Are all Worker’s Comp rates the same?
There seems to be a common misconception when you purchase Worker’s Compensation coverage in NY state.
It is believed that all worker’s compensation rates are the same, no matter what insurance carrier you buy the coverage from.
Now even though this is incorrect, I understand why consumers believe this logic and will dive deeper into it here.
Base Rates
New York State Worker’s Compensation Board sets a base rate for each classification. Worker’s compensation classification or class code are codes used to determine rates based on the type of work an employee performs.
It is not uncommon for a business to have multiple class codes scheduled on one insurance policy.
The base rate is determined by the state and can not be changed from insurance company to company so this is where the theory that every insurance company has the same insurance rates.
The reason it is not is called the loss cost multiple or LCM.
Loss Cost Multiplier
It is up to each insurance company to develop its own loss cost multiplier and file that rate with the state. Most insurance companies will have more than one underwriting company available to them which allows them to file more than one LCM.
The reason insurance companies file more than one LCM is to allow flexibility in their rating. They might accept a higher risk client as long as it is put into the company that has a higher Loss Cost Multiplier, which will increase the cost.
Type of business
Each insurance company will develop its target markets. The type of class codes or industries they are willing to insure.
This may be done by industry-specific or potentially going deeper into the size of the company, number of years in business, and past claim history.
How do I know I have the best rates?
As a consumer, it is impossible to know the in’s and out’s of how insurance rating works. As an independent insurance agent, it’s even hard for me to keep up with the changes.
But, if you are looking to make sure you have the best worker’s compensation rates in New York, then make sure you are talking with a trusted independent insurance agent that is going to explain the details and find the best options for your business.
Buying insurance with your payroll company, an 800 number, or anywhere else is going to leave you more confused and most likely overpaying for the wrong insurance.
Reach out to your insurance agent to have this conversation, if you don’t have a relationship with an agent or want a review of your insurance then click the button below to schedule a review with one of our trusted insurance advisors.
