- Choosing Coverage Based on Price Alone
Some buyers focus solely on price and overlook carrier service, claims management, safety resources, and return-to-work programs.
- Misclassifying Employees
Misclassification can lead to:
- Premium audits and additional premiums owed
- State penalties
- Increased scrutiny from regulators
- Coverage disputes during claims
- Underreporting Payroll
Some businesses unintentionally underestimate payroll or fail to include certain types of compensation. When the annual audit occurs, employers often face significant unexpected premium bills.
- Ignoring Claims Management
Failing to report injuries promptly or actively manage claims can increase claim duration and costs. Higher losses often result in a higher experience modification rate (EMR), which drives future premiums upward.
- Not Implementing a Return-to-Work Program
When employees remain off work longer than necessary, claim costs often increase. Modified-duty programs help injured employees return safely and can significantly reduce claim expenses.
- Neglecting Workplace Safety
Many companies buy insurance but fail to invest in safety training, hazard identification, and accident prevention. One serious injury can impact premiums for several years.
- Failing to Review Experience Modification Factors
Many employers do not understand their EMR or how it affects premiums. An EMR above 1.00 can increase costs substantially and may even impact eligibility for contracts and bids.
- Misclassifying Independent Contractors
Treating workers as independent contractors when they should be employees can result in:
- Additional premium assessments
- Penalties and fines
- Coverage disputes
- Potential legal exposure
- Not Preparing for Premium Audits
Poor recordkeeping and lack of documentation often lead to unfavorable audit results. Employers should maintain accurate payroll records, certificates of insurance for subcontractors, and detailed job descriptions.
- Working with an Inexperienced Advisor
Businesses that work with advisors who do not understand classifications, audits, claims management, experience modification analysis, and safety programs often pay more than necessary.
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