Workers Compensation For The New Employer - Part 2

An Article About Workers Compensation Insurance By Randy Sieberg, CIC, ARM, CRM

Accurately Project Your Payroll By Job Class - Keep in mind your premium calculation is based on payroll times the rate per 100 for the job classification in which you employees are assigned. Your "exposure basis" on a workers compensation policy is payroll so it's important that you project your job classification payrolls as accurately as possible. You also need to know that the payroll projection is for a 12 month period from when you begin your policy and that the policy period may not coordinate with the calendar year. When you begin a workers comp policy the payroll projection you provide your agent will be used to set up your policy and calculate your "deposit premium." Remember from above, a workers compensation policy is an auditable policy. Your final premium for the policy period will not be known until after the audit is complete and your account is balanced out. When you start a policy the premium you are paying is not your final premium! So again, it's very important that you project your payroll as accurately as possible. Monitor Your Payroll - Keep an eye on your payroll throughout the year. If you find that half way through your policy period your payroll seems to be exceeding your original projections contact your agent and ask them to adjust your payroll exposure. By being diligent with this you can help avoid an adverse workers compensation audit at the end of your policy period. It's always better to make adjustments during your policy period rather than waiting until your audit. Review Your Workers Comp Audit - Employers lose thousands of premium dollars each year due to mistakes and errors made by insurance companies. Mistakes and errors occur in many different premium producing areas of the workers compensation process. Unfortunately most of these remain unknown to employers. Because of this, it's important that you verify all audits and review all premium calculations. It's the hidden or unknown overpayment that can hurt your bottom line. Most employers are unfamiliar with the complicated calculations that make up their total workers compensation cost. Not just audits but all premium producing areas of a workers compensation program should be reviewed on an annual basis. Your review should include audits, job classifications, experience modification factors (if applicable,) payroll, premium calculation, rate verification and premium credits. If you need help, seek out an independent professional workers compensation audit consulting firm. Don't let an undiscovered mistake cost your business!

Armed with these simple tips, you'll be ahead of the game when it's time for you to buy your first workers compensation insurance policy. While workers compensation insurance may be a mandated coverage, there are proven methods to help keep your cost in check. For a new employer the place to start is learning about the basics. Learn how your policy is priced and about those key elements driving your price. Most importantly learn that your workers comp policy is not a fixed premium policy, but an auditable policy where the ultimate cost will not be determined until after the audit is complete. Hopefully I've been able to provide a little insight into these key elements for you, the employer.

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Publication Date: 05-18-08

Copyright © 2008 All rights reserved

Randy Sieberg, CIC, ARM, CRM, has over 27 years experience in risk management and property and casualty insurance, is with Workers Compensation Consultants, an independent workers compensation consulting firm and works with business oweners to discover and return workers compensation premium overcharges by reviewing insurance audits, job classifications, payroll class assignments, experience modification factors and credit applications. Please contact Randy at rks@workcompconsultant.com

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