Why Did My Workers’ Compensation Insurance Premium Go Up?
Most often, claims are the reason a business’s workers’ compensation insurance premium increases. It is simply a financial fact that more claims lead to greater costs. That’s why a robust safety program at your business is not only the right thing to do for your employees, but the smart thing to do for cost management. A workplace safety program can save a business thousands of dollars by helping avoid accidents, which can then help the business maintain a low insurance premium. For more information on safety practices, see our blog, 6 Steps to Help Improve Workplace Safety.
Another reason that your workers’ compensation premiums might go up relates to the way your business is classified by your insurance carrier. Classification is based on the nature of your business and the likelihood that an accident might take place. Businesses that are viewed as relatively safe, such as an office that provides accounting services, will be placed in a lower risk category than will a construction business, where the chances of an accident are obviously higher. If your business added a service or product that raises the risk of a workplace accident, your classification could change, resulting in a higher insurance premium. Because the classification of your business is a major factor in determining your workers’ compensation premium, it is important to work with your insurance agent to ensure that your business is classified correctly.
An increase in the amount of your payroll is another reason that your worker’s compensation premium might rise. Premiums are determined by a formula that considers the classification of your business, your claims and accident history and the total amount of your payroll. If you had a great couple of years and ended up hiring more people, that will increase your payroll and thus your workers’ compensation premium.
EMPLOYERS® offers small business owners an exclusive service called the Price and Performance Review, which helps determine whether employers have the right workers’ compensation insurance for their businesses. Let EMPLOYERS help you get the best workers’ compensation insurance for your dollar. Contact us for your no-cost Price and Performance Review.