Workers’ compensation premium is primarily based on assumed risk, including:
- Employer's industry type
- Remuneration
- Prior claims history and/or the potential liability for future claims
NYSIF’s Information Page details these components of workers’ compensation premium:
Classification Code
The New York Compensation Insurance Rating Board (NYCIRB) an independent, non-governmental rating authority, designates classification codes for each type of industry or business. Each business is assigned a governing code based on the company's line of business, not the various jobs within that company. NYCIRB annually determines loss costs for each classification code after an actuarial review of losses and payrolls for each of more than 600 existing classifications. Loss costs are subject to approval by the New York State Department of Financial Services (DFS).
Loss Cost Multiplier
Each individual insurance carrier applies its own loss cost multiplier (LCM) to the NYCIRB loss costs to determine the carrier’s actual rate for each classification. LCMs reflect general overhead, business acquisition, taxes, etc. LCMs do not include claims expenses included in the loss costs. Each carrier must file their LCM with DFS for approval.
NYSIF Manual Rate Premium
NYSIF determines the manual rate by multiplying the NYCIRB loss cost by the NYSIF LCM. NYSIF then computes manual rate premium by multiplying the manual rate by the policyholder’s estimated annual payroll and dividing by 100. This mathematically based rate produces an objective pricing system.
NYSIF Standard Premium
NYSIF determines standard premium by multiplying its manual rate by an Experience Rating declared by NYCIRB.
NYSIF Base Premium
NYSIF computes base premium by adding NYSIF standard premium and the Expense Constant.
Remuneration
Remuneration consists of gross wages and all other payments to anyone engaged in work for the employer for which NYSIF could be liable during the policy period. This includes:
- Retroactive wages or salaries
- Total cash for commissions and draws against commissions
- Bonuses, including stock bonus plans
- Extra pay for overtime (with some exceptions)
- Pay for holidays, vacations or sick leave
- Payments otherwise required by law and paid by employees to statutory insurance or pension plans, such as Social Security
- Payment on any basis other than time worked, such as piecework, profit sharing, incentive plans
- Allowance or payment, directly or through a third party, for hand tools used in work for the insured
- Rental value of an apartment, house, or other lodging received as part of pay;
- Value of meals received as part of pay
- Value of store certificates, merchandise, credits or any monetary substitute received as pay
- Payments for salary reduction, savings plans, retirement or cafeteria plans made through authorized salary deductions from gross pay
- Salary paid in conjunction with the Davis-Bacon Act or other prevailing wage laws
- Annuity plans
- Reimbursements other than valid business expenses, as substantiated by the employer’s records
- Payment for filming of commercials, excluding subsequent residuals
Experience Rating
NYCIRB applies an Experience Rating to each employer that adjusts for differences in losses. Generally, all employers with more than 18 months of coverage history are rated by NYCIRB by comparing an employer’s actual losses to the expected losses for an employer of similar size in the same industry, which results in an experience modification credit or debit.
NYSIF Modification
NYSIF may apply its own modification of rates by means of a credit (discount), or a surcharge (differential), based upon an employer’s
- Loss experience
- Premium payment history
- Nature and hazards of work performed
- Adherence to safe work practices
- Compliance with the Workers’ Compensation Law
- Cooperation with NYSIF on claims issues and premium audits
Expense Constant
A policy fee charged on every workers’ compensation policy, regardless of premium size, to cover basic costs of administering the policy.
New York State Assessment Charge
NYCIRB determines the assessment charge that covers the costs of operating the Workers’ Compensation Board and special funds such as the Reopened Case Fund, Special Disability Fund and the Special Funds Conservation Committee.
Natural Disaster and Catastrophe Premium
Premium for domestic terrorism and other catastrophes is a stand alone charge similar to the Terrorism Risk Insurance Act (TRIA) charge for foreign terrorism. Catastrophe (other than Certified Acts of Terrorism) is defined as any single event, resulting from an earthquake, Non-Certified Act of Terrorism, or catastrophic industrial accident, in which aggregate workers' compensation losses exceed $50 million.
Terrorism Premium
The federal Terrorism Risk Insurance Program Reauthorization Act directs that both domestic and foreign terrorism be reflected on the same endorsement, and include definitions for losses from “terrorism” and “catastrophes” (other than Certified Acts of Terrorism).
Minimum Premium
The lowest premium for which an annual policy may be written.