Workers Compensation may be one of your biggest insurance costs each year, as it plays an important role in providing security and confidence to both workers and employers. It ensures that workers are looked after in the event of an accident, and the employer is free from the significant stress, liability, and potential costs.
One of the most common questions we get is how is my premium calculated and is there a way to lower it?
Unfortunately, to make Workers Compensation insurance premiums work, there can’t be a one-size fits all solution, because all businesses aren’t one size or the same. They must be distinguished in their own way, where possible.
In order to create fairly-costed premiums to suit the different industries, scales, services, and environments of today’s market, there are plenty of complicated rules, and not necessarily a lot of clarity. Getting workcover advice on industry classification from expert consultants such as Jayrose Group can save all parties from immense emotional strain and fatigue – not to mention company resources.
One aspect that can mire the uninitiated when it comes to understanding Workers Compensation is your industry classification and how it accurately reflects your business. All too often, employers are misclassified, whether this is due to their evolving business activities or a misinterpretation of their predominant business activities.
What are the factors involved in determining a business’ WorkCover Industry Classification?
The key factors that impact an organization’s classification are:
- Industry classification determined by the predominant activity of your business e.g. construction, manufacturing, health care
- What you sell or the services you provide
- What is involved in delivering what you sell or provide
- The raw materials, types of equipment, and processes used
- A breakdown of the sales, cost of goods produced, and the cost of labour
- Whether the goods involved are owned or not
- Whether the goods and services are provided internally
- Whether you’re supplying a business that is associated with your own business
Each of these factors contribute to an assessment of risk within the workplace, the likelihood of injury or sickness, and the cost that such an event would implicate. If you’re confident enough to answer accurately the above questions without skipping a beat, you’re part of the way there. Getting this part wrong though can create exorbitant and unnecessary costs, or mean that you’re not actually covered for the risks that you’re worried about. It can become seriously convoluted, and the financial premium differences at stake can reach the millions, depending on where you land.
We often see WICs improperly assigned by insurers due to an ambiguous or poor description of the company’s activity on policy applications, resulting in an inaccurate categorisation and payment of an incorrect premium. It’s also possible the business activity has changed over the years, meaning the WIC needs to be altered as well.
For many organisations, it’s more cost-effective and a lot safer to delegate the task to an experienced specialist workers compensation claims consultant like JGA.
How is the WorkCover insurance premium calculated?
Once the industry classification is determined, your premium is calculated based on:
- Industry classification determined by the predominant activity of your business (e.g. construction, manufacturing, health care). Riskier lines of work will have a higher industry rate.
- Rateable remuneration which is the wages and other entitlements paid to your employees. The higher the remuneration, the bigger your business, the higher your premium.
- Claims costs attached to the claims lodged against your business will correlate to an increase in your premium rate for those businesses with a remuneration of over $200,000.
You have little control over most aspects that determine your premium, other than ensuring you’ve selected your appropriate industry classification and reported the correct rateable remuneration for you business.
Claims costs however is one aspect you can influence. Managing claims efficiently, achieving quick Return to Work outcomes and reducing the risk of injuries occurring in the first place are all ways we can help you keep your premium low.
Does a WorkCover injury claim affect my Workers Compensation insurance premium?
If your rateable remuneration is less than $200,000 there’s some good news, your premium is not likely to be affected.
If it is more than $200,000, your claim history may impact your Workers Compensation Premium. This is based on your employer performance rating, which is displayed on your premium notice. The rating is an indication of your claims performance relative to other employers operating within the same industry and is used to recalculate your premium rate.
Reviewing your premium and WIC annually
Businesses are always growing and changing so we recommend having your premium and WorkCover Industry Classification reviewed annually. This ensures you’re appropriately covered, any refunds you might be entitled to are claimed and future savings can be made.
We provide annual premiums assessments that guarantee accuracy, full obligation protection, and even result in refunds. If you’d like to know about how we can support you with finding your Workcover minimum premium, and our extensive insurance premiums management services, contact us here.