The Benefits of Commercial Insurance

5 Tips to Bring Down Your Workers Compensation Premiums

by Scarlett Thomas

From the first moment you hire an employee in your business, it is necessary to research state laws about employee protection and ensure you have your business covered for liabilities in case anything happens to the employee. Workers' compensation is provided for employees that suffer workplace injuries or diseases, and it covers medical treatment and lost wages. Compensation premiums are calculated according to many factors, but there are steps you can take to reduce how much you pay. The following are some tips:

1. Choose a low-risk line of business

Not all businesses are created equal. Certain jobs have higher risk such as construction, engineering or manufacturing jobs (jobs with manual work) compared with regular office jobs. Since the risk of injury is higher, you'll attract higher premiums on your policy.

2. Reduce number of claims

Every time a new claim is filed, it can contribute to a rise in your premium the next time you renew your insurance policy. As such, you should reduce the number of claims by building a safety plan for your business. This includes:

  • Frequently assessing your building safety status including protective gear for workers, ergonomic office equipment (comfortable chairs, computer screens to prevent glare etc.) and making repairs or replacements in a timely manner
  • Train all employees on workplace safety especially those in high-risk job areas. You can also create incentives for staying accident-free. Have regular trainings and proper signage in accident-risk areas
  • Implement employee wellness programs by encouraging employee fitness and healthy living to reduce the number of people that develop diseases as a result of their work.
  • Ensure employees that handle highly repetitive manual tasks take frequent breaks to do different things to avoid muscular wear and the risk of injury

3. Reduce your experience rating modifier

The ERM is one thing that can really help you to reduce premiums during renewal of your workers compensation claim. You can do this by controlling your losses which will result in a lower ERM rate. While the actual calculations are complex, the ERM is worked out as a ratio of your business's actual losses to the expected losses for a typical employer in your industry and state and who has the same number of employees. These actual losses consist of claims filed and paid as well as estimated loss reserves calculated by your insurance adjuster for the future.

ERM of 1.00 or less indicates a close relation to the expected losses you should have and will result in your paying lower premiums. ERM exceeding 1.00 means the business has more loss than is expected and will result in higher premiums. This is a direct financial incentive insurers give to ensure employers push safety in the workplace.