A combination of low payrolls and rates have resulted in Work Comp premiums being near all time lows. In spite of this, businesses are ignoring the importance of broker and carrier service just to save a dollar by going with the lowest quote. This may seem like a good idea for the short term, but I have an example of why purchasing insurance based off of the “Cheapest Rate” can and will have a negative effect on your premium dollar in the long run.
The majority of my new clients do not think a claim can affect their premium, because it happened in the past. I can assure you that a past claim can come back and cost you more money if it is not properly handled.
In 2009, I became the broker on an account that had a 1.41% experience modification factor. Due to my insured going with the cheapest rate and ignoring the other factors that drive costs back in 2008, they have seen first hand how their experience modification factor can be affected.
In 2008, the insured had several claims, but due to the insurance company not correctly filling out the Unit Stat Report to the Workers’ Compensation Insurance Rating Bureau (WCIRB), their experience modification factor was not calculated correctly.
The Unit Stat is a report sent to the WCIRB to calculate your new experience modification factor. If this report is not completed correctly it can affect how your modification is calculated. There is a rule that allows the WCIRB to recalculate an experience modification factor during the policy year if there are errors. The carrier eventually sent the revised Unit Stat Report and the WCIRB recalculated the experience modification factor.
My insured is now faced with an increase in their modification factor to 2.25%, which resulted in a premium increase of $26,116.
Since the insured went with the “Cheapest Rate”, they are now paying the consequences. The old carrier did not handle the claims correctly and most of the claims are still open to this day. Now that we are aware of the 2008 claims, I am in the process of managing my insured’s past claims and cleaning up the mess.
With further rate increases expected later this year, now is the time to manage your account.
Please call my office for more information and to start on the correct path to manage your account. I look forward to hearing from you. Thank you!