Workers Compensation Basics Today s Focus Coverage Comparisons Workers Compensation policy Manual Rating formula Legal Entities Insurer of Last Resort (Start) Coverage Comparisons Coverage Comparisons 1
Coverage Comparisons Options Bare Occupational/accident policies (Occ/Acc) Workers compensation Self insured Bare Employer responsible No planned benefits for injured worker or their family members Employer subject to loss as large as jury awards Occupational/Accident Policies are not uniform Employer chooses limits Coverage for single occurrence and aggregate Indemnity limit Medical limit 2
Workers Compensation Medical coverage Income benefits No fault coverage Self-Insured Employer files with state Employer pays benefits under workers compensation law Third Party Administrator handles claims Coverage Comparisons Workers' Compensation Benefits 1 Occupational Accident Benefits Claim Description Medical Indemnity Total Medical 2 Indemnity 3 Total Quadriplegic receiving lifetime benefits 1,613,040 1,021,739 2,634,779 598,658 152,000 750,658 Impairment rating is 77% 6,198,890 168,588 6,367,478 716,403 52,000 768,403 Quadriplegic and receiving lifetime benefits 3,772,946 284,812 4,057,758 848,000 152,000 1,000,000 Motor Vehicle accident. Beneficiares are receiving death benefits 11,000 1,179,360 1,190,360 6,294 100,000 106,294 3
WC Rating Texas rating rules are developed by NCCI but must be approved by Texas Department of Insurance Claim payments are Pre Funded WC Rating Terms Rate cost of a unit of insurance Manual Premium rate x payroll Premium Discount based on size of premium Schedule Rating Factor optional rating tool WC Rating Terms Waiver of Subrogation Insurance carrier waives its right to recover from others Specific waiver 5% of premium on payroll for specific job Blanket waiver 2% of total policy premium Modified Premium premium, including the experience modifier, with no schedule rating 4
WC Rating Terms SEIC Small Employer Incentive Credit Experience Modifier Factor based on a specific insured s s experience Deductible Credit reduction of premium for selecting a deductible WC Rating Terms Employer Liability Limit Standard limits are $100k/$100k/$500k Higher Limits available 1.1% 1%charge for $500k/$500k/$500k» Minimum charge $100 1.4% charge for $1M/$1M/$1M» Minimum charge $150 Estimated Annual Premium based on estimated payrolls for coming year Calculation of Premium 1. Estimated Payroll X Rate - for each class code 2. + Premium charge for Waiver of Subrogation 3. + Premium for increased limits of EL 4. + Premium Incentive for SEIC 5. = Estimated Premium Subject to E-Mod 6. * Experience Modifier 7. =Estimated Modified Premium 9. * Schedule Rating Factor 10. =Estimated Modified/Schedule Rating Premium 5
Calculation of Premium 11. *Network Credit Factor 12. = Estimated Modified/Schedule Rating/Network Premium 13. Deductible Credit, If applicable 14. +Minimum premium for USL&H, Admiralty or FELA 15. =Estimated Standard Premium 16. Premium Discount 17. +Expense Constant 18. +Terrorism Premium (Total Payroll /100*Terrorism Rate) 19. = Total Estimated Policy Cost Workers Compensation Policy Part One Workers Compensation Medical Indemnity Part Two Employers Liability Part Three Other States Coverage Part One-Workers Comp Medical Unlimited Lifetime Indemnity Income benefits 6
Part Two- Employers Liability Liability not covered under workers comp Initiated through suit Must prove negligence Provides defense Part Three Other States Temporary automatic coverage States where carrier is licensed Other States - Texas Employees Primarily work in Texas Temporarily sent to work out of state Texas benefits 7
Limited Reimbursement Coverage (TM-LRC-2008) July 1, 2008 Applies to ALL Texas Mutual in force policies No supplemental application Replaces Other States Endorsement (TM OS 2001) Out Of State Coverage Workers do not reside in Texas Workers were hired outside of Texas Texas Mutual / Argonaut paper Contact your underwriter for details Pre-Audit Survey To ensure proper classifications are assigned To verify payroll estimates are adequate To discuss issues that could impact final audit 8
Final Audit Based on actual payroll developed during the policy period Physical Audits Telephone Audits Mail Audits Common Audit Disputes Coverage issues for Owners Spouses Partners Executive Officers Ownership Sole proprietor, partner, and their spouse (if active in the business) Automatically included for coverage unless excluded by endorsement Fixed annual payroll = $55,900 Regardless of actual pay Classified according to their job duties 9
Limited Partners WC Manual includes general and limited partners as partners Both are automatically included unless excluded by endorsement Fixed annual payroll of $55,900 Spouse is treated equally Corporations Executive officer is automatically included unless excluded by endorsement Executive officer coverage 25% or more ownership may elect Less than 25% is underwriting decision i Annual payroll minimum of $7,800 to maximum of $62,400 Limited Liability Company (LLC) The members, managers, managing members, and executive officers of an LLC are treated as executive officer of a corporation 10
START Program Insuror of Last Resort/Rejected Risk Program Does not meet underwriting standards for Texas Mutual voluntary program May not be eligible for other carrier s coverage Due to exposure, rates in voluntary market may be inadequate Rehabilitation of risks with poor loss experience is ultimate goal START Program Submission A complete submission, including completed ACORD application, etc Completed START Application signed by agent and applicant Copy of applicant s written safety program if available Letter explaining any losses above $15,000 START Program Maximum EL limits in Start are: $500,000/$500,000/$500,000 Start policies are not eligible for dividends and not included in agents bonus calculations All Start policyholders must participate in the network if available in the area 11
START Program Requirements Accident prevention program In good standing with Texas Mutual Failure to comply is reason for cancellation Start Review Committee Composed of representatives from Underwriting Loss Prevention Special Investigations Claims Premium Audit Review decisions to decline, cancel or non-renew Appeals made to the Board of Directors Questions? 12