Understanding Workers’ Compensation Premium
New York is known as a “Loss Cost” state. Simply put the NY Rating Board issues base rates effective 10/1, all insurance carriers apply their Loss Cost Multiplier (LCM). LCM are a factor or percentage carriers apply to the base rate to arrive at a manual rate for every given class code. Therefore every carrier could have a different rate for the same class code.
There is a classification code for each type of industry or business, and, for each classification code, a manual rate. The manual rate for each classification code is determined by the New York Compensation Insurance Rating Board (NYCIRB) based on the historical exposure (payroll and losses) and expenses for that specific classification. THEN TH CARRIER APPLIES THEIR LOSS COST MULTIPLIER OR LCM.
For example :TheWorkers’ Comp Board base rate for Trucking Companies (class code 7219) is$ 8.46: the insurers LCM is a 1.43 that specific carrier’s MANUAL RATE for trucking (7219) IS $12.09 for that year.
Premium for each classification code is determined by multiplying a rate times a premium basis. Gross payroll by class code is the most common premium basis. This includes payroll and all other remuneration paid or payable during the policy period for the services of employees and all others engaged in work on behalf of the employer for which the carrier iscovering or could be liable. The rate charged is based on every $100 dollars of payroll.
For example: Premium for an employer who operates a Trucking Company with $100,000 in annual payroll is determined as follows:
Classification Code Manual Rate x Payroll/100 = Manual Premium
7219-TRUCKING NOC -$12.09 x 100,000/100 = $12,090
The above example is the basis for determining premium. Additional components in determining premium enable CARRIERS to tailor workers’ compensation premium to suit the individual character of each employer. This manual rate is the gross rate experience ratings, discounts, taxes and surcharges will apply .