Tag: Business Insurance

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 Workers Compensation 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.

Business Personal Property Insurance

Also referred to as ‘Contents Coverage’

For most business owners Business Personal Property Insurance is one of the most overlooked coverage options out there, in my opinion. Often times when I ask potential insureds if they want this coverage they quickly say NO I just need general liability. This may be ok for a few segments of business, but overall this is actually a really important coverage that doesn’t cost much more. What most business owners do not realize is that around 60% of companies that do not carry this coverage, do not reopen after a catastrophic loss. What exactly is Business Personal Property Insurance Coverage you ask? Business Personal Property Insurance (Contents Coverage) provides coverage for furniture, fixtures, merchandise, materials and all other personal property owned by you and used in your business. Coverage is generally at replacement cost. Now try to envision what this means to your business. If you are a contractor and have a shop that houses all of your tools, unscheduled equipment, etc. A loss wipes out your shop whether it was from fire or something else. Most of your tools and other items are now not usable. What do you think the cost of replacing those are without insurance coverage? This number will vary depending on the size of your company but when you start buying or adding up the value of everything you had this number escalates pretty quickly. If you had this coverage you probably have a $500 deductible but that will pale in comparison to the actual cost of replacing everything you need to function like the day right before your loss.

Business Personal Property Insurance

Examples of the need for Business Personal Property Insurance

Lets take a look at a different type of business and show the importance of Business Personal Property Insurance Coverage. Take a restaurant for example. Lets say you open a restaurant. You are new and business is slow at first. Money is tight due to all of the start up cost associated with getting a business off of the ground. With buying insurance for possibly the first time quite a few owners are caught off guard by this cost> they may  want the bare minimum to get coverage in place to satisfy a lease, etc. Only give me general liability is what they will tell us. Its the only thing that is being requested from my landlord or lease. We recommend additional coverage that is vital in this type of operation and that is furniture, fixtures, kitchen equipment, etc. They decided well I will just add that later. Business owners are very busy especially at the start up phase and they continue to say lets just wait or I don’t have time to deal with it right now. That is a valid point, but imagine if they are four months in and they have a fire that wipes out their restaurant. They only have liability coverage. All of a sudden the dream they had of owning their own business is suddenly snatched away from them. When you way the cost of having to replace everything out of pocket to get back open, it can be crippling to your business.

The cost of this coverage varies with the amount you need to cover. For restaurants specifically, carriers often have a section where they can put the vast majority of the amount you value into a section called restaurant equipment. This is rated better than just blanket business personal property coverage and will make this coverage even that much more affordable.

At the end of the day at least get this coverage priced along with your general liability. That way you can make an educated decision on whether you want to further protect your business. It is after all your lifelong dream of being a business owner. Do you really feel like rolling the dice with your dreams.

6 Types of Insurance every Home Healthcare Small-Business needs.

Home Health Care is one of the fastest growing industries in the country. With the baby boomers moving up in age, the need for these services is growing larger every year. The need for proper insurance in these businesses is also becoming more important. For a business owner, most of the clients in this industry are nearing the end of their life. Most are not in good health. Many get hurt or are sick frequently. Protecting your business from mistakes or court costs is crucial in this industry. Below are 6 types of coverage every Home Health Care Business should carry.

Home Health Care

  • General Liability
  • Professional Liability
  • Business Personal Property
  • Hired and Non-Owned Auto
  • Workers Compensation
  • Commercial Crime/Employee Dishonesty

 

General Liability

General Liability (GL) Insurance, in most cases, is the most important insurance coverage a home health care business can obtain. In most states it is required by law and it is usually the first line of insurance purchased by a business. It protects your business from most liability exposures other than automobile and professional liability. Other coverages are usually added to this depending on the business needs, but all businesses need General Liability. Unlike Workers Compensation Insurance this coverage protects your business from liability to third parties.

 

Professional Liability

Professional Liability Insurance is coverage for professional businesses that give expert advice or provide technical services for a fee. It is designed to help protect a business against any claims of negligence. Therefore, professional liability insurance helps business owners defend themselves from lawsuits and helps pay the damages awarded in a civil lawsuit. Professional liability insurance is commonly referred to as errors and omissions (E&O) or medical malpractice.

