Lower Workers' Comp Rates Might Actually Mean Higher Costs

Although Workers’ Comp insurance rates in Massachusetts as announced in April 2014 are remaining basically flat, there have been some fluctuations within certain industry segments.  Some rates have gone up, while others have gone down.  This may appear to be good news if you’re in an industry where your rates decreased…but those with lower rates may find themselves with higher experience mods, resulting in increased premiums overall.

We recently met with a client for their annual renewal overview.  Because their Workers’ Comp rates decreased based on their industry, they assumed that overall they would save money.  But the premium also takes into account actual losses over the three year rating period: when the class rate goes down, the expected loss rate (ELR) is also is reduced.  So if your losses are higher than expected due to the lower rates, your experience mod is going up.  If you’re a company with some losses during the rating period, your premiums may increase and your overall costs may be higher than you anticipated.  With your higher experience mod, you may even have difficulty finding coverage in the voluntary market.

If the lower class rate increases your experience mod, you can still take action to reduce your costs over time.  Examples include general loss control, safety issues, OSHA training and back to work programs.  In addition, periodic claims reviews can help reduce the cost of your organization’s claims.  After analyzing the client’s Mod which I referenced above, we found that 30% was under his control—meaning that we could work with them to implement changes so they could confidently control 30% of their costs.  

You cannot do anything about your class rates.  However, you can analyze your losses and identify the portion of your Mod which is under your control.  This is one way that you can regain some of the control of your costs, and positively impact your premiums.  

If you want to learn more about the specific procedures that will have a positive impact on your premiums, contact Lisa A. Kendrick, CIC, CRM, AAI, LIA –Director of Commercial Lines at 781-726-7104 or [email protected].

Lisa brings over 30 years of commercial lines property and casualty insurance experience to Provider Group.  In addition to directing the commercial lines practice, she works with businesses to develop insurance programs that not only meet their current needs, but also incorporates strategic goals for the future.