How Is Workers Compensation Premium Calculated?
• A: Classification • Workers Compensation premium calculation is based upon how employees are classified according to their specific work duties and the rate assigned to each corresponding employee classification. Classifications are developed and assigned by the Workers Compensation Insurance Rating Bureau (WCIRB) in most cases. Workers Compensation insurers working with the WCIRB generally use the classification codes the WCIRB provides when rating a workers compensation policy. Insurance companies are allowed to develop and submit their own classification system to the CDI for approval, but this is uncommon due to the strict standards required to file a separate workers compensation classification system. The WCIRB provides a policyholder ombudsman who is available to answer questions from employers on classification, experience modification, and rating issues. Please see the Resources section for contact information on the WCIRB and their policyholder ombudsman. • Open Rating • Wo
Before 1995, the rates applied to your premium were established by the Workers’ Compensation Insurance Rating Bureau. As of January 1, 1995, all insurance carriers are responsible for establishing their own rates. This system of determining rates is called the competitive rating system. Under competitive rating, State Fund’s pricing is based on the classifications, the size of payroll and the individual risk characteristics of each business. These base rates for each class code will be multiplied by the employer’s payroll. Form 10502 “Understanding Your Quote For Insurance” is available upon request at any State Fund Office. The form will explain in more detail how insurance premium is calculated.
