Top Factors Driving the Cost of Workers' Comp Insurance in 2024

Did you know? Workers' compensation insurance costs employers/companies an average of $45 per month or $542 annually (per employee). But those costs are just an average—the actual cost of workers' comp insurance varies wildly, depending on numerous factors.

Learn the Key Drivers of Workers’ Comp Insurance Cost

Understanding the key drivers of this cost will help you make informed decisions to keep your premiums low while providing positive outcomes for all involved. Here's an in-depth look at the significant factors that drive your workers' comp insurance costs and how to optimize/manage them accordingly for affordability:

Employee Classifications Can Affect Workers' Comp Costs

Various employees have different job duties, and the insurance company needs to know exactly what type of job each employee does. Essentially, the higher the risk associated with the individual class code, the higher the workers' comp rate. The reverse is also true. For instance, those working in industries such as transportation and construction have relatively higher rates than those in the financial sector.

Nonetheless, there are still strategies to manage the cost of workers' comp insurance when it comes to classifications. Here are a few:

• Ensure each employee is properly categorized. This includes making sure some workers who may be doing the same type of job have different class codes.
• Check with your state's Department of Labor to make sure you are using approved codes and that any new ones are added in a timely manner.
• Implement a safety program that reduces the risk of workers' comp claims, which in turn can reduce premiums.
• Provide ongoing training for your staff to keep them informed on the latest safety practices.

Claims History Will Affect Workers' Comp Premiums

How much you pay for workers' comp insurance is also heavily influenced by your claims history. If your company has experienced a high number of claims in the past, insurers will consider this when calculating premiums. Insurance carriers typically look at 5 to 7 years of claims history to determine your Experience Mod Rate, which can significantly influence your overall premium costs.

But don't fret, as there are a few ways to manage your workers' comp costs related to claims history. These include:

• Prevention. Put in place a comprehensive safety program to reduce the number of workplace injuries.
• Reporting claims accurately and promptly. This ensures your workers' comp insurer has all the necessary information to process any claim quickly.
• Working with a knowledgeable partner who will help you identify areas where you can reduce or eliminate costs associated with claims history.
• Follow up on claims. Make sure all claims are resolved as soon as possible to keep costs low and limit the impact on premiums.

Location Of Your Business Affects Workers' Comp Costs

The location of your business also plays an important role in the cost of workers' comp insurance. Different states have different regulations and statutes related to workers' compensation, which could significantly impact your premiums. The laws vary from state to state, so it's important to be aware of the specific regulations that apply where you operate, as well as any changes over time. For example, the North Carolina Workers' Compensation Act requires all businesses or organizations with three or more employees to carry workers' compensation insurance. That means the more employees you have in North Carolina, the higher your premium would likely be. 

So, how do you manage this cost? Here are a few tips:

• Keep up to date with any changes in your state's workers' comp regulations.
• Work with your broker to ensure you are meeting all the requirements and have the necessary coverage for your business.
• Stay informed about any other laws that may impact your business operations and insurance costs.
• Invest in safety training for all employees to reduce the risk of workplace injuries and liability claims.

Effectiveness of Workplace Safety and Training

The number of workplace injuries is a major factor in determining workers' comp premiums. Implementing a comprehensive safety program and providing ongoing training can help reduce the chances of accidents or injuries occurring in the workplace. This can, in turn, lead to lower costs for your business.

Here are a few tips to help you manage the cost of workers' comp insurance through safety and training:

• Make sure you clearly communicate safety instructions and protocols to all employees.
• Encourage safety. Develop a culture of safety in the workplace by recognizing employees who adhere to safety practices and holding those who don't accountable.
• Conduct regular inspections. Periodically inspect your facility for any potential hazards or dangers that could lead to an injury or accident.
• Maintain records. Keep comprehensive records of all safety protocols, training, and inspections to ensure you are adhering to standards.

Claims Management Is A Driving Factor in Controlling Workers' Comp Costs

One of the most reliable ways to lower the cost of workers' comp insurance is through proactive claims management. It involves monitoring and reporting claims to ensure they are handled promptly and efficiently. This can help reduce the overall cost of the claim, which in turn could result in lower premiums for your workers' comp policy.

Here are a few tips on how you can manage claims more effectively:

• Follow up on all claims promptly. Make sure all claims are addressed and resolved as soon as possible.
• Make sure all instructions given by your insurer are followed to ensure the claim is handled correctly.
• Identify areas for improvement. Take the time to review your claims history and look for any patterns or trends that could indicate a need for improved safety protocols or training programs.
• Monitor changes in regulations. Stay up to date on any changes in workers' comp regulations in your state to ensure you are compliant.

Your Choice of Particular Insurance Companies

No two insurance carriers are the same. Each carrier will offer different coverage options and have its own specific requirements when it comes to workers' comp insurance. Also, various companies have their unique ways of viewing specific risk categories, offering favorable or adverse rates depending on their underwriting data and experience.

Here are a few strategies to ensure you get the best deal out of an insurance carrier:

• Do your research. Understand the different coverage options each provider offers and compare their rates and policies to find the one that best meets your needs.
• Be aware of any changes in legislation or regulations in your state that could affect the cost of workers' comp insurance.
• Take advantage of discounts when available. Many insurance companies will offer discounts for certain safety measures or other risk-reducing practices implemented by businesses.
• Work with a broker to ensure you are getting the best rates and policies from reputable providers.

Take Advantage of Alloy Employer's Free Claims Assessment!

The cost of workers' comp insurance can be a major expense for any business. However, by taking the necessary steps to reduce risk and implementing effective claims management practices, you can help to keep your premiums low. Additionally, choosing the right insurer and taking advantage of discounts can also help to reduce costs while ensuring that you are still adequately covered.

At Alloy Employer Services, we share in your commitment to keeping costs low and providing a safe work environment. We offer an absolutely FREE, no-obligation claims assessment, where we review your current policies and procedures to identify areas for improvement. Contact us today to take advantage of this complimentary service and learn more about how we can help you reduce the cost of workers' comp insurance.