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, Utah has workers comp 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.

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.

Florida faces another new twist.

The workers’ compensation market in the state of Florida has faced some turbulent times over the last year.  More shocking news came the Wednesday before Thanksgiving in the form of a ruling by Leon County Circuit Court.   Judge Karen Gievers released the shocking news in the form of a ruling in a case that claims the National Council on Compensation Insurance (NCCI) and the Florida Office of Insurance Regulation (OIR) did not follow proper procedure under the states Sunshine Law.

The case that is challenging this ruling was brought before the court by James Fee.  Fee is a Miami attorney who represents injured workers. He claimed, and Judge Gievers agreed, that NCCI was in violation of the Sunshine Laws by holding “multiple, non-public, secret meetings” internally and with the OIR over the rates.  Representatives with NCCI and the OIR claim they have complied with the Sunshine Laws.

How much was the rate increase in Florida?

The total rate change was an in crease 14.5% for workers compensation insurance coverage, on average throughout the state of Florida.

What cause the rate increase?

The rate increase was the result of two court cases, Castellanos v. Next Door Company and Westphal v. City of St. Petersburg, and updates to the Florida Workers’ Compensation Health Care Provider Reimbursement Manual mandated by Senate Bill 1402.

Castellanos vs. Next Door Company

Marvin Castellanos was an injured employee who sued Next Door Company. This court decision ruled invalid a previous court ruling from 2009. The previous ruling put in place a mandatory attorney fee schedule.  THe overturn of this ruling means judges no longer have to stick to the mandatory fee schedule and now can award additional compensation for attorney’s fees.  The judges now use the fee schedule as a starting point.  This will cause the amount judges award to injured employees to increase dramatically because there is no longer a cap on what the judges can recommend for compensation to the injured employees attorney fees.  This ruling resulted in the Florida Office of Insurance Regulation (OIR) approving an increase of 10.1 percent on average statewide.

Westphal v. City of St. Petersburg

The Westphal vs. City of St. Petersburg case found the 104-week statutory limitation on temporary total disability benefits to be unconstitutional.  The Florida Supreme Court reinstated a 260-week limitation.  This Increased the amount of time an injured employees will get partial salary benefits by an additional 156 weeks.  This additional 156 weeks of coverage caused the OIR to approve an average increase of 2.2 percent statewide.

Senate Bill 1402

The additional 1.8 percent increase on premium for workers’ compensation was related to updates within the Florida Workers’ Compensation HCPR Manual. This increase was approved as part of Senate Bill 1402.

How can I Lower my Workers Compensation Insurance Premium?

Workers compensation insurance premium is often a large portion of overall property and casualty insurance costs. Many business owners look at the workers compensation premium and wonder how they can reduce the overall cost of the insurance policy. The following ideas can help reduce your costs and hopefully help make your business more profitable.

Make sure you are classified properly

Business will have a classification code determined by National Council on Compensation Insurance (NCCI) or some cases the State will have a slightly different number that is used by insurance carriers to rate workers compensation insurance premium. For Example one way to reduce your cost is to take advantage of standard exceptions to the code classification. Employees who perform clerical duties and are physically separate from manufacturing operations may be classified as clerical employees with a much lower rate. Make sure the classification for your employees is appropriate.

Monitor your loss control and safety programs

Loss Control and Safety is critical for preventing losses in the workplace. Set the expectation in your safety manual. Follow up by reminding employees of safe practices including lifting, distracted driving, and the hazard of wet floors. Scheduled safety meetings and incentive programs should be used to promote workplace safety. Decreasing losses will reduce your overall insurance costs.

Develop an effective return-to-work program 

Develop a return to work program. Having injured employees staying at home collecting workers compensation will raise your costs on premiums and also on additional labor you will need to hire while that person is out. A way to get your injured employee to return to work as soon as possible is to create a temporary position for that person. You can give them duties that are not taxing on the body so that they will still be able to recover while they are working.

