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Sounds boring I know, but how about saving a lot on insurance?
Did you know that most businesses have an experience rating which directly affects workers compensation premium calculations? Your losses within a multi-year period along with your amount of payroll are part of an algorithm used to issue a rating from NCCI.
Why is this important?
Think of it like a credit rating for workers compensation. When you go to get a loan the amount of credit and cost of credit is directly related to your credit rating. Your NCCI rating is somewhat similar in that it is used to determine eligibility for many insurance carriers and it is used by all carriers in premium determination.
How does it work?
The rating number is a fraction of “actual” losses/”expected” losses. The “actual” losses regardless of size are capped at a certain amount. A claim that results in a loss of wage benefit is weighted more than a loss which is medical expenses only. The “expected” losses are determined by the employee duty classification and the amount of payroll. The rating generally covers a three year period, though it can vary based on certain factors. A rating of 1 is neutral with no impact to premium, whereas ratings of greater than 1 result in a higher premium and less than 1, a lower premium.
What can I do to manage my rating?
Most business owners do not realize that there is a proven process to verify the accuracy of the rating and lower the rating over time. The process involves both mathematical verification and claim reserve auditing. The process that we use has a proven record of an average reduction of 27% over the term of the rating. That means an average 27% reduction in manual premium over the rating term. Our process is an active process where claims specialists audit claim reserves to ensure accuracy at key intervals.