Workers Comp Audit Stress Reducer
Use It For Your Next Premium Audit

Switching Workers Comp Carriers Early Can Be Expensive


Switching Workers Comp Carriers Too Early Very Costly

Switching workers comp carriers can be a trying task at renewal.   During the year, that option can be very costly due to the Short Rate Penalty.  The various state insurance departments decided to eliminate or at least heavily discourage employers from jumping from policy to policy to find a better deal.

Bringing in another carrier may save some premium.  However, the employer has to weigh out the cost/benefit of making such a major move.   The charts below –  one from Rhode Island/California shows the devastating effect of these midterm changes.

Switching Workers Comp carriers in the first month in California or Rhode Island:

table short rate penalty switching workers comp carriers during policy

California and Rhode Island have very different workers’ compensation systems.   The chart for the short rate penalty is exactly the same for the two states.

Looking at the chart, one can see that the canceling the first day of the policy costs 5% of the total policy.   Yes, there are many calculations to the process of the carrier assigning the short rate penalty.   The main thing the chart shows is that moving to a new carrier will incur a large penalty for a small number of days covered by the carrier.

Switching workers comp policies after a premium audit dispute cost employers dearly in some cases.  The percentages level out after six months into the policy.  By then, the carriers figure they have collected enough premium to spread it over the risk, especially the IBNR (Incurred But Not Reported) claims.

I have seen very little carrier leeway with the percentages charged for the short rate penalty.  Sometimes, it may be better to ride out the policy and then non-renew with the carrier.

As mentioned earlier, a cost-benefit analysis would be the best way to see if switching workers comp carriers mid-policy will be worth the money and hassle.


©J&L Risk Management Inc Copyright Notice



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


Get the latest workers' comp news FREE!

This field is for validation purposes and should be left unchanged.