Speak with your agent about adding a deductible

Evaluate the benefit of adding a deductible to your Workers’ Compensation program. A deductible provides an immediate credit to the workers compensation insurance premium calculation. Additionally, losses under the deductible will not be reported to NCCI and will cause a reduction in your experience modification. Be sure to analyze the cost of funding your deductible.

Notice if there is a pattern to workers compensation claims. Determine if certain areas of your business have fewer claims than others, and determine why the risk is lesser or greater in different areas. Reduce risk by duplicating safe behaviors and programs and eliminating risky behaviors.. Eliminate workplace hazards that have caused an employee to get sick or injured so it doesn’t happen again. Some carriers will even provide help in this area. 

Report claims ASAP

Report Claims as soon as possible! Provide medical attention quickly if an employee is injured, as prompt medical attention may reduce complications that may arise from delayed care. Complications can make workers’ compensation claims more expensive, which may increase insurance premiums.Statistics prove that losses reported 24 hours or more after the loss are more expensive than those reported promptly. Managing your Workers’ Compensation program carefully can save money and improve your bottom line.

These are just a few ideas that can help you in either keeping your premiums low or driving them down. Every business wants to be more profitable and it can be as simple as investing in work place safety that could get you started in the right direction.

 

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.

Workers’ Compensation Rates Could be on the Rise in Florida

Workers’ compensation insurance rates in Florida could be on the rise. As reported in outlets such as the Miami Herald, the Orlando Sentinel and the Insurance Journal.  The National Council on Compensation Insurance (NCCI) filed for a 17.1 rate increase to take affect August 1st. The bulk of the recommended rate increase is due to an expectation that attorneys’ fees will increase the Florida workers comp landscape due to a recent Supreme Court Ruling.

Florida Workers Comp Insurance System

The increased rates are unfortunate in that Florida workers comp insurance is already a significant expense to business owners. Furthermore, increased legal fees should not be a necessary expense to add to the system. Increased education, safety devices, adoption of return to work programs and decreased prescribing of opiates are all trends within the industry which are helping to control workers’ comp rates. Thus, while this appears to be a blow to work comp rates in the state, there are some trends that are working to reduce rates as well (which is a challenge given the ever increasing cost of medical care in the United States).

Another factor which drives Florida workers comp rates higher is the existence of fraud and other scams. Florida is one of the highest states in the country for fraudulent work comp claims, especially in the Miami area. Additionally, as demonstrated in this article from the Insurance Journal, scams to artificially reduce workers’ comp premium are prevalent in Florida. Scams and fraud unfairly increase work comp rates for business owners that are trying to work within the system.

Florida is what is known as a rate mandated state for workers’ compensation insurance. Wisconsin and several other states are set up like this as well. This means workers’ comp rates are set by the state. Work comp rates vary by employee classification and experience modifications, but they are otherwise set by the state. This is in contrast with most states where insurance carriers file rates and there is different pricing between carriers. Florida’s workers’ compensation rates are just below average compared to other rates in the most recently published national study.

Given Florida is a rate mandated state, business owners may wonder what they can do to reduce workers’ compensation rates. In Florida, a small number of carriers, such as Employers, have file with the state of Florida to offer a 5% discount from the rates set by the state of Florida. On the other hand, there is a consent to rate, which can be offered by certain carriers in Florida for difficult to quote businesses. This means a carrier offers workers comp insurance, but they are allowed to charge up to 25% more than the rates set by the state of Florida if an insured signs off on this pricing. If rates can’t be improved, business owners may have better payment options available such as pay as you go insurance. Furthermore, better safety practices leading to lower claims (and thus a lower experience modification factor) are always a way business owners can decrease their work comp insurance costs.

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.

Why does my class code matter?