 

Business Personal Property

Business Personal Property Insurance is usually an addition to a Commercial Property Insurance Policy. It protects your business from damages to your buildings and property of your business. The personal property of your employees and the personal property of others you might be responsible for. In most policies it also provides additional coverages including: debris removal, pollutant cleanup, preservation of property, fire department service charges, increased cost of construction, electronic data, newly acquired or constructed property, off-premises property, valuable papers and records, outdoor property, and nonowned detached trailers

 

Hired and Non-Owned Auto

This type of auto insurance coverage is for when employees of a home health care business use their own vehicle or a rented vehicle to do company business. This can be as simple as an employee running to the grocery store to buy snacks for a meeting, an employee using a rented vehicle while away at a conference or using a rented truck to transport your equipment.

 

Workers Compensation

Workers’ compensation insurance differs from most other forms of business liability insurance. That is because it is specifically designed to cover your employees and not third parties. Workers Comp covers insurance claims by employees in the event they are injured on the job. The function of workers compensation insurance is to insure a business is not liable for most accidents that occur on the job and employees have comfort knowing their doctors bills and some lost wages will be covered if they are hurt on the job.

 

Commercial Crime/Employee Dishonesty

This type of insurance coverage is mainly for employee theft of money, securities, or property. Most policies include some or all of the following types of employee crimes: forgery or alteration, computer fraud, funds transfer fraud, kidnap, ransom, extortion, and counterfeit money. It is usually written with a per loss limit, a per employee limit, or a per position limit.

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.

Attention: You’re facing a nonrenewal.

Your current insurance policy is being non-renewed due to….

You may have received a notice that starts, sounds or maybe feels something like the title above. Insurance cancellations, despite popular belief are actually more common than you would think. They are very serious and should be responded to with action swiftly, but they are not always an awful “kiss of death” from the insurance industry. Some business owners I have worked with seem to think this is so. On the other side, it is something you need to respond with action to regardless.

 

We will discuss today most common insurance non-renewal or cancellations we see and how you should respond to the scenarios:

 

 …..Your reason for nonrenewal for underwriting reasons

 

What? Are you kidding me? Yes this is by far one of the most vague reasons, but more common than you think and as an insurance agent this tells me basically no reason why you are facing a nonrenewal. Generally this does mean one of two things. Either something about your operations (claims history, etc) or something in particular about your business makes the perceived risk for the insurance carrier less than satisfactory in their review. It could mean the company has changed their underwriting guidelines as a whole, which just happens to mean your company doesn’t fit with their strategy. Simply put insurance companies generally know what their company is good at and what they are not. Some insurance companies prefer to write roofing companies, but wont write clerical offices. many are just the opposite. Most companies fall in the middle which is why this becomes very common.

For Example: Transportation claims have been a leading cause of claims for several years, especially relating to workers’ compensation insurance. As a result in the last few years several insurance carriers who in the past would write these types of accounts have now decided they were no longer offering coverage for companies in your industry or class code. For some insured’s its no surprise when their claims have shown them good reason for this, however some trucking companies who have done well at controlling claims would see non-renewal notices for this type of reason. They were not seeing the non-renewal because of their claims or experience, but more because of the industry as a whole not performing well. This can be discouraging for these types of clients. Clients who take pride in controlling their claims and being very marketable risks to insure. These are the types of clients who need an experienced insurance agency on their side. Preferably one with several market alternatives to move to when this happens.

            What to do?

Discuss with your independent insurance agent what other carrier options are available. Start this process soon so you can make an informed decision on the direction you want to go without being pushed into a last minute decision. Requesting claims history reports and Experience rating worksheets from companies you have been insured with for the last 5 years is a good start as most companies will need this in order to quote.

 

 

Nonrenewal because Agent is no longer representing this insurance carrier…

 

Insurance companies and agencies have contracts come and go fairly often. More often for some agencies than others. This doesn’t mean your agency is not a good agency or that the carrier you are insured with is not a good carrier to do business with. It just means that one or both of those parties have decided they are not the best partnership at this time. This decision has absolutely nothing to do with you as the business owner with the exception that you are part of the pool. Agents within the industry call this the agents “book of business”. Sometimes, for one reason or another, the agency or carrier has decided that the partnership does not fit one o f their needs at this time.

