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How Are Your Workers Compensation Premiums Calculated


How Are WC Premiums Calculated?

How are your WC premiums calculated?   Your premiums are calculated from a formula that has no less than 34 steps to it. Let’s first look at what is the driving force behind what you pay in Work Comp premiums. The reserves, better known as the total incurred on the file, are the catalysts of the whole process.

Picture of Hand Premiums Calculated Holding Dollars
Wikimedia Commons – Milad Mosapoor


The reserves are what the adjuster thinks you will pay out on the file for the life of the claim. As you read this, do you know what the total incurred is for each of your Workers Compensation files? Most employers do not know the answer.  Do not feel like you are in the minority.  Have your loss run pulled immediately.  The Total Incurred figure usually appears as Indemnity Total Incurred, Medical Total Incurred, and Expense (ALAE) total incurred.    Do these Incurred figures look OK to you?

Do not feel bad as most adjusters take 3 years of on-the-job training to feel confident in setting reserves on files.

If not, you may be in for a real shocker. Immediately ask for your loss runs from your insurance carrier that shows all of the open files. Review them closely to see what you are paying for in your premiums.

If the total incurred for a file looks high to you, ask the adjuster to explain their reserves. If you feel like you need help with the loss runs, consult a Workers Comp claims consultant as soon as possible. Remember, you are charged for THREE years for the total incurred on a claim. Tomorrow – More on the Premium Calculation

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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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