A Field Guide to Worker's Compensation Coverage
If you have over a handful of employees, you probably pay a lot of worker's compensation premiums each year.
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PrintIf you have over a handful of employees, you probably pay a lot of worker's compensation premiums each year. If so, a book you absolutely should not be without is Ed and Scott Priz's book Worker's Compensation: A Field Guide for Employers. Father and son are workers' compensation consultants who help businesses ensure their compensation policies cover their employees at the price they should pay. They work to prevent premium overcharges and help business owners determine the accuracy of their experience modification factors, which can greatly increase or decrease premiums.
"Insurance companies tend to be pretty vigilant about identifying and correcting any mistakes that cost them money?that is, serves to lower premiums," Priz writes in his book. "But the insurance industry doesn't devote anything near the same effort to catching mistakes that increase premiums." State regulators have neither the staff nor the time to devote to ensuring rate adequacy, Priz maintains. So what should a business do?
Priz's Field Guide can help. First, state by state Priz describes when workers' compensation coverage is required and who regulates the rates in that state. Because each state regulates workers' compensation differently, businesses that operate in multi-state settings must keep track of the laws in each state. Priz's book can help.
Priz also describes typical work comp policy construction, important because even experienced business owners are at times mystified by their insurance policies. He also describes federal workers' compensation exposures business owners may have. For example, what if one of your employees is asked to repair a dock on Lake Michigan? That should be covered under your standard work comp policy, right? Not so fast. Because Lake Michigan is navigable, your injured employee may try to assert a federal workers' compensation claim, which can be significantly more expensive and not covered under a standard work comp policy.
Perhaps one of the most important points the book makes is that business owners should understand how their premiums are calculated. Priz describes some of the common mistakes he sees in field audits of policies. These tips can help you avoid overcharges.
Two of the biggest errors in premium calculations are errors in payroll and errors in employee classification. Payroll errors occur when remuneration errors increase your reported payroll, for example when the carrier charges for severance pay or tips.
Classification errors are widespread. As Priz points out, many business operations today weren't even envisioned a few years ago and classifications applied by a carrier may not fit the business you operate. If you are starting a new business, Priz recommends your agent be thoroughly versed in exactly what your employees do. Classification errors will greatly impact your premiums.
Priz also has recommendations for your relationship with your agent and broker. Let me interject my experience here. If you hire a strong consultative agent who understands workers' compensation, you may never need a consultant like Priz. However, not all agents specialize in workers' compensation coverage and may not understand the intricacies of your state's work comp rating system. If your agent cannot evaluate and explain your premiums and analyze your experience modification factor to determine which employees are driving up your costs, then you may need a new agent.
There is a great deal to know about insurance coverage. Priz's book is a strong primer on the ins and outs of workers' compensation coverage.
"Insurance companies tend to be pretty vigilant about identifying and correcting any mistakes that cost them money?that is, serves to lower premiums," Priz writes in his book. "But the insurance industry doesn't devote anything near the same effort to catching mistakes that increase premiums." State regulators have neither the staff nor the time to devote to ensuring rate adequacy, Priz maintains. So what should a business do?
Priz's Field Guide can help. First, state by state Priz describes when workers' compensation coverage is required and who regulates the rates in that state. Because each state regulates workers' compensation differently, businesses that operate in multi-state settings must keep track of the laws in each state. Priz's book can help.
Priz also describes typical work comp policy construction, important because even experienced business owners are at times mystified by their insurance policies. He also describes federal workers' compensation exposures business owners may have. For example, what if one of your employees is asked to repair a dock on Lake Michigan? That should be covered under your standard work comp policy, right? Not so fast. Because Lake Michigan is navigable, your injured employee may try to assert a federal workers' compensation claim, which can be significantly more expensive and not covered under a standard work comp policy.
Perhaps one of the most important points the book makes is that business owners should understand how their premiums are calculated. Priz describes some of the common mistakes he sees in field audits of policies. These tips can help you avoid overcharges.
Two of the biggest errors in premium calculations are errors in payroll and errors in employee classification. Payroll errors occur when remuneration errors increase your reported payroll, for example when the carrier charges for severance pay or tips.
Classification errors are widespread. As Priz points out, many business operations today weren't even envisioned a few years ago and classifications applied by a carrier may not fit the business you operate. If you are starting a new business, Priz recommends your agent be thoroughly versed in exactly what your employees do. Classification errors will greatly impact your premiums.
Priz also has recommendations for your relationship with your agent and broker. Let me interject my experience here. If you hire a strong consultative agent who understands workers' compensation, you may never need a consultant like Priz. However, not all agents specialize in workers' compensation coverage and may not understand the intricacies of your state's work comp rating system. If your agent cannot evaluate and explain your premiums and analyze your experience modification factor to determine which employees are driving up your costs, then you may need a new agent.
There is a great deal to know about insurance coverage. Priz's book is a strong primer on the ins and outs of workers' compensation coverage.
