How do I get a better workers' compensation rate?
Example of year one
The most important thing when negotiating a better workers’ comp rate is knowing your “net rate”. The net rate sometimes known as the “raw rate” is your multiplier. You need to know your net rate for payroll. This can be tricky because unlike most payroll, federal and state withholdings provide you with net rates, but when it comes to insurance companies they most likely will not. This is something that needs to change – all insurance companies should have to provide a net rate. The net rate multiplier is imperative for budgeting the correct amount of money your carrier is charging you come audit time.
How do you get a better net rate? It all boils down to negotiated credit and your experience mod. Your experience mod can be found by creating a login with NCCI. A typical mod is a 1.0, meaning there is no discount. A mod above a 1.0, such as 1.25 means your company is a risk, and you’re now paying an additional 25% increase above your state multiplier. A mod below a 1.0 like .90 now means you have earned a 10% discount off of your state multiplier. While your experience mod is important, it does not necessarily impact your ability to negotiate credit. The larger discount to your premium will come from a larger negotiated credit. Typically you will notice your negotiated credit listed in the form of a dollar amount. This dollar amount is your over all credit for the year. However, you still need to know what your negotiated credit percent is so that you can track your discount year after year and use it to shop for a higher discount.
Example of year two renewal
Insurance carriers sometimes play games with your negotiated discount percentage from one year to the next. If your state multiplier drops in the new year, and last year you received a 40% negotiated discount, this year you may pay the same because some carriers will reduce your negotiated discount percentage but keep the dollar amount credited the same. In this event, your net rate will also stay the same but you just lost 5% in the example provided of additional credit from the previous year.
When shopping for a better net rate, let all of the insurance agents know you want the maximum negotiated credit possible, and that you are letting every agent know the same. This should alert your prospective agents that you know how things work, and if they want your account they are going to have to earn your business.