Residential Cleaning

How a Residential Cleaning Company Can Benefit From Pay as You Go Workers Comp

A Woman Working at a Residential Cleaning Company. Workers’ Compensation Insurance is required by law for businesses in most states. So is General Liability in most industries. For that reason, these two policies are the bare minimum coverage a business needs to be in business. Now for a cash-strapped, seasonal, or start-up business; coming up with the initial payment to get coverage in place can be difficult. Because of this issue, many carriers have come up with alternative payment options for these necessary coverages. The most popular alternative payment option is Pay as You Go Workers’ Compensation. One industry in particular that benefits from this option is the residential cleaning industry. Here are four ways residential cleaning companies benefit from choosing the Pay as You Go Option for Workers Comp Coverage.

  • Pay-as-You-Go has lower up-front costs.
  • Pay-as-You-Go frees up cash for more pressing business needs.
  • Pay-as-You-Go allows businesses to pay premium monthly.
  • Pay-as-You-Go prevents most audits

Residential Cleaning Companies depend upon their employees to keep their customers happy.

Lower Up Front Costs

When a cleaning company decides to go with a traditional workers compensation policy, they are required to make a large lump sum payment just to get coverage in place. They later have to make nine monthly payments at the end of the term. These payments are based upon an estimate of payroll from last year. If your business has plenty of cash on hand and your employee hours are regular from year to year this may not be much of a problem. Most residential cleaning companies do not have regular payroll or mounds of cash on hand. If this sounds like your business than the Pay as You Go Option is a great way to get coverage in place without tying up too much cash.

Frees Up Cash

Now if you are a business that is not rolling in cash, you may need to consider the Pay as You Go Option.  This type of alternative payment method for workers comp coverage allows you to not only lower your up front costs, but it allows you to free up cash throughout the year by paying your premium in real-time each month based upon the accurate payroll from the previous month. This is instead of paying premium based upon an estimate of payroll from last year or the three previous years. This estimate can cause you to severely over or under-pay on premium.

Allows Monthly Payments

Allowing payments of premium each month can help your business in many ways. One of the best ways it helps is by keeping your payments accurate from paying them in real-time. When workers comp premiums are paid on an estimate basis, it can cause you to severely under or over-pay throughout the year. This gets cleared up whenever an audit takes place and an audit takes place at the end of each term, but if you under pay throughout the year it can cause your business to have a surprise payment at the end of the term. Even if you are one of the lucky businesses who over-pays and gets a refund at the end of the term, you still have had additional cash tied up in premium payments throughout the year. This is cash that could have been spent on more pressing needs.

Buying the proper chemicals is an essential part of any successful residential cleaning company.

Prevent Audits

An additional benefit your residential cleaning business can gain from choosing the Pay as You Go Option is to prevent audits mid-term. Because the payroll is calculated monthly by a payroll company it is accurate. This eliminates the need for a mid term audit because the payroll company is auditing the premium payment each month. The Pay as You Go Option also makes the end of term audit much more smooth because the payments have been done based on actual payroll each month. Your staff will spend less time gathering data to compare your actual payroll with the estimated payroll and premium payments based on that estimate. If you have ever underpaid premium and owed a significant amount at the end of the term, you appreciate the accuracy this program provides.

Workers Compensation Insurance in California

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

California Workers' Compensation Insurance

 

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

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

San Francisco, California

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

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

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

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

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

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

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

Santa Monica, California

Workers Compensation Insurance System in Texas

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

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

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

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

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

Texas Workers Comp Market

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

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

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

Coverage Exclusions in Texas

Injuries that are excluded under the Texas Workers Compensation Act:

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

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.

Have a Work Comp Audit soon?

Here are 7 tips for a Smooth Workers Compensation Audit

Find the best advice for a smooth workers compensation audit at myinsurancequestion.com

Each year all businesses must go through a workers compensation audit process. If you are like most small business owners, this is not one of your favorite parts of owning a business.  The process can be long a tidious, but the more prepared you are for this process, the more quick and more smooth the process will be. Consulting with your independent insurance agent can help you prepare for the process and make sure the audit is done well the first time through the process. Here are 7 ways to ensure this process goes as painless as possible.

