 Tips
on Buying the Right Workers' Comp Policy
In every state but
Texas, employers must be covered by workers' comp
insurance of some stripe. In North Carolina, firms with
three or more full-time workers are required to have it,
and even for those with less than three, insurance is a
good idea.
“Workers' compensation protects both employers and
employees,” says Alan J. Miles (left), an attorney
with the Raleigh firm of Bailey & Dixon and chairman
of NCCBI's Legal Issues and Workplace Policies Committee.
“Workers know that they will be covered if they are
injured on the job, while the employer is protected from
liability lawsuits.”
Since the mid-1990s, when the state reformed the manner
in which it regulates workers' comp rates, companies have
been free to assign premiums in excess of the “loss
cost” rates that are recommended by the North
Carolina Rate Bureau, an industry consortium. The N.C.
Department of Insurance then must approve the rates.
“The company multiplier, as it is known, is the
biggest variable in pricing,” says Charles Swindell,
a deputy commission at the Department of Insurance.
Swindell advises employers who are shopping around for
workers' comp insurance to consider three criteria. The
first is finding an insurer that has underwriting
experience with other firms in the same industry.
“It makes sense that business people would prefer to
do business with a carrier familiar with their line of
work,” Swindell says.
Second, always check the financial strength of the
insurer. Swindell recommends looking at the ratings from
A.M Best, Standard & Poors and other services.
Finally, the quality of the agent is often a
differentiator. “Agents make an impact,”
Swindell says. “Some will have influence over the
underwriters and can get policyholders a better
rate.”
Insurers classify employees using 700 numbered
“occupational codes.” Most businesses are given
only a few different classifications to describe their
operations, with different classifications implying
different levels of risk. A small business, for example,
that employs 20 ó some of whom work with heavy machinery
ó faces a greater risk of injuries than a firm of equal
size where everyone sits behind a desk.
As with other lines of insurance, claims experience is
central in setting workers' comp premiums, and carriers
differ in their approaches to discounting rates for firms
with solid safety records and hiking them for those
who've filed more claims than normal for their industry.
Liberty Mutual, the huge Massachusetts-based insurer,
maintains a three-tiered system for its workers' comp
policyholders. Standard policyholders receive no
preferential rates, and there's a sub-standard rating
given to those with higher than average risk claims
experiences. But employers with proven safety records and
few claims can move into the “preferred” class,
where premiums are typically calculated based upon the
best rate possible.
Thus, building a favorable safety record is one of the
soundest moves employers can make in keeping a lid on
premiums, and insurers and consultants frequently offer
advice on implementing strong workplace safety measures.
“It's very important to have new-hire orientation
programs that stress the importance of safety,” says
George Ports, an associate with Capital Associated
Industries, Inc. in Raleigh. “The best companies
have safety teams that go around doing
self-inspections.”
Prevention, Ports believes, begins in the hiring process
itself, making sure that job applicants aren't hiding an
unusual history when it comes to filing claims.
Background checks will often uncover red flags.
“Believe it or not, there are some people who don't
tell the truth on their job applications,” Ports
says tongue-in-cheek.
But preventing accidents and avoiding unneeded claims is
a matter where employers must assume the lead. “It's
been our experience that employers who maintain a
positive relationship with employees are in the best
position to keep workers comp issues under control,”
Ports says. “A worker who believes his company is
looking out for him is far less likely to file a
frivolous workers comp claim than someone who thinks his
employer doesn't care.”
-- Lawrence Bivins
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