Safety = Savings on NY Workers Comp Insurance

Recently, I was asked to provide information on ways to Save Money on NY workers compensation?insurance?premiums?

This is a commonly asked question and for good reason, NY workers comp insurance can be a significant expense for any (try every) company?s budget.

{click here to learn more about pay-as-you-go NY workers comp insurance}

In this particular case, however, I didn?t want to just rattle off the standard list of accounting and planning tips which can save dollars.? Instead I tried to explain the two true driving forces behind NY workers comp insurance premiums and how to make a measurable impact.

Unfortunately, a safe work environment and an organizational culture of safety are the most straight-forward ways to minimize NY workers compensation expense. This is not the answer that management at most businesses wants to hear because making these types of changes take dollars and time.? But when it comes to NY workers comp insurance premiums it is all about the?Experience Modifier?or Exp Mod and the?Carrier?s Loss Cost Multiplier?or LCM (In competitive states).

Safety = Savings

The Exp Mod in basic terms is an Organization, actual loss data compared against the expected loss for an organization of similar operations, size and classifications.? The Exp Mod places the onus of safety on the Organization by providing an incentive for safe work environments.

In general, NY workers comp insurance carriers will look at the preceding 3-year period of losses.? Let?s say a large professional services office is paying $30,000 in workers comp.

If that Firm has fewer losses during the preceding period than would be expected for a similar firm of that size. A firm that hits right on expectations has a Exp Mod of 1.0, but let?s say this firm has a great loss history and instead has an Exp Mod 0.9.? When this Exp Mod is applied to the $30,000 in premium they were paying, their renewal ends up at $27,000.

This is super-duper simplified, the actual calculation of Exp Mod is much more complex, but the point remains. Well run organizations with a culture of Safety will drastically minimize their premiums.? There is no other single way to drastically reduce the NY workers comp burden then through a healthy Exp Mod.

Choose Your Carrier Wisely

In states which allow competitive pricing, (Ohio, Washington, North Dakota, and Wyoming are Monopolistic, meaning Workers Comp may only be bought through the State Fund) it is important to do business with an insurance carrier with a favorable Loss Cost Multiplier.

Here is great example that I use to explain this Expense:

Carrier LCM?(Carrier Specific, although approved by the State)?x Approved Loss Cost Rate?(Standard rate set by the State for a specific job class code)?= Price Charged Employer

If one insurance company has an LCM of 1.250 and another company has an LCM of 1.667 there will be a difference of 33% between their prices.

For Example say you?re a Salesperson with a?loss cost rate?of $1.30 times an?LCM?of 1.250 = a price of $1.63; a?loss cost rate?of $1.30 times an?LCM?of 1.667 = a price of $2.17.

Result you pay your sales staff $50,000 a year in wages with:

Carrier #1: ( $50,000 / $100 ) * $1.63 = $815 in Premium

Carrier #2: ( $50,000 / $100 ) * $2.17 = $1,085 in Premium

You Just Wasted $270

The Rub

This is a lot of information and it may seem very technical? You don?t have to be an expert in how NY workers comp insurance to properly manage your NY business insurance program.

At The Murray Group, our business insurance specialists are here to answer all your questions and walk you through the process of properly setting up your NY workers comp insurance policy. ?Call us at (518) 456-6688, we?re here to help!

Source: http://www.murraygrp.com/safety-savings-ny-workers-comp-insurance/

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