Renewal season is here, or about to be, for most of you with the majority of businesses renewing their insurance programs on either 12/31 or 1/1. And, since we read that 2024 workers comp rates are falling again in almost every state in the country that should mean good news for next year’s work comp pricing. Right?
It is entirely possible for workers compensation rates to fall while every observable indicator points to the opposite. That is what we referred to as the Soft Market Illusion in another recent blog post.
Workers Comp Rates and Workers Comp Premiums Are Not The Same
You can read about the "Illusion" by following the above links. Here, though, we want to discuss other factors that can cause your workers compensation premiums to increase while your work comp rates are (or seem to be) falling. Rates and premiums (what you pay) are not the same thing. If you continue to have level or improving claims experience, stable payroll, etc. and pricing isn’t improving, you should ask questions.
Pay Attention To The Work Comp "Underwriting Company"
Are the renewal rates lower than your expiring policy? Insurance companies have multiple underwriting companies that they use, and, even though you might be renewing with the same parent company, they might have moved you into a different underwriting company with higher filed rates.
Pay Attention The Work Comp Schedule Rating
Has the Schedule Modification or Schedule Rating changed? This is either a credit or debit and it is not supposed to be used as simply a pricing tool. There should be an objective reason for the level of credit or debit you receive. If your credit has been reduced, your debit increased or your credit has changed to a debit, ask what has changed about your operations to justify this.
There are plenty of other reasons why your premiums could increase even though workers comp rates are decreasing. You can read what I wrote last month about problems with final audits while keeping in mind that those errors can happen at renewal just as easily. I just read a recent Market Conduct Exam in Missouri, and some of the violations for which this particular insurance company was cited include:
· “[Company] utilized unfiled deductible credit percentage in violation of….”
· “[Company] failed to maintain evidence in the file justifying the reduction in the Schedule Modification Credit in violation of….”
· “[Company] moved an insured to an affiliated insurer which move was not justified by claims experience or other schedule rating factors and resulted in a premium increase in violation of…. “
· “[Company] failed to apply the correct experience modification factor to premium in violation of….”
· “[Company] used an unfiled rate to calculate the final premium in violation of….”
Errors can and do happen.
Review the renewal rates and other elements as you would at final audit. If something just doesn’t seem right or your renewal quotes aren’t coming in as expected, don’t hesitate to ask questions.
Stuart Cytron, MBA has been published in trade journals such Construction Forum St. Louis and St. Louis Business Journal among others. You can read more about Stuart and how he developed a passion for helping businesses reduce work comp expenses on his website.
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