Workers Compensation Insurance Premiums Could Increase

Effective October 1, 2012 the New York Compensation Insurance Rating Board (NYCIRB) has submitted to the New York Department of Financial Services a request to increase Workers Compensation Insurance rates by an average of 8.5%.  Details by classification on this increase are not yet available.  The reason NYCIRB has made this request, on behalf of the New York Workers Compensation insurers, is that both claim frequency and claim costs are increasing.

There are many individual factors that affect overall Workers Compensation premiums for an employer.  They are:

  • Individual claims experience.  The fewer claims that an employer incurs will result in a lower Experience Modification (EM). This is a credit multiplier to the rated premium.  Conversely, more claims increase the EM, which results in a debit multiplier being applied to the rated premium.
  • The Loss Cost Multiplier (LCM) of an insurer.  All insurance companies have a variety of LCM’s available that can affect your premium cost significantly. This multiplier is used to reach the final rate for the individual classifications. Insurers use lower LCM’s for above average customers whose EM is a credit multiplier. A higher LCM is used for an insured that has a debit EM. If an employer has had poor claims experience, their premium increase will be proportionality higher.
  • The overall commitment to safety.  Employers should have regular safety meetings where specific safe working practices are emphasized.  These meetings should review past claims to prevent a reoccurrence.  An employer should institute a safety program as well.  The emphasis should be on instituting an overall company culture of safety.
  • Having the proper Workers Compensation Insurance Classification of all employees.  As an example, it is most important to make certain that employees whose duties are clerical or sales do not have their payroll rated in a manufacturing classification.  The improper classification of employees can increase insurance costs substantially.

In speaking with local business owners, a major complaint and concern is the high cost of Workers Compensation Insurance in New York State.  Along with our tax environment, running a profitable manufacturing business is very challenging.  With hands on management and a little bit of luck, an employer does have some control over their Workers Compensation costs.  The Risk Management Department at Lawley can provide expert assistance and guidance.  Please contact me at 716-849-8258 or sjacobs@lawleyinsurance.comfor more information.

Date Published: Wednesday, May 23rd, 2012