I still find this a pretty amazing statistic. How can over half of all Workers Comp policies be wrong and not in favor of the business owner? When you look deeper into the matter, it isn’t surprising at all. Here are some of the factors that can lead to these overcharges.
- The premium is based on historical data that is two, three and four years old.
- Many sources are supplying data. Payroll companies, the employer, the insurance company underwriter, claims personnel, and your insurance broker all contribute information that determines your premium. With all these sources submitting information, it is certainly possible that some information may be incorrect.
- Inappropriate classification of workers. Even a minor misclassification proves costly in the long run. Getting total payroll is easy through quarterly tax filings. The trick is to make sure the breakdown between the different classifications is accurate.
- Not taking advantage of excluded payroll. This happens a lot and can be very costly. There can be a cap on the maximum pay for some workers. Also, overtime, holiday pay and bonuses can be credited in most cases. Not knowing what to exclude from payroll costs businesses thousands of dollars over time.
- Being unprepared for an audit often means missed opportunities at accurate information and taking advantage of every credit. Being organized and having all the necessary documentation for the auditor not only helps you avoid overcharges, but it also makes the audit process less time consuming.
- Claim reserves that remain open are treated as losses and are typically not eligible for a credit once they finally get corrected or paid. This alone creates an average 30% increase in Workers Comp costs.
This list could continue on. I do hope it gives you an idea of how many factors there are that impact your Workers Comp premium. You must have a comprehensive program that addresses these key matters and helps you learn how to play this game. In every industry those that know how to apply the best practices, are typically paying 30-50% less than the rest of their peers.
Do you feel like you’re in the overcharged 50%? Call Knight-Dik Insurance Agency, Inc. at (508)753-6353 for more information on Massachusetts Workers Comp insurance.
Rami Dalli, CWCA
“The Workers Comp Guru”