Five Ways A Bad Economy Affects Workers Comp
A Bad Economy affects Workers comp premiums in varied ways. I have read a few articles on the effect that our current sour economy has had on insurance such as an upcoming hard market, lowering claim numbers, etc. I thought I would cover five ways that Workers Comp is being affected presently.
Employers may be severely overpaying for their Workers Comp premiums upfront at the time of policy renewal. I have written a few prior posts (one here) on policy premiums. As an employer you can possibly be giving your insurance carrier a 0% interest loan for a year. If your payroll is decreasing are you basing your payroll numbers on prior years? That could be a costly error.
- Insurance carriers and state insurance departments have become more aggressive in classifying independent contractors as employees. This beckons the question, “Is the subcontractor independent or really an employee?” As in #1, I have written a number of posts on this subject. The most recent one for subcontractors is here. I realize that all states have their own set of independent contractor laws. The IRS has been deciding this conundrum for many years.
- Employers are searching more heavily than ever for alternatives to the traditional first dollar Workers Comp insurance policies. This blog contains many posts on alternative programs. Your company does not have to be huge to be eligible for other Workers Comp insurance programs. PEO’s, captives, large deductible, and others are becoming more popular now.
Claim numbers are down, but the cost per claim has increased to offset the claim number reductions.. Along with this fact is the small claim number “bumps” that have appeared in every state. These bumps may likely be due to laid-off workers filing claims for injuries they have been working with over the years and just put up with them or laid off workers have run out of unemployment benefits and are just trying to make ends meet.
- Insurance personnel such as premium auditors, claim adjusters, underwriters, and others are much more overloaded than in the past. Insurance companies have to cut back as all employers have over the last two years. I saw in one study where there was a 4.9% decrease in Workers Comp premiums when compared to last year. A cut in premiums of this magnitude will only snowball as the insurance carriers’ rate of investment return plunges to new lows. Is your company or organization not receiving the same level of service as in the past?
The quickest way to combat these effects is by becoming more involved with your Workers Comp insurance plan. That is and has always been the quickest way to reduce your insurance costs.
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