Tag: Workers Comp

Florida Small Business Owners need to prepare for Increase in Work Comp

On December 1st, rates on Workers Comp Premium are set to go up 14.5 % throughout the state of Florida. This could have a drastic impact on Florida Small Business   

 

Approved by the Florida Office of Insurance Regulation (OIR), rates on premium for workers compensation are going to increase by 14.5 % beginning the first of December.  There are the reasons for this dramatic increase and it will have an immense impact of the Florida small business community. There were two court cases ruled on over the Summer and there was a Senate Bill that caused a very small portion of the increase.  The two cases were Castellanos vs. Next Door Company and Westphal vs. City of St. Petersburg.  The additional part of the increase was related to Senate Bill 1402 which dealt with a a new printing of the Florida Workers’ Compensation HCPR Manual.

 

Castellanos vs. Next Door Company

This court case was ruled on this year and it was between a Florida small business owner named Marvin Castellanos and Next Door Company.  Marvin was an injured employee who sued Next Door Company and the Florida Supreme Court overruled a previous court ruling from 2009. The previous ruling was overturned because it limited the ability of the claimant to get a reasonable amount for attorney’s fees.  Pretty much the previous ruling limited the amount a judge could award for attorneys fees. As a result, most of the money being awarded in workers compensation cases was going to the lawyers to cover their fees instead of going to the inured employees who it was meant for.  With this ruling in place judges merely had to use the previous fee schedule as a recommendation, but depending on the situations surrounding each case the can award more or less for attorney’s fees.  Because of this ruling insurance companies anticipate they will have to pay larger amounts for workers compensation lawsuits in the future. For this reason they asked for and were approved by the Florida Office of Insurance Regulation (OIR) a 10.1 percent on average statewide.

Westphal v. City of St. Petersburg

The next case that had a negative impact on workers’ compensation rates in the state of Florida was Westphal vs. City of St. Petersburg. This case was regarding the 104-week statutory limitation on temporary total disability benefits. This time period was ruled unconstitutional.  In its ruling the court stated the previous time period denied injured workers the ability to obtain proper right of access to the courts. The ruling extended this time period to 260 weeks.  Because injured employees will now be receiving partial salary benefits for an additional 156 weeks insurance companies were taking on additional risk to offer workers comp coverage within the state of Florida.  For this reason the OIR approved 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.

 

What can business owners do to protect their business? 

Shop your policy

The first thing a Florida small business owner should do when they get sticker shock from their renewal quote is to shop their policy around to different agencies. One thing that can save you a lot of time doing this is to partner with an independent agent who has the ability to shop your policy with many different carriers. A lot of agencies have exclusive relationships with only one or a select few carriers. This dramatically impacts the amount you pay in premium, especially if you are in a difficult to quote class code. A typical independent agent can quote your policy with 10 or more insurance carriers. This gives them the ability to negotiate more effectively for more comprehensive coverage and better rates on premium.

Pay as You Go

Pay as You Go Workers’ Compensation is a flexible payment option that allows business owners to get coverage in place at a much lower price and allows them to pay their premium monthly based on the payroll each month.  This is an excellent option for cash strapped or seasonal businesses.

Broker of Record vs Agent of Record

Before you sign a Broker of Record (BOR) or an Agent of Record (AOR), here is what you need to know.  

A BOR is a broker of record notice and an AOR is an agent of record. A Broker of Record is an agent designated by the policy holder to represent and manage the policyholders insurance policy.  Now before I move forward let me ask a question.  Does anyone work for free? Does anyone complete a job for a customer, but then the funds go to a competitor or a different local business? No that doesn’t typically happen. Except in the insurance industry. Let me also follow that up by saying I enjoy the customer service that I give everyday. By no means, do I think that every person coming to me for insurance will decide to let me handle their insurance needs.

Marketing, Financial, Insurance, Broker

Here is another scenario that may give you a better understanding of the Broker of Record (BOR) process and what it exactly means.  Let’s say a business owner decides their renewal rates for workers compensation or general liability insurance just can’t be the best out there. So what does the business owner do?  They can start calling other agents? I am assuming they call other agents because they either assume their agent has already looked for a renewal and can’t do any better. They may assume their current agent simply does not have the access to other more competitive markets.  But do they call and ask them to shop for better rate’s?

