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What You Need To Know: Important News on Workers' Compensation

What You Need To Know: Important News on Workers' Compensation

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Workers’ compensation is one of the few types of insurance where the insurance buyer decides directly how much to pay for the policy. There are a number of factors that influence how the final premium is calculated, but they all boil down to one thing: claims history. From tiered pricing to schedule credits to experience modifications, insureds with fewer claims pay lower premiums.
Workers’ compensation is one of the few types of insurance where the insurance buyer decides directly how much to pay for the policy. There are a number of factors that influence how the final premium is calculated, but they all boil down to one thing: claims history. From tiered pricing to schedule credits to experience modifications, insureds with fewer claims pay lower premiums.

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Categories:Types, Business/Law
Published by: Las Vegas Metro Chamber of Commerce on Jul 17, 2012
Copyright:Attribution Non-commercial

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05/13/2014

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24
BUSINESS
 
VOICE
 
 // 
JunE 2012 LAS VEGAS CHAMBER OF COMMERCE
orkers’ compensation is oneo the ew types o insurancewhere the insurance buyer decides directlyhow much to pay or the policy. There area number o actors that inuence howthe fnal premium is calculated, but theyall boil down to one thing: claims history.From tiered pricing to schedule creditsto experience modifcations, insuredswith ewer claims pay lower premiums.On March 1, 2013, the National Councilon Compensation Insurance (NCCI) will bemaking a signifcant change in the pricemost o us pay or workers’ compensationinsurance. The ormula used to determinethe credit (or debit) or an individualbusiness based on its saety record will bemodifed to provide even greater penaltiesor insureds with claims. The good newsis that employers with ewer claims mayactually see a reduction in premiums.Here’s how it works: I your average annualpremium is more than $3,000, you areeligible to have an experience modifcation(or e-mod) applied to your policy. Ane-mod is a comparison o how your claimsmeasure up against similar types obusinesses over a three-year period. I thee-mod is less than 1.00, your claims areewer than average and your premiumsare discounted accordingly. Conversely,an e-mod greater than 1.00 indicateslosses that are greater than your peersand your premiums will be increased.Under the current ormula, claims are“charged back” based on both requencyand severity. When a claim is enteredinto the calculation, the NCCI appliesthe frst $5,000 o any claim at 100%o its value. The balance o the claim isthen discounted to soten the impact oa severe loss. Ater March 1, the frst$10,000 o any claim will be included atull value and only the amounts more thanthat will be eligible or discounting. Thismeans that, i you have claims that aremore than $5,000, your premiums willmore than likely increase next year.To get an idea o how this could aectinsurance costs in 2013, consider ahypothetical retail employer whose workers’compensation premiums are $10,000per year. Currently, a claim costing$10,000 will increase the annual premiumby $1,800 or three years, or a total o$5,400. In 2013, the same claim willincrease the annual premium by $2,700,with a total three-year cost o $8,100.So, as an insurance buyer, how canyou make certain you aren’t payingtoo much or workers’ compensation?Here are our steps that can help:
Make sure the current e-modcalculation is accurate
. Ask 
What You Need to KNoW: 
 ImportaNt NeWs oN WorKers’ CompeNsatIoN 
need to know
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