Workers’ compensation insurance is costly, complicated, and legally mandatory.
Not exactly a pleasant combination, is it? Still, it’s better than the alternative. If you fail to pay your workers’ comp premium, you become liable for work-related injuries and illnesses at your facilities. You’ll also likely face serious penalties, lawsuits, and criminal charges.
That said, workers’ comp insurance isn’t always a predictable or controllable cost, either. Here are a few factors that providers consider when determining your premium:
1. The Insurance Market
Insurance is a business. As in any business, costs are subject to larger market trends. Sometimes, a carrier needs to raise its workers’ comp rates to turn a profit. Other times, it may lower rates to compete. Such decisions are in the hands of the insurer, not the insured.
2. The States in Which You Do Business
Every state has its own insurance market subject to state-level trends and regulations, and the coverage you pay depends on the state or states in which your organization does business. Some states have significantly higher average premium rates than others. In 2018, for instance, employers in New York paid approximately 3.75 times what employers in North Dakota paid.
3. The Kind of Work Your Employees Perform
Your industry and niche largely determine your workers’ comp insurance rate. Providers assign codes to organizations based the work employees perform, and certain codes carry higher costs. Employers in industries such as agriculture, oil production, and transportation pay more for insurance than art galleries, retailers, and real estate companies do. Generally speaking, the smaller, more hazardous, and more volatile your industry, the greater your insurance expenses.