Workers Comp Insurance

by Baxter Insurance in Santa Barbara

Work Comp insurance, along with other commercial insurance lines, have seen steady rate increases in California. Employers though out the state have felt the pinch of these climbing rates. 5 to 20 percent workers comp insurance rate increases are not uncommon, which has led business owners to cut costs and market for insurance quotes from different work comp companies.
Business owners have questions about the current status of the workers compensation insurance market, and we have some answers. One of the most common questions….

Why do my Work Comp Insurance rates keep going up?!
This is the plight of the 2013 employer. The answer? Well it comes down to basic math…
Increased Claims Payout + Decreased Investment Yields= Higher Premiums

Let’s look a little closer at the causes:

Increased Claims Payout
Workmans comp insurance claims paid are now exceeding premiums collected. With health costs increasing, every $1 in premiums received by insurers is accompanied by $1.16 paid out in claims. This negative underwriting profit is the first part of the equation.
Decreased Investment Yields
It should not be a shock that the stock market has been volatile as of late. Work comp insurance carriers take premiums received and invest in preferred stocks and bonds. With bond yields largely insignificant as compared to prior years, the workers comp carriers are forced to look elsewhere to make up the difference

Higher Premiums
We continue to head into an insurance hard market. Symptoms of the hard market include higher stricter underwriting guidelines, less willing commercial insurance carriers, and worst of all higher premiums.
These symptoms are largely a result of increasing health costs and a weakened economy.

The Remedy
No…the remedy is not just “drink water and get plenty of rest.” Employers with increasing work comp rates should explore the following options to mitigate, and ride out this wave of incessantly increasing premiums.
1. Increase workplace safety! For many employers, work comp rates are affected by their ex-mod (or experience modification). Higher than average claims history can increase a companies ex-mod. This in turn directly affects the premiums paid. Example: An average ex-mod is 1. If a company has a claims history 20% higher than the industry average, this can create an ex-mod of 1.2 and increase the premiums by 20%!!
2. Shop Around. Call a broker with knowledge of your industry, experience, and competitive markets. Beginning the business insurance quoting process 3 months prior to your renewal date is ideal as is offers enough time for carriers to review and offer quotes. The more lead time afforded, the higher potential for larger savings for the business owner.