The first thing a business owner should do is jump on their own computer and search workers comp insurance (let’s keep to work comp). So here they are talking to an agent that is going to get all of the company information. Then this agent will shop all of the markets they have for this businesses particular industry. On average submitting to 3-6 markets. Then presenting that business with new applications to sign and a shiny new quote with not just a better price but a better rate per 100 in payroll.  Most business owners are are so happy that they are saving money (hopefully a lot), but even if it’s only a little hey every penny counts right. At this point most business owners will call their current agent and telling them some similar to, I’m not renewing my policy with you. I found a better price.  At that point the business owner has the agents attention!  At this point the agent decides to start submitting to all of the insurance carriers they are appointed with.  The agent will do this in order to see if they can match or beat the pricing you got from the other agent (me). This may not be because they were not doing their best work for you in the first place. It may be you were not clear to them what your priority was to begin with.  Agents speak with many business owners with many different priorities. Some just want a quote, quickly so they can get back to their business. Others do not mind waiting to get the absolute best deal.

Here is how I imagine the next scenario goes. The current agent that most likely wants to keep your business will ask what carrier is offering better pricing?  The business owner may tell them who the carrier is and the current agent will say, oh I am appointed with that particular carrier.  I can get you those rates.  The current agent would then asks you to sign a BOR or AOR letter, letting them take away the work they did for the business.

I understand this is an imperfect situation, but this is the name of the insurance agent game.  So the next time you are shopping take into consideration the time, effort and work the agent you called for help put into saving you money before you sign a Broker of Record (BOR) letter.

My Insurance Question is a created by the experts at The Insurance Shop LLC. The Insurance Shop was formed in 2005 and over the course of more then a decade the agency has developed relationships with more then two dozen carriers. This vast amount of carriers allow their agents to acquire the best value when shopping for commercial insurance. If you are ready for a new look at your coverage, give us a call at 800-800-4864.

6 Tips for controlling the cost of a Workers Compensation Claim.

  1. Quickly report all claims to the insurer.

Some states have requirements for how quickly a workers compensation claim must be reported. Insurance carriers have specific departments that deal with claims exclusively. They will know the process thoroughly for filing a workers’ compensation claim. Because this is a process your business hopefully does not deal with frequently, getting your injured worker the proper coverage quickly will be easier with the help of your carrier.  Documenting the claims allows the carriers to pick up on patterns and help businesses develop programs to prevent common injuries.

  1. Make sure supervisors are adequately trained.

Taking care of an injured employee may not be at the top of the priority list when hiring a manager for your business. Hopefully it is not something your managers have to encounter very frequently, but it needs to be something they can effectively deal with for the success of your business. Many businesses have a point person who studies the workers compensation claim process thoroughly. It is still important to have this person train the other managers to be aware of this process in case of an incident occurring when they are not on duty or away on vacation.

Communicating with your employees is important to limiting the impact of a workers compensation claim.

  1. Keep complete notes of the injury and reporting process.

Note taking is crucial in everything you do within your business. This is especially important when you experience a workers compensation insurance claim.  It may seem tedious, but it can save your business immensely if a claim makes it into the court of law.  Besides the fact you need to cover your business legally, accurate documentation helps your carrier document injuries within your industry. They can use this information to see patterns and to determine appropriate safety programs to deal with those patterns.

  1. Communication is key.

Communicating with all parties involved in the workers compensation claim is extremely important. This starts with communicating with your employee. In most states they have the right to seek a second opinion, but the more you keep your carrier in the loop of these situations the better they can help you control the cost of the claim.  Separate from the cost of the claim, it is in your best interest to let your injured employee know you care about their well-being.  Communicating with both your insurance agent and carrier is important as well. The carrier is the one equipped to handle the claim, not your agent.  The agent can be helpful if you feel your carrier is not living up to your expectations. Keeping them updated on the workers compensation claim can help you ensure you are getting the proper attention from your carrier and they can help you prepare for explaining the claim when you go to renew your policy.