            What to do?

Decide who you like more. If you have not been happy with the agency, call another agency. Especially one who has access to several commercial markets. A lot of times your policy could be moved into another agency book with a just few forms signed.

 

If you like the agency more than you like the carrier, discuss with your agent the alternatives they have to offer so a replacement option can be found well in advance of your renewal date.

 

 

Nonrenewal due to Claims or Non-Renewal Due to payment history issues

 

Don’t be discouraged. We all have set backs and things come up with payments. Insurance claims are the reason we buy insurance. These statements are not to enable you to continue on your path, don’t beat yourself up, but action and change is needed in these situations. Otherwise you are going to see the same situation in the future.

           What to do?

Nonrenewal due to payment issues are a sign that you want to look at things. You might have an accounting back-log or issue that’s delaying your payments (Fix the back log issue and prioritize making payments on time).  You might have cash flow issues from high accounts receivables (manage this aggressively-maybe even consider outsourcing to a collections agency if need is to that extent). Your sales are just low throughout the year or part of the year (work to improve sales or drive down costs more aggressively-most importantly budget for your known operating costs like insurance). These are the most common reasons we see cancellation of insurance. The seriousness of this issue extends into all aspects of your business and is a reason why several studies point to poor accounting practices as a leading reason why many small businesses fail.

 

A Non-Renewal due to claims do happen often. There is really no one answer to how to handle these because the scenarios are always different. Some carriers are more aggressive than others. Some are more reactive while others are more proactive. This is really where having an agent that understands these differences in carriers is vital to helping diagnose the best game plan for your business. For instance, if you had one claim that blew up into a much bigger issue and you have made the necessary corrective actions, most of the time that is not going to be hard to overcome in finding a competitive replacement for coverage.

 

But when you have shown a trend of several claims, either big or small, corrective action must be taken. If these incidents have similar reasoning than from the carriers perspective it may point to poor claims management. If sufficient corrective actions have not been made than the claims are likely to create the same or worse problems for you in the future. These types of issues must be addressed or the problem with claims and obtaining insurance will get worse over time.

 

Overall a nonrenewal of your insurance should not be taken with a grain of salt, but are also not a reason to close your business. The issues are sometimes within your control and many times they are something no one could prevent. The key to is to manage and react promptly. Get past the problem with a well thought out game plan. The help of a good agency is crucial to deal with these problems for your business.

Seven Insurance Coverages Every Restaurant Should Carry

I am opening a restaurant, what Insurance do I really need? This is a question insurance agents get asked a lot. Not just from restaurant owners, but from all small business owners. The answer to this question is like many things in life; It depends. The answer to this question will be different if you are a Painter, a Dry Cleaner, or even an Artisan Contractor.

 

There are many variables that go in to running a restaurant and those variables bring on completely different risks.

First and foremost the restaurant owner needs to determine what class code their business will be in. To find this out you will need the help of an experienced insurance agent. It is very important to be open and honest with the agent about what your restaurant will and will not be doing. For example, if you are a bar that stays open until 2 AM you will be in a different class code than a diner that is open from 6 AM until 2 PM. The risks are different, so the businesses are classified different. Furthermore, if you are not honest with your agent about serving alcohol they may leave out Liquor Liability Coverage. If an incident occurs without coverage it may be a loss so large it forces you to close permanently.

So once a business is classified correctly there are seven main coverages every restaurant should carry. Some restaurants will need all of these coverages and more. Some restaurants will need only a few coverages. Again, that is where the help of an experienced commercial insurance agent is important. This list is a great starting point for protecting any restaurant.

 

  • General Liability
  • Liquor Liability
  • Commercial Property
  • Hired and Non-owned Auto
  • Commercial Crime
  • Workers’ Compensation
  • Umbrella Policy

 

General Liability

General Liability (GL) is often referred to as the first line of defense in any good business insurance policy. A GL policy protects a business against liability claims for bodily injury and property damage as a result of normal business operations. It also covers some types of advertising liability. This can be as simple as someone slipping and falling on the way to the bathroom to another business claiming you stole their advertising slogan. There are exclusions in every policy and not every carrier has the same exclusions. Reading your policy and consulting with your agent are important.

