • Business owner is active within the business. When a business owner is active and around employees, typically those employees follow the policies and procedures more carefully.
  • Proper training of how to handle situations that could cause workers comp claims. If you own a convenience store, how should employees handle a robbery?
  • Return to Work Program. History shows that the sooner a business owner can return the injured employee to work the less expensive the claim will be.  Even if you have to create a light-duty position temporarily.
  • Establish a safety program and enforce discipline for not following proper procedures.  This can positively impact your workers compensation rates.
  • Conduct safety meetings. Constantly reinforcing helps prevent injuries.
  • Employee Training for the job they are performing, equipment they are using.
  • Designate Key Employees to be responsible for holding employees to the standards of your business
  • Update your equipment when needed, make sure it has the proper guarding to prevent injuries.

Inland Marine Insurance Coverage

Four things to remember when purchasing Inland Marine Coverage.

 

Inland Marine Coverage is frequently referred to as ‘Floaters’ or ‘Equipment’ Coverage. That is because it is designed to protect equipment that a business owns, leases or rents that is not a vehicle or a piece of property. It is also typically equipment that is going to be transported in some way shape or form. This can include a mower that a landscaping business is transporting to a clients premises or a product being delivered to a customer. Many business owners think this part of their business is covered by their basic general liability policy, but that is incorrect. If they partner with a good insurance agent they know what is and what is not covered by each of the policy they may or may not be purchasing for their business. If you find that inland marine coverage is right for your business, here are four things to keep in mind in relation to this policy.

  • Choose an agent who partners with many carriers and not just a select few. 
  • Determine the proper classification code for your business. 
  • Inventory all equipment that needs to be protected under the policy.   
  • Establish a good working relationship with your Insurance Agent.

Choose an agent who partners with many carriers and not just a select few. 

By choosing an agent who partners with many different carriers you are allowing yourself to let the insurance agent shop the policy for you. Some agents work with only one carrier or just a select few carriers. This means they are not able to make sure you are getting the absolute best coverage at the best price. You can always shop the coverage around to several agents, but wouldn’t your time be better spent running your business. Finding an agent you trust and who knows your industry well can allow you to let the insurance professionals do their job. It allows you to get back to doing what you do best, which is running your business.

Determine the proper classification code for your business. 

Most industries have several classification codes within the industry. Insurance agents and insurance carriers are in the business of analyzing risk. It is in the best interest of their business to always assume more risk until proven otherwise. If you are in a less risky classification code within your industry the agent and carrier are only going to know this if you bring it to their attention. Otherwise they will probably assume your business takes on more risk. This will result in you paying more premium and may cause some claims to not be covered. Now, these mistakes typically do get fixed at the end of term audit, but even when they are fixed you still have been tying up cash into premium you did not owe that could have been used to reinvest in your business. In some cases if you are classified into a less risky class code you will owe more in premium after the audit. In the worst case scenarios your claim may not be covered because you are misclassified and the carrier would not have offered coverage in your higher risk class code.

Inventory all equipment that needs to be protected under the policy.  

It is very important to keep an up to date inventory of all the equipment you want listed under your Inland Marine Coverage Policy. Taking pictures of the equipment is a good idea as well because if there is a claim you will get replacement level value for the equipment that is damaged or destroyed. If you have an expensive version of whatever piece of equipment you are covering the best way to prove that is with a picture. Keeping this information on file with your agent and especially your carrier is crucial when a claim does occur.

Establish a good working relationship with your Insurance Agent.

The better relationship you have with your agent the smoother the process will be when you go to renew your policy and when a claim inevitably does occur. If they know you, your business and what is important to you as a business owner they can better insure your business the way you want it to be protected. Some business owners are okay with excepting some of the risk. Other business owners want to be protect to the fullest limits of the policy. The agent can only attempt to cover your business the way you want them to if you let them know what you expect and how you run your business. This relationship can also come in handy when a claim does occur. If you were combative during the quoting process and then your business has a claim six weeks into your term it does not speak highly of the way you operate your business. On the contrary, if you take some extra time to explain all the intricacies of your business and the way in which you want to be insured during the quoting process it starts off the relationship on the right foot. Later when a claim does occur this process will move through much more smoothly and your agent will be much more likely to go to bat for you with the insurance carrier.

Work Comp 101

Work Comp Insurance 101 – A Complicated Insurance Explained Clearly

Find out everything you need to know about work comp insurance here at my insurance question.com

I regularly speak to business owners that are purchasing workers compensation coverage for the first time. Most insurance agents do not take the time to explain how the basic process works.  When this happens, business owners are purchasing a coverage they don’t clearly understand. It can lead to frustration on the part of the business owner and the insurance agent when something changes with the policy.  Especially when the change demands more money. Work Comp Insurance is my niche. I make sure to take the time to explain the basic process of how premiums are developed at the beginning of the policy period and after the policy period ends. I feel it’s important to explain this coverage properly. By doing this I find that business owners understand why changes happen and what changes are important to pay attention to.  I also make sure they know to notify their agent or insurance company throughout the policy period if any of these changes occur.

