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Small Deductible Policies Worth It? – NCCI – Varies by State


Small Deductible Policies

Using small deductible policies can be a great cost-saving technique in some states. One of the long standing assumptions I had made was that small deductible policies really did not make that much of a difference to the cost of a Workers Comp policy.  Small deductible policies had a deductible in my observations of $2,500 or less.

Picture Of Coins Dropping Into Piggy Bank Small Deductible Policies In Blue Background

NCCI (National Council on Compensation Insurance) recently performed a study on small deductibles.  They considered a small deductible to be $25,000 or less.  I had not really considered a $25,000 deductible as small.

NCCI had split their analysis as:

  • Small – $1 to $24,999
  • Medium  – $25,000 to  $99,999
  • Large – $100,000  and up

There are three main definitions that should be pointed out:

  • Frequency- number of claims over a given time period
  • Gross of claims- certain states do not allow the removal of the deductible when reporting values  to NCCI or other rating bureaus for E-mod calculation
  • Net of claims – certain states allow the removal of the deductible when reporting values

One would have to conclude the net of claim states would actually have more of a benefit that the states with gross of claims.  The gross of claims states indirectly devalue the effect of having a small deductible.

The three main conclusions drawn by NCCI were:

  1. As expected employers with high frequencies chose small deductibles – or did the carrier force the higher risk employer to take a deductible before they would cover their business or organization?
  2. Contractors and employers in the most hazardous group (Group G) selected small deductibles more often than other industries or as in #1, did the carriers require the employer to have some type of deductible before being underwritten?
  3. A significantly greater number of employers select small deductibles in states that mandate the use of losses net of the deductible than states that mandate the use of losses gross of the deductible.

Conclusion #3 makes great sense as the employer would want the deductible amounts taken out of the E-Mod calculation.  This would seem to be a very large incentive.

The net of deducible states are:

Picture Of Businessman Receiving Small Deductible Policies Bag Of Money
  • Alabama
  • Colorado
  • Georgia
  • Hawaii
  • Idaho
  • Iowa
  • Kansas
  • Kentucky
  • Maine
  • Missouri
  • New Mexico
  • Oklahoma
  • Oregon
  • South Carolina
  • South Dakota

The gross of deducible states are:

  • Alaska
  • Arizona
  • Arkansas
  • Connecticut
  • District of Columbia
  • Florida
  • Illinois
  • Indiana
  • Louisiana
  • Maryland
  • Mississippi
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • North Carolina
  • Rhode Island
  • Tennessee
  • Texas- with exceptions
  • Utah
  • Vermont
  • Virginia

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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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