 

Liquor Liability

Liquor Liability is designed for businesses that sell or serve alcohol. If you do not plan on selling alcohol this is not necessary for your business. In many states, business are required by law to carry this coverage. Liquor liability covers liquor related instances including bodily injury, mental anguish, psychological damage, assault, intoxicated employees and property damage.

 

Commercial Property

Regardless of whether you own or rent the facility your restaurant is located, property insurance is an essential part of protecting your restaurant from disaster. Commercial Property Insurance covers losses and damages to a companies property including buildings and permanent fixtures, inventory, furniture, equipment, personal property, signage, fences, and even landscaping.

 

Hired and Non-Owned Auto

One risk that many restaurant owners forget about is when their employees are using their personal cars for business purposes. This is where Hired and Non-owned Auto Coverage is necessary.  Many restaurant owners think if they do not offer delivery services they do not need Commercial Auto Coverage. That is not always the case. Hired and Non-owned Auto Coverage kicks in when your employees use their own vehicle or a rented vehicle not owned by the the company. The employee could be using their vehicle for something as simple as going to get change at the bank. Regardless of how small the activity may seem, when the employee is using any vehicle to do business activity you are liable.

 

Commercial Crime

In today’s day and age the risk for credit and debit card fraud is very high at a Restaurant. You and your customers are putting a lot of faith in the people you hire to not steal their personal credit card numbers. For this reason it is necessary to carry Commercial Crime Insurance. This coverage provides coverage for criminal acts committed by you or your employees. These can include employee dishonesty, forgery, computer fraud , funds transfer fraud, kidnap, ransom, extortion and money laundering. Depending upon the policy it will pay to defend you at trial and some fines or judgments awarded by a court of law.

 

Workers’ Compensation

 Workers’ Compensation Insurance offers coverage similar to General Liability. Workers Comp is designed for your employees instead of third parties. Work Comp Coverage is frequently referred to as the “exclusive remedy”. This means employees give up some rights to sue for injuries occurring on the job in exchange for guaranteed benefits like lost wages and coverage of medical costs. Employers gain the piece of mind that they will not be sued for most accidents occurring on the job unless the business is intentionally negligent.

 

Umbrella Policy

An Umbrella Insurance Policy is a great way to provide an added layer of protection to your business. The coverage is a policy that goes over the top of other insurance policies for a rainy day. Basically, the Umbrella Policy will provided higher limits of coverage when a large claim occurs. Think about the size of a potential claim if your restaurant caught on fire while people were inside. This could easily lead to you reaching the limits for General Liability and Commercial Property Coverage. This type of situation could easily exceed a typical $1,000,000 occurrence limit for those underlying policies. This is when the Umbrella policy would kick to provide additional coverage over and beyond those limits.

 

In most cases these policies can be bundled together under a Business Owner’s Policy (BOP). Most insurance carriers like to offer policies in a bundle because it brings them more business and allows them to get better prices for the business owner. It also ensures business owner’s are completely covered with no gaps in their coverage. So when you go out looking for your restaurant’s insurance policy these are seven insurance policies to consider when protecting your restaurant.

Do I really need Inland Marine Insurance?

Inland marine insurance is a specialized form or property insurance. It is often referred to as equipment coverage or Floaters by many business owners and insurance agents. The primary distinction between inland marine and other property insurance is the fact that inland marine is specifically for property that is likely to be moved or in transit, or it is a highly specialized type of property that required a unique valuation.

inland marine insurance

Originally, inland marine insurance policies were referred to as Floaters because they were primarily policies written to cover cargo in transit on large marine vessels. Inland marine coverage has expanded in the U.S. to include most types of property that has an element of transportation. Today, inland marine insurance covers a wide range of property and equipment.  When the property being insured does not fit within a traditional property insurance policy and is not always stationary in a reasonably fixed location it will automatically be eligible for an inland marine quote. While inland marine insurance is slightly more expensive than other property coverage, it also provides additional protection from theft or damage to the property while it is away from the primary business location.

The most common types of inland marine coverage includes construction equipment, transportation cargo, mobile medical equipment, cameras and movie equipment, musical instruments, fine arts and solar panels. Traditional property insurance is not designed to cover claims associated with these types of property. It is not uncommon for a business to purchase both property coverage and inland marine coverage together as part of a Business Owners Package (BOP).

