How Costs are Determined for Workers Compensation Insurance

There are a number of varying factors that can impact your costs for workers’ compensation insurance. Here are a few of the key influences:

  • Premiums are based on the employer’s industry classification code and payroll.
  • Employers with an annual premium above a certain amount are usually eligible for experience rating, which adjusts the premium up or down depending on the claims history of the company relative to other companies in that industry category.
    • Businesses with higher than average claims will pay a higher premium and those with lower claims will generally pay less.
    • Experience rating is more sensitive to the number of claims (loss frequency) than the dollar value of claims (loss severity). Insurers know from experience that where more accidents occur, there is a greater likelihood of big losses. A greater number of accidents indicates that overall in working conditions are not as safe as an environment where fewer accidents occur, even if in a given year the few accidents that occurred were more costly.
  • Location has also become a major factor in workers’ comp premiums.
    • Premiums can vary depending on the state you do business. In states were benefits are more generous, premiums may be greater. In most states, workers’ comp benefits continue even after the worker begins collecting Social Security and Medicare.
    • However, benefits are only one part of the equation. In some states with low benefits and costs, premiums may be high due to the inefficiency of the system for awarding benefits. The generally increasing cost of medical care impacts premiums as well. Although states are working to make changes, for the most part, workers’ comp doesn’t have the types of cost control measures that have been applied to health insurance. Workers’ comp claimants do not have to pay deductibles. In many states they may visit as many doctors and specialists as they like. There is generally no requirement for doctors to prescribe generic rather than brand name drugs.
    • Since the terrorist attacks of September 11, 2001, workers’ compensation insurers have been taking a closer look at their exposures to catastrophes, both natural and man-made. For businesses located in an area at high risk of catastrophe, premiums may be higher, regardless of the nature of the business itself.

What is My Cost for Workers’ Compensation as a Restaurant Owner

Your costs include insurance premiums, payments made under deductibles and the administrative costs of handling claims and making reports to the state and your insurer.

Our team at Besnard Advisors can help you navigate the challenging requirements of workers’ compensation insurance and help you reduce costs and claims.

Reduce costs. Reduce claims. Talk to our advisors today.