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Short Rate Workers Comp Policy – Problems Many Employers Face


Short Rate Workers Comp Policies

The Short Rate Policy or Short Term Cancellation is when an employer and/or their agent decides to cancel a policy before the renewal date.

Graphics of hand holding red card Short Rate Penalty Concept

There are many problems with Short Rate Policies including:

  • The ominous Short Rate Penalty – This penalty can be significant, as the employer is making the insurance carrier receive less premium than canceling at the renewal date. The insurance carrier has to possibly take on more risk, as the carrier does not have as long, as usual, to recover their paid losses by charging a full policy term premium.
  • Hand Analyzing Short Rate Coins Using Magnifying Glass

    Payroll Anomalies – We have been studying this phenomenon for the past few years and are still investigating the statistics. We have seen a disproportionate amount of payroll being loaded into, for example, a three-month policy, and a new policy is then written. For some unknown reason, the Experience Modification Factor (E-Mod) can easily increase at a very rapid rate. The claims after the short-rate policy now have more claims vs. a lower amount of payroll. If both the claims increase and the payroll decreases sharply, the E-Mod can skyrocket.

  • The employer’s insurance history may be marred, as having more than one short rate policy in a few years may indicate a “workers comp premium shopper”. This could result in fewer carriers being willing to write workers compensation coverage for an employer.

If you think that there is something wrong with your insurance policy, do not just switch the workers comp policy. First, at least try to work things out with your carrier until the renewal date. You have many rights as the insured and one of them is to question how the policy has been written and at the time of premium audit.


Related: Short Rate Penalty Expensive Choice To Change Policies Mid-Term

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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