Even though most homeowners policies provide some coverage for personal property such as fine arts, jewelry, guns, antiques, and musical instruments, these policies typically have lower insurance limits and provide less coverage in terms of causes of loss. In some instances, individuals or home based businesses find some of their property can’t be covered properly by their homeowners insurance. This is another situation where an inland marine policy could provide additional coverage.

Personal inland marine coverage is also offered in rare circumstances. It is very similar to a commercial inland marine policy, but the main difference is the named insured (i.e. the person or business buying the policy). Personal inland marine polices are commonly written for individuals who want broader insurance coverage for select property, or want higher limits of coverage than a homeowners policy will provide.

Commercial inland marine insurance represents approximately 2% of all insurance premium written in the United States. This is not a large amount, but when your business needs it it is a great thing to have. Claims on this type of coverage are much more common than many business owners assume. Most business owners and insurance managers could benefit from having a long discussion about what business equipment commonly leaves the primary insured location. In most cases it is only insured if it is located at primary insured location. Once it leaves the premises it must be insured under an inland marine policy. In many cases business owners have turned in property claims on equipment they store or use offsite, only to find their business property coverage does not cover the claim.  This is frequently when business owners understand the value of their inland marine coverage. Unfortunately many times it is too late.

What is General Liability Insurance?

General Liability (GL) Insurance is the most important insurance coverage a business can obtain. It is frequently referred to as the first line of defense. GL Insurance protects policy holders from third party risks associated with lawsuits and other claims. It can cover things as simple someone slipping and falling when they come in to your building, to a fire in the basement of your property.  General Liability is required by law in most states. Businesses are often required to purchase coverage with most contracts for leases, loans, and work performed for others. More importantly, businesses need general liability in order to protect their business and personal assets.

Get the best answers to your questions about general liability insurance coverage at myinsurancequestion.com

In most cases a General Liability Insurance Policy is the first line of insurance purchased by a business. It is usually purchased in addition to other policies like Workers’ Compensation, Commercial Auto or Professional Liability Insurance. Most agents can easily package all of these policies in to one Business Owner’s Package (BOP). Purchasing insurance from one carrier in a BOP, is a good way to maximize savings. Dealing with one carriers also makes interactions much easier for business owner’s when they have to get certificates or when there is a need for a claim.

One part of a General Liability Policy that is confusing for many policy holders is, who is a Third Party? Third parties can include anyone from customer’s, to contractor’s, to anyone who may be injured as a result of an action taken by you, your employees or caused by the actions of your business in some manner. It does not protect your employees. That type of injury would be covered under a Workers’ Compensation Policy. In most states Workers’ Compensation is required by law.

Typically a General Liability Insurance Policy provides only specific types of coverage named within that policy. GL coverage is almost always related to third parties who suffer a loss caused by the insured as opposed to employees and the insured’s themselves. Generally speaking, covered losses must be unintentional. Intentional damage  is not covered by most liability insurance policies.

Some examples of incidents covered under a General Liability Insurance Policy are:

  • Personal Injury
  • Advertising Injury (The unintentional use of a competitors advertising material)
  • Medical expenses
  • Legal defense costs
  • Property Damage (third party property caused by company negligence)
  • Electronic Data Liability (Businesses that service computers and could cause damage to a server)

One common misconception about General Liability Coverage is that it is all encompassing.  There are many instances where an occurrence is not covered by a General Liability Policy and there are other types of insurance offered to fill those gaps. That is where the necessity for a BOP can be crucial. When all coverages are purchased from one carrier there is less risk of there being a gap in coverage. It also speeds up the time for a claim because there are not two insurance companies interacting to determine who is liable for the claim. Most Insurance agents can help a business owner determine any and all coverage your business needs. All businesses should start with a General Liability Policy.

Workers’ Compensation, Competitive State Funds

Each state has their own method for how they go about setting up a provider of last resort for workers’ compensation insurance coverage. 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.

Although, I have recently found there are a few state funds that are very competitive.  Some are so competitive my select carriers cannot compete with the rates being offered. I have a hand full of accounts that in the last few months I have tried to move out of the various state funds, but cannot find competitive rates.

