Does Your Workers' Comp Go Up After a Claim? Understanding the Impact on Premiums
Many business owners are concerned when they have a claim and ask us, "Does your workers' compensation go up after a claim?" The short answer is yes, it usually does. This is because insurance companies calculate your premium based on your business's experience modification rate (ExMod), which takes into account the number of claims filed. If your ExMod goes up, it is likely that your premium will also go up.
That being said, there are ways to reduce the possible increase in your workers' comp premium. By focusing on workplace safety, offering support during the claims process, and taking proactive steps to help injured employees return to work, you can better handle the effects of a claim on your insurance costs.
How does a Workers' Comp Claim affect your Business?
What factors influence my workers' comp premiums after a claim?
When an employee files a workers' compensation claim, your insurance premiums can be influenced by several factors. One of them is your experience modification rate (ExMod).
The ExMod is a number that shows how your business's loss history and claim costs compares to industry averages. The baseline is always 1.0. Factors such as the severity and frequency of claims, as well as the cost of medical treatment and rehabilitation for injured workers, can impact your ExMod which will affect your premiums.
When a claim is filed, your ExMod increases, causing your premium to increase the next time around—whether you stay with your current insurance carrier or switch to a new one.
Can the frequency of claims impact my insurance costs?
Yes, the number of workers' comp claims directly affects your insurance costs. Insurance providers assess your business's risk by looking at your loss history. A higher number of claims raises worries about the safety of your workplace and the effectiveness of your preventive measures. Ultimately, more claims can result in higher premiums.
How can I reduce the impact of a Workers' Comp Claim on my business?
To reduce the impact of workers' comp claims on your premiums, consider the following strategies:
Close Claims Promptly
Closing claims as soon as possible is essential to prevent the inflation of total claim costs on your records due to open claims. Insurance companies apply "reserves" to open claims, which can inflate the total claim cost.
Implement Safety Measures
Before renewing your policy, carriers will assess your loss history and inquire about the measures put in place to prevent future claims. Taking real steps to change the safety culture in your company can potentially minimize or prevent premium increases upon policy renewal.
Monitor and Assess Risks
Regularly evaluate your workplace for potential hazards and address issues promptly to improve overall safety.
Start a Return-to-Work Program
Encouraging workers to return to work as soon as possible can lower the impact of claims on future premiums by reducing the total claim cost and positively affecting your Experience Modification Rate (ExMod).
This can also demonstrate to insurance providers that you are "sharing the burden" of the claim by paying light duty wages during the claim period.
Institute Better Hiring Practices
By implementing smarter hiring practices, you can demonstrate a proactive approach toward minimizing risks and ensuring a safer work environment. Tailor hiring practices to address industry-specific challenges and risks.
By taking these practical steps, you can improve workplace safety and actively manage risks, potentially leading to lower premium rates.
Frequently Asked Questions
Why do workers' comp insurance premiums increase after a claim?
After a workers' compensation claim is filed, your insurance premiums may increase because the insurance company perceives your business as a higher risk. This is because they believe that a claim could indicate potential future claims, and thus, the insurer needs to offset their risk by charging you a higher premium.
The more claims your business has, the more likely it is that you'll see an increase in your premiums.
How can a workers' comp claim impact a company's finances?
A workers' comp claim can impact your company's finances in several ways. Firstly, insurance premiums may increase, as previously mentioned.
Secondly, there could be indirect costs, such as lost productivity, hiring and training replacement workers, and potential legal fees if a dispute arises.
Finally, your business may also be subject to higher experience modification rates (ExMod), which could further increase your insurance costs in the future.
Is it mandatory to file for workers' comp after an on-the-job injury?
In most cases, it is mandatory for employers to have a workers' compensation policy that covers their employees. If an employee suffers a work-related injury or illness, they should report the incident to their employer.
The employer is then responsible for initiating the workers' compensation claim process. Failure to provide workers' comp coverage or report a claim when required can result in penalties and fines for the company.
Just because you report a claim does not mean that it will increase the rate. It will depend on the severity of the injury and if the employee needs time off from work to recuperate.
What are some potential downsides to filing for workers' compensation?
While workers' compensation is designed to protect both employers and employees, there can be possible downsides for workers. For example, a worker who files a claim may receive wage replacement benefits that are less than their regular salary. This may create pressure to return to work before they are fully recovered due to financial concerns.
What is the typical duration for resolving workers' comp settlement cases?
The duration of a workers' comp settlement case varies depending on the severity of the injury, the complexity of the case, and the state in which it occurs. On average, it can take several months to over a year for a case to resolve fully. Patience and open communication with your attorney and insurance company can help ensure a smoother process.
Take Control: Protect your business with our expertise
Yes, workers' comp claims can potentially lead to increased premiums and even policy non-renewal. But, the good news is, there are proactive steps you can take to mitigate these impacts. Whether it's about understanding how your Experience Modification Rate (ExMod) affects your premiums, implementing a return-to-work program, or exploring the best safety procedures, we are here to guide you.
Don’t let a workers' comp claim derail your business. Reach out to us today for an instant quote or a comprehensive consultation. Call 886-338-8823 or get your instant quote here and take a practical step towards protecting your business's future.
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
Your company's payroll will be reviewed and verified during a workers' compensation audit. Since the payroll paid to your employees over the course of a policy term directly affects the workers’ compensation premiums, auditors look at your payroll at expiration or cancellation of every workers' comp policy.