Communicate with your agent.

Open communication with your insurance agent is essential to a smooth workers compensation audit. This is a reason why it is important to consider an independent insurance agent.  An independent agent is not as closely associated to the insurance carrier.  They can help you prepare for the audit and negotiate on your behalf if anything does not go in your favor. Open communication throughout your relationship with your insurance agent is essential to a satisfied experience during your small businesses workers comp audit.

Have paperwork prepared in advance

Having all necessary paperwork prepared in advance of your audit will make the process move as smooth as it possibly can.  This includes any and all payroll and employee records.  Job descriptions need to be included for each employee and their annual weeks, days and hours worked.  The more detailed the better.

Payment and cash disbursement records,

Throughout the year it is important to keep a record of all payments and cash disbursement.  Not having these available and organized is a good reason to have the auditor dig a little deeper. The more open, honest and organized you are throughout the entire audit process the more smooth the process will be.

Certificates of Insurance 

In order to ensure a smooth workers compensation audit, make sure to keep a detailed record of all needed certificates of insurance for any and all sub-contractors or independent contractors your business used. The primary reason for providing these documents is that if you do not, these contractors will be listed as employees and it can substantially raise what you pay in premium.

Experience Modification Worksheet

The experience modification worksheet is a document that is published annually by the rating bureau in your state.  It covers the loss history for your business during the most recent three-year period, not including the most recent year.  The most recent year is not included due to overlap from some claims not being closed.  If you have had a large claims or a large amount of minor claims during any year it is important to have this worksheet available in order to show the true loss history of your business.

Make yourself available for the exit interview 

After a typically smooth workers compensation audit there is an exit interview at some time.  It usually lasts several hours and is a way for the auditor to ensure they have all the necessary information to accurately audit your business. The more up-front you are with the auditor the more smooth the process will be.

Respond promptly to auditor follow-up questions  

There will more than likely be questions you do not have the answer to, the auditor will have for you during the audit.  The more quick and more thorough you respond to these questions the more the auditor will work with you to promptly and accurately finish the audit process.  The time period after the audit, before the auditor will finish the process, normally takes two to three weeks. There may be additional questions that need clarification.  This may be a frustrating part of the process, but the more accurate the audit is the better it is for your company.  Your agent can help you with any of these questions if you are having a trouble finding the exact information to satisfy the auditor.  It is also important to keep in mind that for security purposes, the auditor does not keep your payroll records.  You very likely will be asked to provide additional information or records that you have already provided.

An Accurate audit is in your best interest, moreso than a fast audit.  This process is frustrating even during a good audit.  It will take time away from your normal work, but it is within your best interest to ensure your audit is fair and accurate. Keep a positive attitude and consult your independent insurance agent in order to ensure your audit process goes as smoothly as possible.

HVAC Contractors

Heating and Air Conditioning Contractors ( HVAC Contractors ) are those business that provide services for and repair heating and air conditioning units.  They provide these services for both commercial and residential clients.  They have to be knowledgeable about both duct and vent work, the different types of fuel sources for heating equipment, which can be natural or LP gas, electric, steam, solid fuel, coal, or fuel oil.  Many contractors also install, service, and repair air conditioners. While air conditioning units are normally electric-powered, they are charged with different coolants, some of which may be hazardous.

All of these different types of work bring their own unique risks to the contractor. For this reason, it is very important for you to have an extended conversation with your insurance agent about all of the types of work you do and do not participate in.  It is equally important to inform your agent if there are certain types of work you do not partake in. There are more than one classification code for this industry and the types of risks you take on can dramatically impact what you pay in premium for a number of commercial insurance policies.  Below are 6 policies most HVAC Contractors need to secure in order to protect their business properly.

