Workers’ compensation policies are the closest thing to generic as possible in commercial insurance because the coverage provided by each insurance company is exactly the same.
Individual State legislatures mandate benefit levels by State Statute and the insurance companies must comply. In Minnesota, workers’ compensation is regulated by the Department of Labor and Industry.
Assisting the insurance industry in many ways is the Minnesota Workers’ Compensation Insurers Association.
Coverage is provided on a “No Fault” basis. This means that coverage is triggered for any work related injury regardless of whose fault it was.
Benefits are provided for 2 main categories:
- Lost Wages
- Medical costs
Employer premiums are a function of the hazard level of the occupation; separate classifications and rates exist for each position.
Policies are issued with estimated premiums initially based upon estimated payroll levels with an audit upon conclusion of the policy period to determine actual premiums.
Another component to pricing is the Experience Modification Factor. This is the “scorecard” for the insured that compares his claim results with the others in his industry throughout the state. Above average claim performance will result in a credit applied to premiums but below average claims as compared to peers will provide a debit factor.
Insureds need to implement vast Loss Control systems to manage this part of their business to contain workers’ compensation premiums. These include proper hiring practices, safety programs, claims management and a return to work program.