A proper safety program can prevent employee injuries and limit a workers compensation claim.

  1. Prevent employees from injuries.

Safety programs are key to the long term success of your business. Making a safety plan part of your ongoing training is essential to your business and it does not have to take a lot of time.  Fifteen minute discussions two or three times a month should be sufficient. Make sure the meetings have a specific topic and ask for feedback from your employees. Asking for their feedback gets them involved in the discussion. This will make them more involved in the program. It can lead to higher job satisfaction if those employees feel like you are listening and make changes based on their feedback.

  1. Create a return to work program.

Studies have shown that the quicker a person gets back on the job in any form or fashion, the more likely they are to return to permanent work.  Humans are creatures of habit. Coming to work is part of their habit and the longer they go without that habit the more likely they are to create new habits not associated with your business. This is when a claim can get out of control if an injured employee goes on long term or permanent disability.  Designing low impact work of some kind will allow those employees to return to work and get back in the routine of work quicker.

10 terms to help you navigate the Workers Compensation System

Previously we wrote about several common terms related to commercial insurance here.  These were terms that a business owner should familiarize themselves with before renewing any commercial insurance policy. especially before interacting with their states workers compensation system.  Here is a list of terms you might come across related specifically to workers’ compensation insurance. Some of the terms may not have to do with your renewal specifically, but if you use the workers comp system long enough you very well may come across some or all of these terms.  

 

Aggravation:  Aggravation usually implies a fresh incident producing additional impairment to a previously injured anatomical region. Aggravations are usually not temporary.

Carrier Code:  The ten-character code that identifies a specific insurance carrier. W is always the first character in the code for a carrier of Workers’ Compensation policies. The codes for carriers of Disability Benefits insurance always begins with the letter B. Carrier codes are issued by the Finance Office of the WCB.

Claims administrator:  The term for insurance companies and others that handle your workers’ compensation claim. Most claims administrators work for insurance companies or third party administrators handling claims for employers. Some claims administrators work directly for large employers that handle their own claims. Also called claims examiner or claims adjuster.

Date of Injury (DOI): If the injury was caused by one event (a specific injury), this is the date of the event. If the injury was caused by repeated exposures (a cumulative injury), this is the date that the worker knew of should have known that the injury was caused by work.

First Report of Injury:  Each state has their own form that should be filled out anytime an injury occurs on the job. They should be reported no matter how minor the injury is. Insurance carriers track these forms to look for patterns of injuries and to help employers prevent injuries from becoming more severe or more common. Here is an example of one of these forms from the state of Wisconsin.  

Functional capacity evaluation (FCE):  An FCE is a series of tests administered to a workers’ comp claimant by a physical therapist or other health care professional. They can be beneficial in determining an injured worker’s capabilities and restrictions.

Independent Medical Examination (IME): Am IME is a medical evaluation that is used to resolve questions about your medical condition, including what treatment is necessary and the degree of your permanent impairment, if any. An IME is most often requested by the insurance company when there is a question about what treatment you need or what permanent disability rating you should be given.

Loss Ratio:  The relationship of incurred losses compared to the earned premiums expressed as a percentage. If, for example, a firm pays $100,000 of premium for workers compensation insurance in a given year, and its insurer pays and reserves $50,000 in claims, the firm’s loss ratio is 50 percent ($50,000 incurred losses/$100,000 earned premiums).

National Council on Compensation Insurance (NCCI):  NCCI is a U.S. insurance rating and data collection bureau specializing in workers’ compensation. Operating with a not-for-profit philosophy and owned by its member insurers, NCCI annually collects data covering more than four million workers’ compensation claims and two million policies.

Workers’ Compensation Audit:  A review of the compensation paid during the policy term to determine whether the exposure used to determine the original premium was accurate. If during the policy term, the actual exposure changed from the original estimate of what it would be, then an adjustment to the premium would be made at the time of the audit. If there was more exposure than the estimate indicated, then more premium will be charged. If there was actually less exposure than the estimate, premium will be refunded.

 

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.

