A Workers Comp Manual Premium is calculated using the classification code payroll multiplied by the assigned manual rate for that code and then divided by 100. As an example, if class code 8810 has an assigned rate of $.62 and the total payroll for that code is $15,000, the formula would be $15,000 times $.62 divided by 100=$93.00.
The manual premium is only one part of the rating formula.
Each individual classification code would be calculated using its assigned rate and payroll. From this point, experience modifiers, credits, surcharges or premium discounts would be applied to arrive at total premium due.
The manual premium is not the final quoted premiums. In fact, the number can vary greatly as there are at least a dozen variables applied to arrive at the policy premium bill and the premium audit bill.
Do not ignore the manual premium figure. The classification codes, payroll, and assigned manual rate create the basis for your eventual total premium billing. Your complete policy will be inaccurately charged if, for instance, the classification codes are wrong.
Check the payroll for each corresponding classification code to make sure it matches your accounting figure. If not, address those with your agent immediately to make sure your manual premium is accurate.
Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com.