How are Workers Compensation Insurance Costs Determined?
When you want to calculate overall workers compensation insurance costs, you first need to figure out which of your employees must be covered.
Workers compensation insurance costs vary between industries based on how dangerous a given industry is determined to be. The National Council on Compensation Insurance has developed over 700 codes that provide guidelines as to what the insurance premium cost should be based on occupational risk.
For example, a high-risk field like construction usually costs an employer about $4 per $100 of payroll to provide workers compensation insurance for employees, while in a low-risk field, such as clerical, it costs about 30 cents per $100 of payroll. This number is subject to change on an annual basis, but it usually remains close to the same from year to year.
Typically, after premiums have been calculated, rates are set for a period of three years. During those three years, the insurer keeps track of how many workers compensation claims are submitted. After those three years are up, the number and costs of those claims are compared with other similar businesses that are based in nearby locations and an experience modification factor, or MOD is assigned.
Can Costs be Cut?
The MOD is a numeric representation of a company’s claim history that is used to determine their overall costs. A typical MOD is set at 1.00, and will be lowered when a business has fewer, less severe claims than similar businesses.
In other words, by establishing a good history with few claims, workers compensation insurance costs can be lowered. An employer with very few claims may even be refunded part of their insurance premium at the discretion of their insurer.
For more information on Workers Compensation Insurance Costs, get in touch with one of our specialists at 800-649-9094.