Work Comp Insurance and Employers Liability Coverage

The Basic Process:

Workers compensation rates are first dictated by the workers compensation classification code. Every industry does not have a specific code. A lot of times the process of how the work is completed is assigned to a work comp insurance code where the process is similar. For example, a business that puts waterproof coatings on parking lots would be classified the same as a painter because the process is similar.

After the workers compensation classification code is determined, in nearly every state the insurance company is able to file their rates depending on how competitive they want to be in an industry. The state typically sets the minimum and maximum rates, insurance companies file their rates within the range.

Work comp insurance policies require that business owners declare an estimated payroll for all covered persons for the annual policy period, 12 months from the date the policy begins. Business owners are tricky because states require that business owners are covered using a minimum annual payroll up to a maximum. If a business owner is included in coverage and takes less compensation than the state minimum, the additional payroll is added after the audit. If a business owner takes more than the maximum set by the state, then wage calculations stop at the maximum.

The total policy premium is determined by several factors. First the rate per $100 of payroll established by the insurance company per work comp insurance code. That rate is a percentage of the gross wages paid to employees in each workers compensation code. Second, different states can charge different taxes that are added to the bottom line. The insurance company typically charges an expense constant factor that is a flat fee. Then, the insurance company can apply credit or debits (discounts or increased pricing). All of these factors determine the final pricing when you activate coverage.

After the Workers Compensation Policy is finished a payroll audit must take place. The purpose of this audit is to determine the actual gross wages paid to covered persons throughout the policy period. Also, the auditor will double-check the work comp insurance classification codes for accuracy. If the agent used the incorrect workers compensation code OR something changed throughout the policy period, the auditor will adjust the workers compensation code. It’s very important to verify the workers compensation code for your business before purchasing a workers compensation policy. Your agent should be able to provide a detailed description of your workers compensation code to verify accuracy.

During the audit process, most insurance companies do not have the ability to staff auditors across the U.S. so they use 3rd Party companies to handle their audits. These 3rd Party auditors typically specialize in workers compensation audits for multiple insurance companies. Typically the auditor will make contact with the business point of contact within 60 days after the policy period has expired.   It’s very important to set-up the audit as soon as you can coordinate schedules, make this a priority. The auditor will inform of the payroll documents needed, have all of them prepared. These auditors are required to complete the audit process within a small timeframe otherwise they return as non-productive. When an audit is returned as non-productive, the insurance company will process and mail to the business owner an “estimated audit” with a balance due and a cancellation notice. The business owner must contact the insurance company to re-open and process the audit. This is typically a headache, it’s a lot easier to make it a priority and take the necessary time to complete it.

After the audit is processed you will receive the results and either a balance due or a credit being returned. At this point the business owner should review and file a dispute with the insurance company IF the results are incorrect. The auditor’s duties are to capture the gross wages for covered persons and verify job duties. Auditor’s make mistakes, don’t ask the appropriate questions and sometimes they are new to the industry therefore, do not know all of the rules. I know these to be the truth, I speak with the auditor’s for clients frequently. Before filing the dispute the business owner should request the auditor’s notes from the insurance company to understand how they arrived at the results. Then, the business owner can file the dispute with the insurance company if there is an argument.

There are several rules within the workers compensation industry that surprise owners after audits are complete. The audit’s purpose is to accurately charge the owner based on what happened during the policy period. Workers Compensation audits are determined by the 4 bullets below:

  1. Gross Wages for Employees of the business (no surprise here).
  1. Gross Wages for Uninsured 1099 sub-contractors. This is the most common surprise. 1099’s is discussed further below.
  1. Proper Classification Codes per employee job duties.
  1. INCLUDED Business owners. In most situations, business owners are allowed to choose whether they want to be Included or Excluded in the workers compensation coverage. When a business owner chooses to be included, the State typically determines a minimum and maximum wage threshold.   Rules for whether or not a business owner can be included/excluded and wage thresholds are determined by Entity Status (Individual, Partner, LLC, Corporation). If a business owner changes entity status during a policy period, it’s important to notify your workers compensation agent to determine if different rules apply. Otherwise, all adjustments are made at audit.

Uninsured 1099’s

This is one of the most common surprises for business owners after the audit is completed, especially in the construction industry. Uninsured 1099’s are added to the workers compensation policy based on the classification of work the 1099 is performing. Even if the state doesn’t require the 1099 to purchase workers compensation coverage, the only way for a business owner to exclude 1099’s from their policy audit is to collect a certificate of workers compensation coverage OR a “state approved exemption”.

It’s important to understand when a business owner can treat a 1099 like a true independent contractor and request a work comp insurance certificate.

1099 must use their own tools/equipment

1099 must drive their own vehicle

Contractor cannot determine when and where the 1099 is working. Must assign a project and let the 1099 execute on their own time.

1099 must also perform work for their own customers

1099 must carry appropriate licenses with state when required

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.