•   General Liability

•   Property Insurance

•   Hired and Non-Owned Auto (full commercial auto if vehicles owned)

•   Inland Marine

•   Business Income with Extra Expense

•   Workers’ Compensation

General Liability Insurance

General Liability Exposures at the contractor’s office or shop are generally limited due to lack of public access to the premises. Retail sales increase the possibility of customers slipping, falling, or tripping if customers visit office to view products.

Property Insurance

Property exposures at the heating contractor’s own location are generally limited to those of an office, shop, and storage of materials, equipment, and vehicles. Operations may also include retail sales. The fire exposure is generally light unless repair operations involving welding take place on premises. Welding involves the use of tanks of gases that must be stored and handled properly to avoid loss. The absence of basic controls such as chained storage in a cool area and the separation of welding from other operations may reflect a greater risk.

Commercial Auto

Automobile exposures are generally limited to transporting workers, equipment and supplies to and from job sites for HVAC Contractors. Hazards depend on the type and use of vehicles and radius of operation with the main hazards being upsets. Vehicles may have special modifications or built-in equipment such as lifts and hoists. Large heating systems may be awkward and require special handling and tie-down procedures. Age, training, experience, and drivers’ records, as well as the age, condition and maintenance of the vehicles are all important items to consider. If employees utilize their own personal vehicles for work related tasks then Hired and Non-Owned Coverage should be purchased.

Inland Marine Coverage

Inland marine exposures include contractors’ tools and equipment, including ladders and scaffolding, hoists, and portable welders, the transport of materials, and installation floater. Goods in transit consists of tools and equipment as well as products purchased by the customer for installation at the job site. HVAC units can be of high value and susceptible to damage in transit; they frequently require expertise in loading to prevent load shift or overturn.

Workers’ compensation

Workers compensation exposures vary based on the size and nature of the job. Both residential and commercial work involves lifting, work with hand tools, wiring, and piping. Cuts from the fabrication and installation of sheet metal for ducts and vents are common. Lifting injuries such as hernias, strains and sprains plus back injuries may occur. Electrical burns are common; electrocution can occur from the use of high-voltage lines. Any time work is done above ground, injury or death from falls and being struck by falling objects can occur. Slips and falls, foreign object in eyes, major and minor burns, and inhalation of fumes are all potential hazards.

5 Types of Insurance every Daycare Center needs.

Finding good daycare is an enormous concern for families with children under the age of 5.  Compared to the previous generation there is an extremely large amount of families who now have both parents in the work force.  ‘According to the group Child Care Aware, about 11 million children under age 5 spend an average of 35 hours a week in child care’.  Because of this fact, the day care industry has exploded. With this explosion has come many new businesses needing help with their liability needs.  There are many things that can put a day care center at risk.  Here is a list of the 5 most common coverages a day care center should secure.

 

✓ General Liability Insurance
✓ Hired and Non-Owned Auto
✓ Workers Compensation Insurance
✓ Business Income with Extra Expense
✓ Commercial Crime / Employee Dishonesty

 

General Liability Insurance

GL Insurance is required by law in most states. Many business owners unfortunately think this coverage is all encompassing and it is not.  It is the baseline for coverage for your daycare business.  It will cover your businesses liability for normal bodily injuries from things like slips and falls.  It can also cover property damage that occurs to third parties on your property.

 

Hired and Non-Owned Auto Coverage

If your business owns and uses vehicles as a part of your business you will need commercial auto coverage, but if you have employees who use their personal vehicle or rented cars you will need to secure Hired and Non-Owned Auto Coverage.  This will cover the liability your business faces as a result of any accidents you or your employees are in while on company time.

 

Workers’ Compensation Insurance

Workers Comp is another coverage that is required by law in nearly every state in the country.  It is similar to General Liability except it deals with bodily injuries to your employees. When an employee is injured on the because of normal business practices work comp coverage will cover a portion of their salary and any medical costs as a result of the injury.  Each state has their own laws governing how to administer workers’ compensation coverage.  For this reason, it is important for you and a key employee to know the process to properly help your injured employee get the care they need and get back on the job quickly.  Your carrier can help you with this both before you have an injured employee and when a claim occurs.

