Workers’ compensation costs for employers are based on payroll, employee job classification, and claims history. Premiums are calculated based on the equation of multiplying payroll per $100 by job classification rate and an experience modifier known as MOD. This algorithm can be confusing to policy holders, leading to the following 5 mistakes behind a costlier workers’ comp:
1. Forecasting Payroll Inaccurately
Part of what determines workers’ compensation premiums involves payroll projections. But these forecasts must be within the ballpark of accuracy or you might be faced with higher premiums at the time of an annual audit. Estimates should include overtime pay throughout the year. A solution to reducing guesswork and keeping this tracking orderly is to choose a pay-as-you-go workers’ compensation plan.
2. Reporting the Wrong Type of Insurance
When a company hires an independent contractor, the subcontracted firm must provide proof of workers’ compensation insurance before the work begins. It’s up to subcontractors to ensure their workers are covered with appropriate insurance, but many times they incorrectly assume that the work-related injuries are covered by General Liability Insurance.
3. Incurring Extra Charges for Lack of Proof
An often-overlooked workers’ compensation mistake occurs when the annual premium audit lacks proof of insurance for subcontractors. This omission can trigger extra charges.
4. Misunderstanding MOD Scores
You can end up paying increased costs as experience modification (MOD) changes over time. A MOD score compares a company to its industry in terms of claims history. The lower the number of accidents, the lower the MOD rating, which can lower premiums. Implementing a safety training program will help reduce the company’s MOD score.
5. Failing to Properly Manage Claims
Filing too many claims and avoiding the establishment of safety plans can result in higher premiums. An employer can keep claims management under control by thoroughly reviewing and monitoring all claims on time. Clear communication with insurance adjustors also helps avoid costly surprises.
Avoiding common workers’ compensation mistakes will help you cut costs on your policy. To answer your questions on establishing appropriate insurance strategies, contact the experts at Steve Wilk Insurance today. Our office is located at 310 S Main Street, Suite C, Lombard, IL 60148.