Fact #1: 2012 Rates are increasing by 10 to 40% – even with good claims experience.
Rates have dropped dramatically since peaking in 2004 and now insurers are getting hit with increasingly costly claims – driven by increased medical costs and state-mandated benefit levels. This “cycle” happens about once every decade and we are now seeing a significant upswing.
Fact #2: How Insurance Companies Calculate Your Rate
California has hundreds of workers’ compensation insurers and each one sets its own “base” rates. Base rates can vary by as much as 100% from one insurer to another. Insurers apply discounts or surcharges to their bases rates – all based on information about each risk as submitted by your agent or broker. Your experience modification is then applied to the insurer’s final rates – resulting in the “net” rates that you apply against payroll.
Fact #3: Why Rates Can Vary So Much
Insurers don’t give discounts unless there is a good reason. They do this to protect their profits and make sure that they’re not accused of discriminating from risk to another. Underwriters primarily look at the particular industry, documentation of good claims experience (“los runs”), and workplace safety measures to determine how to “price” a given risk. It is the primary responsibility of your agent or broker to explain claims and any workplace safety programs – so that you receive all available discounts. Without sufficient information or a proactive explanation, underwriters will often default to minimal discounts or in some cases, surcharges.
Fact #4: Your Agent or Broker Plays A Major Role In Determining Your Rates
120 Days before each renewal, your agent or broker should explain the strategy that they will use to market your risk and what you should expect as the outcome. This is of particular importance in industries where proposals/bids for future work are based on current information. Also, your agent or broker must be knowledgeable and motivated to understand how best to leverage information for the best possible outcome from each insurer. The final outcome can have a significant impact on your bottom line.