A Brief Note About Loss Costs:
Several years back New York State went to a loss cost rating mechanism. Essentially this means that The N.Y. State Workers Compensation Rating Board sets what they deem as the appropriate “Base Loss Cost Rate” for each class code that makes up the
Confused about Workers compensation loss costs?
NY State Workers Compensation Insurance Rating System. The class codes are applicable based upon what the job duties and job descriptions are for your business. Most businesses have several applicable class codes that make up the entirety of their operation relating to what must be done to produce their good or service. These “Base Loss Cost Rate” are published for each class code. This is what the state suggest to the insurance market place in NY what the insurance carriers should be charging per $100 of payroll for those employees in that class code.
As an example : If your business is as a Demolition Contractor. The majority of your payroll is in class code 5701 – Wrecking-Buildings – Not Marine & Drivers The Loss Cost Rate in 2013 was $14.77. The Loss Cost Rate in 2015 is $18.12 ; a 22.7% increase. If your payroll for 2016 is $1,000,000 you simply divide that by $100 as the Loss Cost Rates are calculated per $100 of payroll, then multiple that number by the Loss Cost Rate supplied by the state to get an idea of what your base premium might be.
( $1,000,000 Payroll / $100 ) = $10,000 which is your compensable workers compensation payroll rate.
$10,000 X $18.12 Loss Cost Rate for a Demolition Contractor = $182,000 as the base premium as per the filed Loss Cost Rates in N.Y. State.
Add to this taxes, assessments, and the experience modification factor surcharge or credit to arrive at your workers compensation cost for that payroll class.
A Brief Note About Loss Cost Multipliers :
The above example is generic as the premiums arrived at are the N.Y. State suggested rates or costs. From there each insurance company doing business in the State of N.Y. then files their own deviations off the suggested state rates. Some carriers charge more than the state suggests, some carriers charge substantially less. This is called the Loss Cost Multiplier which insurance carriers use to aggressively target or discourage the writing of certain classes of business in the State. Contingent on what your particular class codes are we can tell you what carriers are surcharging for your class codes and what carriers are aggressively targeting your class of business.
To find out what the % increase is for the class codes that make up your workers compensation policy please CLICK HERE. We included a list of most of the known written class codes in N.Y. State. We then compared the Loss Costs from 2013 to the new Loss Costs issued at 3rd quarter 2016 to determine which industries are adversely effected. You will see the results of this adjustment in your 2016 / 2017 renewals. CLICK HERE to see where your carrier ranks.
