The cost of workers' compensation insurance, both in California and nationally, is clearly cyclical. Manufacturers operating in California over the past 20 years have seen rates rise and fall several times. Unfortunately, once again rates are rising, driven by the high cost of medical treatment and increasing disability costs. California has the 5th richest benefits structure in the nation for injured workers and at the same time presents itself as one of the easiest states for employees to obtain benefits. Workers' compensation insurance will never be free. But as an employer, there are measures you can take to control of your workers’ compensation costs.
It Starts With Losses and Ends in Rates
Rates and premiums are based on a number of factors, but there is one certainty. The worse your loss experience is, the higher your rate will be. There are two components of your rate that are directly attributable to your workers' compensation claims loss experience. First, there are the insurance companies scheduled credits and debits. Underwrites can provide debits and credits to their filed rates depending on the quality of risk you present. This is most objectively evidenced by your loss history. If you control your losses, you control your rates. Those employers with poor loss experience will pay significantly more because historic experience is the best predictor of future results.
Second, in California the Experience Modification recognizes the effectiveness of a company's loss prevention and safety practices. This system compares your company to operations similar to yours in class and size, and either rewards or penalizes you for your loss experience. The Experience Modification is also applied to an insurance company's rates/ premium as a debit, neutral or a credit factor. Again, if you control your losses you control your workers’ compensation premium cost.
Shouldn't I Just Buy the Lowest Price?
Unfortunately, that's not a long-term course of action. Insurance companies can lower their rates in the short term by outsourcing or discontinuing certain services. They'll use third-party administrators to manage claims and stop providing loss control service altogether. That's helps reduce their expenses and improves their profitability, but it does very little to help policyholders prevent and reduce losses, giving them control over their workers' compensation costs.
The CMTA - CompWest Partnership
CMTA has been active in the area of workers' compensation since 1918. We've seen several market cycles and we recognize that many insurance companies will make short term operating and pricing adjustments in order to acquire market share. This does not help our members achieve the lowest possible workers’ compensation cost over the long term. As an advocate for all manufacturers we helped draft and pass SB 899 in 2004 which has come to be known as the Workers' Compensation Reforms. The results of this crucial legislation included controls in the area of medical treatment and permanent disability that dramatically reduced workers' compensation costs for California's manufacturers.
Even before the workers' compensation reforms that became law in 2005, CMTA worked within the legislature to create workers' compensation cost management avenues for manufacturers. In 2003, CMTA sponsored and helped write SB 1007, a bill amending the insurance code to include "manufacturing" as an employer group recognized to be engaged in a common trade or business and eligible to form a workers' compensation group insurance program. We then formed the CMTA Group Workers' Compensation Program that delivers discounted premiums to the participants along with support services to help manufacturers operate safely and protect their employees from work related injuries.
During this time we've learned that consistency is the key to controlling workers' compensation costs for our members. That's why we, like you, made a decision to partner with CompWest Insurance Company. They're a full service workers' compensation insurance company, providing everything from developing your loss control plan at the beginning of the policy year to completing your premium audit at the policy's closing. All of the needed services in one place for our members.
Much like rowing a boat, when everybody is pulling in the same direction, you get the best results. The most effective workers' compensation programs involve your broker working together with you, CompWest and CMTA to provide the necessary services to help you prevent injuries and reduce the cost of claims if they occur. A unified team with proven workers' compensation expertise working in your best interests will ensure you achieve the lowest possible net workers’ compensation insurance cost in all market conditions. We think you made a sound, long-term decision to place your workers' compensation coverage with CompWest in the CMTA Group Workers' Compensation Program. We provide the greatest value for manufacturers, regardless of market conditions.
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