 

Business Income with Extra Expense Coverage

Business Income with Extra Expense Coverage is a type of commercial property insurance that covers the loss of income suffered when damage is caused to the property by a covered loss and it causes a slowdown or suspension of business operations. Coverage applies to loss suffered during the time required to repair or replace the damaged property and may extend to apply to loss suffered after completion of repairs for a specified number of days. Expense Coverage is an additional type of commercial property insurance that pays for additional costs in excess of normal operating expenses.  These are normally expenses that an organization incurs to continue operations while its property is being repaired or replaced because of damage from a covered loss.  Extra expense coverage can be purchased in addition to or instead of business income coverage, depending on the needs of the organization.

 

Commercial Crime / Employee Dishonesty

Commercial Crime Insurance is a type of insurance that is designed to help businesses deal with crimes committed by their employees. This type of coverage typically covers several different types of crimes, such as: employee dishonesty; forgery or alteration; computer fraud; funds transfer fraud; kidnap, ransom, extortion; and money orders and counterfeit money coverage.  Employee Dishonesty Insurance is an additional coverage for employee theft of money, securities, or property. This type of coverage is written with a per loss limit, a per employee limit, or a per position limit. This is important to speak with your agent about what types of activities your employees partake in.  They can help you determine what type and how much risk you actually face.

14.5% Workers Comp Rate Hikes in Florida! What do I do now?

Get the best answers to your Florida Workers Compensation Insurance questions  at MyInsuranceQuestion.comYou do what you can to do your business every day and create opportunities for yourself, your employees and your customers. Rates of everything is rising, property cost, materials, shipping, employee wages. The state of Florida has now said its time for workers’ comp insurance to do the same. The rate increase is to be 14.5%! Articles can go into much more detail but ultimately medical costs, legal costs and claims expenses rise over time and Florida workers compensation rates are rising to catch up for the natural changes that have taken place and certain court rulings have made precedence that support the increased cost. There are fair arguments for and against this change but at this point we work with what we have, so as a business owner what can you do?

The state of Florida is a rate mandated state for Workers Compensation which means the starting rate is the same for everyone based on their classification code, so every carrier should be offering the same rate. There are some exceptions that can be helpful for you to keep in mind. Here are a few things that can help benefit you in combating this increase with a more competitive option:

 

There are some exceptions:  Some of our carriers have programs for particular industries that allow for discounted rates(5% below state set rates) one in particular caters to Retail stores, Restaurants and Professional Offices(Law firms, Accountants, Doctors offices, etc.)

Check with appropriate discount programs:  The Florida workers compensation system has discount options available if you meet the guidelines and have these policies in place for your business. They do have an application for each and require certain protocols in place but these can save 5% on your Florida workers compensation rate.

  • Drug Free Workplace Credit
  • Safety Credit

Divident Plans:  Some of our carriers offer dividend plans in Florida that reward businesses that control their claims. One in particular offers a 5% dividend for businesses paying 5-10k in premium and keeping a loss ratio under 5% and for accounts over 30k in annual premium they can qualify for a 20% dividend if they have a loss ratio under 20%. Like anything they do have some basic eligibility criteria but this is a huge way to reward safe business operations and lower your overhead against your competition.

Review loss control Measures: We do understand accidents do happen, however most accidents with better preparation can be prevented. A few areas to focus on:

Hiring Practices: Hiring the right employees that are experienced in the field and vested in your business are your lifeblood. Don’t put that in the hands of just anyone.

Safety Controls: Start with OSHA basics and if you have a unique business you might need more. Keeping your employees safe and preventing workers comp claims is the best way to save money on your workers comp.

Document everything: If you have safety meetings, a safety policy, drug free workplace, make sure this is all in writing and in your employee handbook. Make sure sign offs are in place so your employees are aware of these policies. This can be a great tool to prevent claims and keep a culture of safety that you take seriously in your business.