 

Travel exposure and work comp

I have had many conversations recently about employees and travel exposure in regards to workers’ comp insurance. Most employers understand that regular commuting does not result in a work comp claim.  Even if there is an accident involving an employee. However, many carriers view every day or long distance highway travel as a higher risk exposure.

Salespeople, nurses, and other employees who are on the road a lot often are exempt from the coming-and-going rule. Travel is integral to their employment because they don’t work from a fixed office. This also holds true for construction risks.  These businesses have employees that are going from their home state to another state to work. Basically from the time they leave their front door until they return home from that job they have 24/7 work comp exposure. The Walsh Test helps to determine jurisdiction when multiple states are invloved in a workers compensation claim for these employees.

Workers Compensation Coverage for Travelling Nurses.

On-call employees are likely covered from the moment they are called into work even if they get hurt at home. Employees who are injured during business travel may receive compensation, even if the accident happens during recreation. Courts generally are liberal in determining workers’ compensation eligibility in work travel accidents. In many cases, even if the activity that caused the injury is not considered work related.

If an employee is on a trip that is work related and they go to work out at the gym, if they injure themselves at the gym they are covered by workers comp. They are covered because a lawyer  would argue they were only in that gym at that time because they were out of town for a work trip.  For this reason the injury is covered.

With that being said, if an employee goes out for a business dinner and is in an accident after having too much to drink, work comp would most likely deny the claim.  This is because the use of alcohol would exclude the injury whether they were on the clock or not.   So with in certain limits would work comp kick in for traveling employees. It’s worth noting that workers’ compensation coverage for commuting employees varies state to state.

If an employee runs a work-related errand on the way home from work and gets in an accident, her injuries may be compensated. Another example of this would be if an employee is injured running a work-related errand while out for [personal time] lunch. This relates to the dual purpose or capacity concept.

Most of the time I run into having this conversation with a client if it is a higher risk construction company.  A company like carpentry commonly has employees in the home state that are traveling into multiple states annually. Here is the outlook from an underwriting perspective.  Not only is your business in a risky trade like carpentry, but we are throwing in across state lines travel. Where accidents happen in a vehicle with possibly one if not three or four employees could be injured. These are two big reasons insurance carriers are not interested in this type of risk.

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Differentiating Workers’ Comp Insurance from being a Commodity Product

Workers’ Comp Insurance is often thought of as a commodity product. There is some logic to that line of thinking. Pricing is determined by classifying employees and then taking the percentage rate assigned to that classification and multiplying it by estimated payroll. In some states such as Florida and Wisconsin, the workers’ comp rates assigned to those classifications are set by states, whereas in some states the rates by classification can vary from carrier to carrier. In competitive states, pricing is often thought to be the main differentiator between workers’ comp carriers. Most of the benefits paid from claims related to workers’ comp insurance are set by statutes, so carriers should be viewed pretty similarly in that regard as well.

Other than pricing, what can separate workers’ comp insurance carriers? Carrier rating is one factor that is considered. It relates to the financial strength of carriers. A higher carrier rating should lead to more certainty that claims will get paid, but it is highly unusual for claims not to get paid by any workers’ comp insurance carrier. Higher carrier ratings are sometimes required to meet insurance requirements of vendors or customers. A carrier’s customer service reputation can also be relevant. Additionally, payment plans can vary by carriers. Some carriers offer pay as you go. This allows premium to be paid in line with how busy a company is at a particular time. Furthermore, it generally reduces large audit balances.

Another differentiating factor is, are different programs offered by workers’ comp insurance carriers. Missouri Employers Mutual is one carrier who offers several programs to enhance employee safety. They often safety grants to policy holders. The grants will provide dollar for dollar matching funds up to $20,000 for successful applicants to purchase more permanent type safety devices. Some applicants may be able to get a grant larger than their policy premium. Missouri Employers Mutual also offers safety dividends to policy holders with lower loss ratios as a way to reward good safety practices. The Hartford is another carrier that offers numerous programs to differentiate its product. They offer programs to provide discounted slip resistant footwear to employees, programs that can lead to weight loss and overall a healthier employee pool and discounts related to vendors which can provide a more ergonomic friendly workplace. The Hartford also provides a broad form policy which includes things like more cancellation notices, pays benefits for more additional expenses, includes complimentary waivers when needed and provides longer notification periods for insureds related to certain mandatory notification events. Some carriers, such as Employers, offer price differentiators such as filing for a 5% rate deviation in Florida which allows them to offer worker’s comp rates which are 5% lower than other carriers in Florida which must use the rates set by the state.