Workers Compensation Insurance is required by law in 48 out of 50 states. It is offered based on a classification code system developed by the National Council for Compensation Insurance. There are more than 700 industry specific classification codes. Some industries have just one, some have many. For this reason, it is very important for business owners to take a few extra moments and speak with their insurance agent when buying or renewing their commercial insurance policy. It is crucial for a business owner to talk to their agent about the daily operations of their business. The key to getting the best policy on the best insurance package is to speak open and honestly with your insurance agent. 

Remember that your insurance agent is on your side. They are there to help you get the fullest coverage at the best price possible. Your agent can only do this if you give them all the information possible to negotiate on your behalf with the insurance carriers. This is where having an agency that has the ability to quote your policy with many carriers is important. Some agencies only carry policies with a few select carriers. If your business is in a difficult to quote classification code than this can make it difficult to get a better price or get any coverage altogether. So having a relationship with an agency that can quote from a variety of carriers is important. 

Next it is also important to ensure your agent and your carrier are aware of all the operations your business does and does not partake in. This can cause you to overpay or underpay on premium. Regardless of the amount of risk your business takes, it is very important to be classified correctly in the proper NCCI classification code. There is an audit of your business done at the end of every term. Usually if your business is coded incorrectly it gets caught during the audit. If you are actually supposed to be in a riskier code than you will end up owing more in premium. If you should be in a less risky code it can result in a refund, but you have been paying more in premium throughout the year. Typically, that is cash flow you could be using for other more urgent business needs. 

A few industries that give us some perfect examples of industries that have classification codes that could be incorrectly coded are landscaping and commercial vs. residential cleaning companies. For example, landscaping  has two class codes 9102 and 0042. 9102 is for businesses that only maintain existing lawns. 0042 is for businesses that install lawns, plants and other beds. 0042 is more dangerous. Because it is a riskier classification code the premium for these types of businesses is higher.

commercial and residential cleaning companies include the classification codes 9102 and 0042.

Another example of an industry that has multiple classification codes is the cleaning industry. Commercial cleaning is classification code 9014 and is the less risky class code. Residential cleaning service companies are class code 0917 and they cost more. The reason for a larger risk in the residential industry is because of the fact the employees are driving to one or more off site locations. Commercial cleaning companies typically have employees come to one location, like a mall, and clean one or more business at that one location. For residential cleaning companies, they are liable for any injuries that occur while the employee is driving to and from the different locations. These types of injuries may not be frequent, but when they do happen they tend to be much more expensive than a simple slip and fall while cleaning a building.

So the most important things any business owner can do to ensure they are classified correctly is to speak open and honestly with their agent about the what their business does and does not partake in. Again, this can prevent both over and under paying on premium. Regardless of whether you are in a a fairly risky class code like landscaping or you have a bunch of employees who sit around an office all year, it is imperative to have your business classified correctly. This can prevent your business from over paying throughout the year or from having a surprise when you are audited at the end of your term.

What is the Assigned Risk Provider?

The assigned risk provider is also frequently referred to as The State Fund or The Pool

Workers’ Compensation Insurance Coverage is required by law in nearly every state in the country. The basic purpose of the Workers’ Compensation Insurance is to provide wage replacement benefits and medical treatment for employees who have been injured on the job. Workers Comp prevents the employer from bearing the costs of injuries that occur during normal business operations.

Each state has their own method for how they go about determining rates on workers’ compensation class codes. Most states partner with the National Council on Compensation Insurance (NCCI) to determine rates for different class codes. Some states; like Indiana for example, have their own rating system administered by a government organization. Most use the basic guidelines of the NCCI system.

Every state also has a different way for how they go about setting up a provider of last resort for the employer’s of the state. This provider of last resort is also referred to as the assigned risk provider, the state fund or sometimes as the pool. This provider is designated as the provider of last resort for businesses who cannot find coverage through the open market. It is typically more expensive from this provider for a number of reasons.