Manage your workers compensation claims:  As you develop an Experience MOD over time for your Florida workers compensation claims history, your premium can go up or down based on this experience. This means your premium is directly affected by claims you had 2-5 years ago. Settling those claims and learning from them can help you combat the rising workers comp costs. This process takes time but you will thank yourself in the next couple years as that MOD drops lower.

Buy in to avoid the increase:  If you have not placed your workers comp coverage for your business yet and are in the market, get this coverage before December 1, 2016. This is when the rate change takes place. You will still have to face the rates next year but at least this is one year you are paying 14.5% less on this policy.

Put some skin in the game:  Especially if you are paying premiums in excess of $20,000 annual, Deductible plans as well as coinsurance plans can allow you to put some skin in the game and take on a little risk of your own. Some start as small as $500-$1000 deductibles but go up and the savings increases with that. It might not make a lot of sense for the smaller premium amounts but this is a good tool to help save money without putting too much of your business at risk. Pick a deductible that saves you money and you feel comfortable with.

Alternate payment options:  Plans like Pay-As-You-GO can be helpful tools which allow you to pay your premium when you run your payroll. This won’t change the price but for companies that have a tough time with premiums in the slow season but still have a year round payroll, this can be a great solution.

In times like these were pricing can have such a direct impact on your business and its livelihood, Rate increases are inevitable, however taking these steps above if you are not already, could show savings of up to 25% below market for some clients but 5-10% is very obtainable for most clients. The increase in Florida is a tough one to swallow, however taking these actions could allow you to offset these increases. Speak with one of our Professional Insurance agents to learn how you can implement and benefit from some of these tools.

Commonly Misclassified Workers Compensation Class Codes

One of the most misunderstood and difficult parts of setting up a workers compensation 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. Class codes are one of the most important parts of the workers compensation policy, as they are one of the two driving factors in price/premium.  The other factor being amount of payroll for your employees. If the employees are not classified properly, there is a chance that upon audit for a significant difference in rate between the classifications.  This can cause either a large increase in premium owed, or meaning that too much has been paid into the policy. I wanted to go over my experiences with some classifications that I see commonly misused to hopefully help you with your search for the proper class code.

5606 Contractor – Project Manager – Construction Executive – Construction Manager or Construction Superintendent.

This classification would have to be one of the most misused of all 700 codes. This classification is designed for an employee who is in charge of the construction project but 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.

5437- Carpentry – Installation of Cabinets or Interior Trim.

This classification code is commonly mis-classified 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 rate for the work done at the job site. This classification is designed to be used by an artisan (specialty) contractor, someone who’s scope of work is only doing the installation of cabinets or trim inside of the structure and 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 typically much less than all the other construction classifications, this means that if you are using this classification and it is incorrect you will have a very large audit balance that will be due at the end of the term.

8810 – Clerical Office Employees NOC

Clerical employees are typically one of the least expensive classifications; this is for a good reason as 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 will try to classify as many of their employees as they possibly can 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 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, they refer to this as a standard exception class code meaning the employee cannot be doing any other class of work. You cannot have an employee who is classified as 5437 (trim carpenter) and then coming back into the office and assigning payroll to 8810 for them taking calls and working at their desk. Some states may have certain instances where they allow this code to be split.  Missouri is one such state who will allow 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 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 classifications that are commonly misused in this manner, 8742 (outside sales), 8810 (clerical), 7380 (delivery). Make sure that if you are using these classifications that the employee is not participating in any other aspect of work being done in the company that should be classified elsewhere.

 

Conclusion

The biggest take away from this is that you should verify all the classifications the agent is using on your policy.  It is important to talk through the class codes with the agent and make sure they are being properly assigned. You can always look up class codes online as a consumer through several different sites and most agents will be more than happy to explain why they used a particular classification. Classifications can sometimes be very tricky any 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 could end up saving you a lot of hassle and money upon the audit of the policy.

