Workers Compensation Deposit Premium <> Final Policy Bill
We are starting to notice a trend between your company’s initial deposit premium and the final premium audit bill. The deposit premium is just that – a deposit to bind coverage. We hear from many company owners and risk managers that what they expected to pay for the year is quite different – causing a budget shortfall.
There are many reasons for the final premium not being what your company has expected to pay for Workers Comp coverage for the policy year. Some of the reasons are:
- Congratulations – your company has grown which in turn is going to increase your premium proportionally. When you signed on with a carrier, you may not have expected such growth, which actually increases all variable expenses.
- Take the Mod into account – your E-Mod or X-Mod may have been higher than you expected overall. If your company grew, the Mod is not going to decrease substantially.
- Along with the previous bullet point, you may have had a bad claims year up to four years ago. This is going to cause your company to pay more than expected if the company grows quickly.
- Your business is reclassified – there may have been changes to your business operations. There is a caveat with this one. There are very specific rules on how your business may be reclassified during the policy period.
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- Your safety program needs improvement. This would be the most popular problem with sharply increasing premiums. NCCI has added in a new penalty of sort if you have repetitive accidents. All the other rating bureaus have a built-in penalty if you have multiple accidents regardless of the size of the claims.
- Your company may start operating in multi-state jurisdictions or operate near a navigable waterway. These two situations can cause a large jump in final premium.
- “The good quote” by the agent is just a quote – not what you are going to pay after the premium auditor is finished after policy expiry.
Another caveat (I use that word often), is to never start a dispute unless you know the basis for why you are disputing your final bill. Exclaiming that you just feel that your company paid too much often ends up with your company having an even larger premium bill. I have a file on my desk right now that is proof positive of this situation.
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