Another area carriers can differentiate themselves is by superior loss control or claims management services. Utah Business Insurance (UBIC) is a carrier that offers superior loss control. Very knowledgeable field reps meet with prospects and insureds to provide insight on safe work places. These field reps are strongly versed in OSHA and other safety protocols. Both UBIC and Missouri Employers Mutual also diligently investigate claims as they arise.

While price is always an important consideration as it relates to workers’ comp insurance, there are numerous other factors worth considering when selecting a workers’ comp provider.

What Do My Workers Compensation Limits Mean?

We get this question a few times a week because most business owners don’t quite understand their workers compensation limits. They try to compare them to their general liability limits and that is where some of the confusion sets in. The Limits on your workers’ compensation insurance policy provide coverage for a business against lawsuits arising from employment-related injuries or illnesses.  For example, if an injured employee is not satisfied alone with medical and loss of wage benefits because they feel their employer purposefully put them in harm’s way on the job or were grossly negligent, and as a result they were injured, they may sue for punitive damages.  In some cases, even the employee’s family can sue for the same damages. This is where Part II of a workers’ comp policy would kick and provide coverage.

It is important to note that employers’ liability coverage is limited, unlike medical benefits or loss of wages.  This is the spot that a lot of business owners or anyone starts to get confused. They see limits on their workers’ compensation policy and naturally think that is the max that would be paid in an injury scenario. A workers’ compensation policy will pay out whatever it takes to rehabilitate an injured employee. Employers liability or Part II will not pay out unlimited amounts on behalf of employers who were charged with gross negligence or knowingly placing their employees in harm’s way.  Employers’ liability coverage in most states starts at $100,000 each employee, $100,000 each accident and at $500,000 per policy limit for disease- these limits are statutory or minimum limits that come with the purchase of a policy.  These coverage limits can be raised for a nominal additional premium percentage on most policies.  Many businesses opt for increased employers’ liability limits.  They do this because of a need for peace of mind or because their work contracts often require higher limits than statutory requirement.

To give you an idea on how these limits work, think about it in this manner. An employee working in a manufacturing plant is exposed to lead on a daily basis. The employer does not have proper ventilation or does not always check on the employee to make sure they are wearing proper attire. Whether that is long sleeve shirts and pants or to have a respirator so they are filtering the air quality they are breathing. The employee gets injured on the job after many years of never missing work. It is also discovered that they have come down with a serious illness that may be caused by years of lead exposure. The employee and his family are not satisfied with the level of benefits workers compensation is providing and has decided to sue the Employer for negligence. This is where the limits in Employers Liability or Part II would kick in. There are many other scenarios that could come into play outside of illness, but this is just one example of how a 3rd party may potentially bring suit against your company. The best thing to do is always be proactive with safety, etc. which can be hard for a small business.  Because your time is very invested in the day to day activities of the business.

4 tips of inured worker outcomes

Here are 4 ways to improve your businesses injured worker outcomes.

Injured workers are a part of running a business.  If you stay in business long enough, you are going to have an incident where one of your employees is injured. This is not a bad representation of your business, but how you handle the situation can have a lasting effect on your relationship with your employees and your insurance company. Here are four ways in which you can manage and incident where you have an injured worker that are best for your injured worker, your business and the insurance company you partner with. 

 

Take care of the injury, first and foremost

This is simply the right thing to do. The best way to improve injured worker outcomes is to first deal with the injury.   Taking care of the injured employee is also the best thing to do for the insurance companies to help get the injured employee the best medical care and it can help the medical professionals treat the injured employee quickly and cost effectively. 

