For years I wondered if there was any way to control the Worker's Compensation rates for my entrepreneur customers. Their concerns were simple enough. Every time they hired someone new, the audit at the end of the year would force my clients to pay an additional 1 or 2 thousand dollars in order to renew.
In addition to having to pay the audit, they had to also pay the renewal premium which is usually requested in full if under $5,000. This is the major concern of starting contractors. The more you make the more you pay. The more you scale, the more it seemed like you would lose. How can we offset this problem?
Well, there are a few ways in fact. I took the time to call the state department that monitors all Worker's Compensation companies across Indiana. What I found out was surprisingly different than pretty much all of the information I found online. I was dumbfounded. All the hours I spent reading misinformation on the internet posted by insurance companies or other insurance agents. It was as if they were trying to convince people, they had no choices.
After talking with the state, they set the record straight with me. I was told that every company has similar rating factors for each individual type of work. Let me explain. Basically, a roofing has a code, siding has a code, landscaping has a code, tree trimming has a code and all these codes can and likely do have slightly different rating factors with each insurance company.
I set out a plan to painstakingly call all the Worker's Compensation insurance companies that sell insurance policies in Indiana and I discovered something that was very interesting. Over the next several weeks as I played phone tag with the wrong people who could get me in touch with the right people. The "right people" were very apprehensive and guarded. With a significant amount of prodding, I was able to find out quite a bit.
I determined if these companies were appropriate for my clients based on a few factors:
- Do they accept contractors and general contractors?
- Do they require 2 to 5 years prior Worker's Comp Insurance?
- Will they work with any Independent Insurance Agent?
Based on that criteria, I weeded out over 75% of the available insurance companies offering Worker's Compensation for contractors and general contractors in Indiana. This incredibly small amount of companies left offer a varying rate for all the different types of contractors. The average rate for roofing was about $10.33 per every $100 of payroll.
Yes, that's right! Your Worker's Compensation rate is determined by PAYROLL. Of all the contracting work you can do, roofing is among the highest rated as well. So, every time you hire someone you need to be saving up for the end of your worker's comp policy term audit. With this interesting find, I did discover some lower (albeit pretty slight) rated insurance companies available in Indiana.
Most insurance companies that sell worker's comp, do unfortunately require you to have a several years prior insurance without lapses and nothing still owed to a prior company. There are other ways to lower the rate over time, but I can get to that on another post.
If you have any other questions, feel free to give me a call. Writing Worker's Compensation insurance and other business insurance insurance policies is my full time job and I'd love to hear from you!
Martin J Glennon