Could I get a better rate if I change my workers’ compensation insurer?
Although rates may be considerably lower at a new company, the minimum premium may be higher.
If you are a small business with a small payroll, you probably pay a minimum premium, the smallest amount for which an insurance company will write a policy. Minimum premiums can be “across the board” or “class specific.” An across-the-board minimum premium is charged without regard to the classification of the insured on the policy. A class-specific minimum premium reflects the level of risk involved in the work that the insured does, charging a higher minimum for work classified as more dangerous.
Before switching insurers, find out if you pay a minimum premium and the new company’s minimum for your line of work. You might save money by staying with your current insurer.
Should I change my coverage now or wait until my policy expires?
Generally, it is best to wait until your policy is expiring to change insurers. The amount of premium you pay is based strictly on payroll, not on the length of time the policy is in force. If you are insured by a private insurer or SAIF Corporation, you are not in the Oregon Workers’ Compensation Insurance Plan (assigned risk pool), and you decide to cancel your policy before it expires, you will be subject to a penalty. The assigned risk pool does not charge a penalty; however, it can keep an amount equal to or greater than the minimum premium for your classification, no matter how early in the policy term the cancellation takes place. Give your old insurance company 30 days’ written notice of cancellation and make sure you have coverage in place when your old policy expires.
I am buying an existing business. Is there anything I should consider about workers’ compensation insurance?
Yes. In Oregon, when you buy a business that is large enough to qualify for an experience modification, you inherit the experience modification of the prior owner. (Generally, an annual premium of $2,500 or more is enough to qualify for an experience modification.) That means if the claims experience of the prior owner was dramatically worse than what would be expected of other businesses of similar size and nature, your insurance costs will be much higher than average. We recommend that a prospective business buyer request a copy of the latest claims reports for the current year and prior year as well as the current experience modification worksheet.
Are there different types of insurance agents?
The type of agent you have can affect your choices of companies and rates. Captive agents write coverage for only one company. Independent agents write insurance for an average of three companies. If your workers’ compensation coverage gets canceled and you have a captive agent, the agent’s only choice is to take your coverage to the assigned risk pool, where rates are the highest.