Few things disrupt a business more than an industrial accident.
Aside from the trauma caused by an accident, especially when serious injury or death is involved, and the need to fill the vacated position, there is a long-range financial impact on the companyA company's safety record is one of the most important items that goes into setting workers' compensation insurance premiums, according to Lane Summerhays, president of the Workers Compensation Fund of Utah, an organization that carries workers' compensation insurance for 55 percent of Utah employers.
Since Utah law requires every business to have workers' compensation insurance, a good safety record can help save money.
Every year, the National Council of Compensation Insurance reviews the on-the-job safety record of Utah companies and, with several other items factored in, recommends what the insurance pre-mium will be for the next year. For example, this year NCCI recommended an 8.4 percent increase in workers' compensation insurance premiums for 1994, which was approved by State Insurance Commissioner Robert Wilcox.
The increase was good news to Utah businesses who have faced double-digit increases for several years. Summerhays said the 8.4 percent is an average and some companies could face a big increase while others pay only a minor increase.
NCCI also provides a rate for 700 job classifications in Utah, Summerhays said, and those also are approved by the insurance commissioner.
Obviously, the more dangerous the job, the more workers' compensation insurance premium the company pays. For example, restaurant employees are rated at .0340, which means the company will pay $3.40 per $100 of payroll for an annual premium.
Roofers are rated at .3956, which means a roofing company will pay $39.56 per $100 of payroll for an annual premium.
As an example of how a good safety record pays off in the amount of workers' compensation insurance premiums a company pays, Summerhays provided figures for two companies involved in the same type of business (see accompanying chart).
Both companies have a payroll of $100,000, and their standard premium is $8,000. But because one company has a good safety record it is given a .61 experience modification that knocks the standard premium to $4,880. The other company with a bad safety record gets 1.71 experience modification that increases its premium to $13,680.
Summerhays said the fund often gives a company with a good safety record a 25 percent discount on its premium, further lowering the annual premium to $3,660. The company with a bad record gets a 25 percent increase in its premium, which goes to $17,100.
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ADDITIONAL INFORMATION
Workers compensation fund of Utah: Comparison
COMPANY A COMPANY B
Payroll $100,000 $100,000
Rate per $100 x8.00 x8.00
Standard premium $8,000 $8,000
Experience modification 1.71 .61
SUB TOTAL 13,680 4,880
Safety discount +25% -25%
TOTAL PREMIUM $17,100 $3,660