Overcoming Difficult Workers Compensation Situations

Often times I speak to business owners that are experiencing difficulties with their work comp coverage.  Either they are being non-renewed and cannot locate an alternate option OR their renewal pricing has skyrocketed to a point they are begging for help to locate a less expensive alternative.  Typically, the difficult situation is related to claims.  Below is a real life situation with a business that I assisted solving their difficult workers’ compensation situation and how the changes they made within their business helped decrease their pricing in future policies.  For purposes of privacy, I am using a false business name, Test Company, Inc.

When Test Company, Inc. contacted my agency, they were up against a non-renewal, no other insurance company options and had employees in multiple states.  Within work comp there is a state program that is required to offer coverage even with bad claims history or a difficult industry to insure.  The state workers’ compensation programs are higher rates and typically do not have a flexible payment plan so cash flow becomes an issue.  Also, instead of having 1 annual workers’ compensation audit for all states with 1 company, Test Company, Inc. was going to need to complete 12 audits, 12 separate policies to monitor and make payment to.  Most state policies only cover that particular state so a separate policy is purchased for multiple states when private insurance companies are not willing to quote.

Test Company, Inc. had grown from 0 to 6MM in gross receipts in 5 years and suffered several very substantial claims.  Their workers’ compensation cost had increased from 200K to nearly 500K due to their claims experience generating a very high experience modification rating and the competitive companies unwilling to quote.  The ownership of the business was so focused on growing, they didn’t think about how claims were going to cause this big of a problem with their workers’ compensation coverage.  Claims were happening over multiple years of coverage and it finally caught up to them so they were forced to identify the problems and fix them.

Together we identified the reasons for the claims and communicated about realistic business practices that needed to be implemented to prevent similar claims from happening in the future.  The employees working in the field have a constant driving exposure and when working at the customer’s home, the Techs are moving heavier items.  There was a driving and lifting exposure that were causing the claims.  First step was to set-up a Motor Vehicle Report (MVR) program to review the driving history of the employees in a vehicle to make sure those employees have a safe driving record.  When setting up a MVR program Test Company, Inc. must establish a set of requirements that are considered “a safe driver”.  Most work comp providers have resources the insured can access to help with establishing guidelines to prevent claims, ask the insurance companies “loss control department” for assistance if your agent doesn’t know.  Secondly, we discussed hiring practices for Techs.  Since these employees have a lifting exposure it’s important to hire employees that are strong enough and haven’t experienced injuries in the past that could lead to a large workers’ compensation claim.  A pre-employment and annual physical for all Tech’s was the solution Test Company, Inc. implemented.

With a business of this size and growing, claims are going to happen.  When there is a claim, what can Test Company, Inc. do to minimize the amount paid?

It’s amazing how stories throughout the process of a work comp claim happen.  One of the best suggestions to prevent an employee’s story from changing is to Immediately document the injury, have the employee sign the injury report form, have a supervisor or key employee drive that employee to the medical clinic and have the supervisor or key employee sit with the doctor’s office when explaining what happened that caused the injury.  Record it with a cell phone if it’s allowed and you think it’s needed.  These steps will prevent a story from changing and an employee’s injury mysteriously becoming more serious than it should have been.

Return to Work Program.  This particular insurance company has a non-profit program where their insureds can set-up a light duty return to work program with a local participating non-profit.  Test Company, Inc. did have a work comp claim where the Return to Work Program worked perfectly.  The Tech employee hurt their back, therefore, could not lift the objects within the homes they would be working on.  This employee was set-up with a local non-profit where the employee sat at a table and folded towels.  2 days of doing this and the employee’s back felt better, he was released by the Doctor, the claim was closed and the employee returned to work.

When making these changes it’s extremely important for Test Company, Inc. to put them within their Employee Handbook, communicate those changes to the employees and have them sign off on a notice form.  This helps set the standards for current employees and future hires.

The pricing decrease doesn’t happen overnight.  The business must implement changes then experience 1,2,3 years of positive claims history proving their changes have led to a safer business to insure.