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Deposit Premium Has Very Little To Do With Final Bill

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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.

Graphic Of Money Deposit Premium Icon
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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.

    Picture of Two Man hand Shaking Deposit Premium of Workers Comp
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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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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt 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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