Insured Solutions
Insured Solutions

What criteria do insurance carriers use to determine workers’ comp premiums?

What your client does can bring risk to an insurance carrier. Your client pays for that risk in their premium. For instance, many construction company employees work with and around heavy equipment. But an accounting firm’s employees work in an office. Each industry carries its own risk class and that is reflected in its class code.

So, underwriters look at a company's class code(s) (what type of work they do) and their claims history in the form of the experience modification rate – or MOD (a calculation used to determine whether a company has high or low claim losses) to determine a workers’ comp premium.

Three years’ of a company’s claim history is weighed to come up with the insurer’s risk. Some companies make a common and huge mistake – under reporting workers’ compensation injuries for fear of increased premiums.

But claim frequency causes less damage to a company’s MOD than high-dollar claims. Besides, all WC incidents must be reported or the cost will be much bigger when the unreported claims are discovered and penalties are assessed or lawsuits are filed.

The company’s payroll, the carrier’s manual rates and the carrier’s application of scheduled credit/debit and the states’ taxes and fees are other contributing factors.