Two of the states that I have had a hard time competing in are Texas and Kentucky. Both of these “competitive state funds” are really good at what they do. Offering Workers Compensation with both great rates and great safety resources for their insured’s. The clients I have tried to move out of these state funds are companies that do not fit in the underwriting box of our main street carriers. They still have opportunity to get coverage from a carrier that will offer pay as you go work comp and get out of the state fund. However the day has come when my current clients have said I am perfectly fine staying with the state fund. These carriers are offering dividends in some situations and are also offering an in network option. The in network option offers a network of Doctors that work with the carrier and streamline the process for workers’ compensation claims. This saves money for the employers and lowers the total pay out for a claim.

The state of Colorado also offers a “competitive state fund”. Three years ago I would have said my markets could still compete with these states in the voluntary market. Today I am not so sure. Don’t get me wrong it is still worth going through the process of getting quotes from all options. Depending on what classes of business the funds are doing really well in, you may be able to find better rates in the state fund. Much like the select carriers that are out there, the state fund will write most classes of business, but that does not mean they are going to offer their best pricing. For instance, take a Class Code 9014. This is for a commercial/industrial janitorial business in the state of Texas and this business has a substantial amount of payroll. The industrial cleaning portion of this company is going to kick them out of most of my select carrier underwriting guidelines. That leaves me with my high-risk carriers and my state fund (Texas Mutual). The high-risk carriers are usually going to have higher rates because they are offering to cover a business that not many carriers are willing to take the chance on. The high-risk carriers can only offer a 25% max credit. If the rates are not low enough to begin with we still are not going to be able to save the client money. On top of that we have the in network option and the dividend program. Many customers are benefiting by staying with the state fund of their home state.

The flip side to this is if we take the same Texas Janitorial Company and they decide to expand their operations outside the state of Texas. This would create a completely different scenario. State funds do have the ability to offer “other states” coverage’s on a separate writing paper or policy, but that is usually very limited to states and how much payroll will be allowed. In this case a high-risk carrier would be beneficial. The high-risk carrier will often times have the ability to add additional states to the policy as the company grows. They may also be able to offer better rates than the alternative, which would be having a policy with a handful of separate state fund policies.

Whether I am trying to move an existing client to a more competitive carrier or I have the opportunity to help a client that has come to me in need of a new policy. I have the tools and the ability to take care of the companies insurance needs. That can be through the state fund or through one of our many carriers.

What is the process for a Workers’ Compensation Payroll Audit?

The premium for most Workers Compensation Insurance Policies are based on a payroll “estimate” for the upcoming 12 month period from the effective date of the policy.  This is made as accurate as possible during the workers compensation payroll audit.  In addition, each business type is assigned one or more workers’ compensation classification codes. Each of the workers comp class codes are assigned a percentage rate factor. Payroll is than multiplied by the percentage rate factor for each class code. This is what determines the amount of the premium. After the policy period is complete, EVERY standard workers compensation carrier will perform a payroll audit for the previous 12 months of coverage.

During this payroll audit process the auditor can require either a physical or mail audit. Mail audits are fairly simple. They require completing a worksheet and submitting the requested payroll verification documents. Physical audits require the auditor to meet with the business owner, collect and verify payroll documentation and inspect the business to determine proper classification. Payroll documents usually include year-end tax reports, payroll ledgers and 1099 payroll information.

The purpose of an audit is to determine the “actual” wages paid to employees and to make sure the employees are classified correctly. After the payroll audit process is complete, the auditor reserves the right to change the workers compensation class code however they interpret the business based on their inspection. The auditor will report to the insurance carrier, the “actual” wages paid to employees and uninsured 1099’s per class code. The insurance carrier will than adjust the payroll figures and class codes. IF need be the auditor will than send the business owner a refund or an invoice for the additional amount due. If the business owner fails to complete the audit as requested it will cause difficulty purchasing a workers compensation policy in the future.

After the business owner receives the audit results, the business owner has the right to dispute the results if they feel something is incorrect. Business owners can go directly to the audit department to capture the auditor’s report/notes or business owners can involve their agent to assist with this process. If a classification code is changed and the business owner doesn’t agree the business owner must request an inspection by the appropriate state workers compensation bureau. Typically this request costs the business owner a few hundred dollars. The bureau inspection and classification code determination is final.