Workers compensation rates are developed by claims and premium paid within each industry, per state over a period of multiple years. In most sections of the U.S., each State sets a minimum and maximum rate for each industry code. Within the minimum and maximum rates established by the state competitive insurance companies are able to file their rates for each industry depending on how competitive they want to be. Depending on the characteristics of a particular business, insurance companies could be willing to discount or increase their rates. Each state also sets a minimum and maximum amount of credit or debit an insurance company can use when quoting. When researching rates, lower rates indicate an industry that is less likely to suffer a claim and higher rated industry codes indicate a higher risk of a claim. The lower hazard industries have more options therefore more competition than the higher hazard industries. More competition typically means those industry types are going to pay considerably less than a higher risk industry with only a few options willing to quote.
Identify the areas that cause the greatest concern for workplace injuries. Business owners in all industries can increase their chances of paying the lowest workers compensation rates by implementing proper policy and procedures to prevent claims. Which policy and procedures to implement will not be the same for all industries. A restaurant would have different exposures that could cause a claim than a remodeling contractor. When quoting your business, make sure you highlight the areas that your business has implemented that prevents claims. Brag about the areas that make your business different than other businesses in the same industry. In my opinion, most business owners and agents are focused on which insurance company has the lowest rate. Instead, the business owner and agent needs to tell the story of that business and the components of that business that make it attractive to insure. Just because an insurance company has one of the lowest rates for a particular industry doesn’t mean they are the most competitive option. Insurance companies that are willing to apply credits/discounts based on business practices to prevent claims will typically be the most competitive options. If your agent is not asking about your business practices, they are not properly selling to their underwriters to get the best possible pricing. Below is a short list of ways a business owner can help reduce their workers’ compensation costs. These are the things that insurance company underwriters want to know about in order to properly price their quote.
- Business owner is active within the business. When a business owner is active and around employees, typically those employees follow the policies and procedures more carefully.
- Proper training of how to handle situations that could cause workers comp claims. If you own a convenience store, how should employees handle a robbery?
- Return to Work Program. History shows that the sooner a business owner can return the injured employee to work the less expensive the claim will be. Even if you have to create a light-duty position temporarily.
- Establish a safety program and enforce discipline for not following proper procedures. This can positively impact your workers compensation rates.
- Conduct safety meetings. Constantly reinforcing helps prevent injuries.
- Employee Training for the job they are performing, equipment they are using.
- Designate Key Employees to be responsible for holding employees to the standards of your business
- Update your equipment when needed, make sure it has the proper guarding to prevent injuries.