Businesses that end up having to purchase coverage from the assigned risk provider, may not be able to find insurance coverage for a number of reasons. Lots of times it is because the business operates in a classification code that carries more risk than most carriers are willing to take. Sometimes it is because that business has had too many claims within a short period time. It also is frequently because the business just does not generate enough income for the amount of risk in their industry. States usually have a requirement that the business has to try to obtain coverage from a certain number of providers on the open market before they can apply to the assigned risk provider. Usually that number is two or three providers.

There are three main ways states go about providing employers with an assigned risk provider. Some states provide their own fund, some use NCCI and some have a partner carrier who guarantees coverage for employers who cannot find coverage on the open market. Typically states who have a strong assigned risk provider who competes with the open market enjoy the best rates on workers’ compensation insurance. There are different ways to provide this strong provider, but typically the stronger this provider is the lower the rates employers pay.

Utah is an example of a state who has its own fund. This fund is called the Workers’ Compensation Fund. This fund dominates 57 percent of the market and is the main reason Utah enjoys some of the lowest rates in the country for workers comp coverage. Colorado has a partnership with a company called Pinnacol. Pinnacol was begun around the time workers’ compensation became a requirement in the state. It was designed in partnership with the state government so there would always be someone guaranteeing coverage and competing to keep the rates reasonable for the employer’s of Colorado. Both of these states enjoy some of the lowest rates on Workers’ Compensation Insurance because of their strong Assigned Risk Providers. New York is an example of the other end of the spectrum. New York has its own state fund administered as a non profit agency. New York also has very difficult regulatory compliance regulations for workers comp. These regulations force many carriers to simply not offer coverage in the state. All of these factors combine to cause New York to have some of the highest workers compensation rates in the entire country.

So administering the state fund is left up to each individual state. Again there are three main ways the states go about doing this. Some handle it themselves, others partner with an outside carrier and some contract this service out to NCCI. All three ways can be effective ways to keep costs down for the employers of that state. The strength of these pools goes a long way towards determining what employers across the state pay for workers compensation coverage.

Lawncare & Landscaping

Lawncare and landscaping businesses are similar yet very different.

As a business owner of a lawncare or landscape company you might have had to shop for insurance. You might have had to do this to either to meet state requirements or to make sure your business is protected just in case an injury occurs to an employee. Recently I have taken many phone calls from owners of small lawncare or landscape companies that have been asked by a client, sometimes even a home owner to provide proof of work comp coverage before they are grated the job or bid. Whether you have a small or large lawncare company chances are you have had to make a call or two to obtain a work comp insurance certificate.

When going through this process have you ever wondered how your company is classified? There are two class codes that contemplate lawncare and landscaping, 9102 and 0042.  The most qualifying question to determine what class code you are in is, does your company primarily engage in maintaining already existing lawns and garden beds or is your business designing and installing landscape or flower beds. Another deciding factor is if there will be any installation of paving stones or rock beds. The class code 9102 is designated for lawncare or maintenance of existing lawns. Snow removal will also be covered under 9102 and should be discussed if there is snow removal operations in the down season of lawncare. 0042 class code is designated to design and installations of lawns and beds. Any sod laying or pavers would also fall under the 0042 class code. However both class codes do contemplate the applications of fertilizers and insecticides.

One aspect of both classes of business, that I feel I must bring up, is tree trimming. If at any time there is tree trimming the class code 0106 would need to be added to the work comp quote. Designated payroll can be added to that class or it can be added on an “if any” basis. I also must fully explain that the 0106 class code is considered high risk. It is very difficult to place with an insurance carrier.

When calling in or submitting an online quote, the first couple of questions back to you will most likely be:  How many employees not counting the owner are there and what type of lawncare are you providing? If the answer to the first question is there is only the owner, which some times is the case, that would be an owner only policy. If there is one employee or more there will need to be included a total annual payroll. At that time we would figure out how to best classify you. lawncare or landscape will find the best price and insurance carrier for your company.