Everyone in Florida who owns and runs a business with employees knows that Workers’ Compensation insurance premium is set by state and what you pay with one company is what you pay with the next.
THAT IS 100% TRUE.
However, what many might or don’t know is that there are ways to help reduce the premium that fall within guidelines and ensure that the employer is not a competitive disadvantage because their costs are high.
MAKE SURE YOUR EXPERICNCE MODIFICATION IS CORRECT.
Many employers feel that this number is written in stone; when in reality a simple review of a couple of key forms is all that is needed.
First, obtain a copy of your Experience Rating Worksheet. Containing payrolls, claims and other factors that make up the experience modification; you should have received a copy in the mail, but if not you can get a copy from your agent or insurance company.
Second, make sure you have an up to date loss run (obtained from your agent) and make certain claims that have been charged to your business, in the column labeled “Act Inc Losses” belong to your business. We have seen mistakes made and businesses charged for claims that do not belong to them, so ALWAYS check and confirm that the experience modification only contains your company’s claims.
Confirm that the insurance company has correctly determined and deducted “Loss Adjustment Expenses” from Incurred Losses. These expenses are the company’s expenses and should not be charged to you.
Lastly, check the column labeled “Payroll” and confirm the amounts correspond with the audits.
THE CONTRUCTION CLASSIFICATION PREMIUM ADJUSTMENT (CCPAP)
This is a potentially large adjustment for Florida contractors. This credit is available to contractors that pay wages greater than Florida’s average wage. The sad truth is that details of this credit are not widely known among insurance professionals, let alone contractors. In Florida the average hourly wage is $17.79.
Your worker’s compensation policy should include NCCI Form NC-5000A. This form asks for the gross payroll for the third calendar quarter prior to the policy’s effective date.
There are three columns on the form: the first one asks for class codes or descriptions of the work (carpentry, clerical, roofing, etc.), in the second you provide gross wages (after adjustments) for each classification, in the third you provide the number of hours worked per classification.
If you are a new business you will provide the figures for the first complete quarter after the policy’s effective date.
When the form is completed simply mail it to the Florida Division of Workers’ Compensation. Once the credit is calculated it will be forwarded to your insurance company. The company will then endorse your policy with the credit and carry it over to the final audit.
The credit received can range from 5%-25% of the premium, depending on the company-wide average wage. If you operate in multiple states that offer CCPAP then you would be required to complete forms for each state.
PREPARE FOR YOUR ANNUAL AUDIT
Prepare a pre-audit before your annual audit. When the insurance company completes is annual premium audit, it works from the records provided by you. When you complete your own pre-audit you make the auditor’s job easier and MORE ACCURATE.
The prepared payrolls should take into account all credits, limitation, and deductions available. Most auditors will accept your work as their own.
When the audit is complete, request a copy of the worksheets, review them with the auditor, and discuss how the employees were classified. When your finally invoice arrives be sure to compare it to those worksheets that you reviewed.
By working with your insurance agent and the company you might be able to reduce your premium and be able to expand your business, increase your profits, or reduce your prices without compromising quality of work.