Report the injury to your agent and carrier

A lot of business owners may not think it is so, but your insurance agent and carrier are on your side. It is in their best interest to help your business and to help your injured worker get the care they need and get back on the job as quickly as possible. They deal with these situations a lot. They can navigate the workers’ compensation system much more effectively than you can. More important than anything is the fact that they cannot help you with these injuries until you notify them an injury has occurred.  Also, documenting the injury allows your business and the carrier to keep track of your claims history. If there tends to be a pattern of injuries, you can address it and the carrier can help you. They interact with business owner across the country in all industries. Chances are they have dealt with a similar situation and can give you some guidance as to how to prevent/fix the problem from continuing to occur. 

Keep your Agent in the loop

Remember your independent insurance agent is on your side. At least they very well should be.  If for instance, you feel your carrier may not be living up to their responsibilities the agent can speak with the carrier on your behalf. Agents interact with carriers very frequently for a number of reasons. They have an established relationship with these organizations and they can more easily get your claim in front of the right person to most effectively solve your problem.   Also, they can only help you when they know an incident has occurred. The longer you go without getting them involved in a claim the more likely the claim is to get out of hand. This means more missed time for your injured worker, a larger cost to the insurance carrier and probably higher rates on premium for you in the future.  Keeping your agent involved can help prevent all of this from occurring. 

Let the carrier take care of the billing

Do not try to take care of the billing yourself. Even if you have been in business for a long time and you think you know the workers comp system fairly well. Things change. A medical facility that you have been taking your injured worker to for years may stop a relationship with your carrier. If you take the injured worker to a medical facility out of the carriers’ network, you may be liable for the costs. The network for workers’ comp is not necessarily the same network for health insurance, even if you use the same insurance company for both policies. It is always best to let your insurance company do what they do best.  

4 Advantages to Pay as You Go Workers’ Compensation.

Small business owners have a lot to think about. Whether it be finding new clients, efficiently servicing the clients you do have, making sure your employees are paid on time, what type of insurance to offer your employees, to what type and how much insurance coverage is needed to adequately protect the business; a business owner must be involved in all of these decisions. One of the largest fixed costs most small business face is workers’ compensation insurance coverage.  In 48 out of 50 states this is required by law for nearly all businesses to carry this coverage. For this reason, any way to limit the cost of this coverage is helpful to a small business. Especially a start-up, a small business with a seasonal business cycle or a small business with cash flow issues.  Pay as You Go Workers Comp Insurance Coverage is one option to help these types of businesses.

Pay as You Go Workers Compensation is a great way for seasonal and cash strapped small businesses to free up cash.

Improves Cash Flow

Most Workers Compensation Policies require a portion of the policy up front to establish coverage.  After this initial payment the company pays 9 monthly payments beginning 3 months in to the cycle. The amount that is due up front is typically 25 or 30% of the entire premium. With the Pay as You Go Option most businesses, depending on revenue, can get policies in place for only a few hundred dollars. This allows the business to free up cash for more immediate business needs.

Increases Payment Accuracy

Pay as You Go Billing allows businesses to accurately pay what they owe each month based on real time payroll amounts. In a traditional work comp policy the payroll amounts are an estimate and during an audit at the end of the period they either are offered a refund for overpaying or they are charged for the additional amount of premium owed. Pay as You Go lessens this burden by allowing companies to pay a more accurate amount each month in real time.

Simplifies the Auditing Process

Because the amount of premium is paid in real time based on the payroll each month there are less inaccuracies during the auditing process. Typically the biggest problem during the auditing process stems from the business being improperly classified. This can cause a dramatic over or under payment if the business is supposed to be in a classification code that is dramatically more or less dangerous. A good example of this is related to driving risks. If a company has employees drive to many different locations to do a job as opposed to do a similar job at only one location without the employees operating a vehicle those are two class codes that are dramatically different risks and premium is dramatically different for those two businesses.

Allows the Business to Budget more effectively

When a business has a more accurate assumption of what their premium will be from month to month and throughout the entire year they can more accurately budget for other expenditures. This is important for new or growing businesses. If you are adding on to your location, thinking of buying new equipment or adding new employees than what you pay in premium will determine what and how much you can spend on these other parts of your business. Businesses that use a traditional workers comp policy may have to be more conservative in their growth because they need to keep more cash on hand for the auditing process.