Common Workers’ Comp Terms

• Manual premium? This is the raw premium of the WC rate times payroll at a per hundred. Once you apply credits, premium discounts, mods, then the premium becomes adjusted premium.
• Guaranteed Cost? This term refers to the WC quote without added Consent to Rate(FL) or Scheduled Debits or Credits (non-FL).  The cost of the policy is not based on loss history when it is guaranteed cost.
• Are tips counted for WC? I know this one is not a WC term, but I get this question a lot, so I decided to include it. The answer is, no, WC is not charged on tips.  In some cases, they could be an exception like when restaurants automatically add a tip or a minimum% tip.
• Policy jacket? A policy jacket, or policy form, is a document that provides more comprehensive details about your insurance coverages, including exclusions and conditions of your policy. It is included with the declarations page, and it goes into more detail with policy language, such as exclusions and conditions, as well as definitions of important terms. The policy jacket is helpful to read first so you understand the terms you will see on the declarations page.
• Onboarding? I personally hate this term since it sounds like we are about to board a cruise ship.  The term in WC is most commonly used with enrolling in a Professional Employer Organization (PEO).  Click here to learn more about PEOs.
• Premium Discounts? This is the automatic discount applied to WC premiums after the manual premium. Nearly all carriers use NCCI’s Table 9 Premium Discounts which starts at premiums over 10k.
• Terrorism? If you write Excess & Surplus (E&S) you might think WC terrorism is optional, but it is not.  It is a tiny .01% of payroll fee added to all WC policies.  This is a federal government created this act in 2002 as a result of 9-11. 
• Statutory limits? This is simply the minimum required limits for employer’s liability which is $100k for each accident, $500k for disease – policy limit, $100k for disease – each employee.
• WC limits? Remember, WC has part 1 which is for medical and indemnity (lost wages), but has no stated limits.  That is why it is important to get the claims closed as soon as possible.  Part 2 of the WC policy is Employer’s Liability which has stated limits from statutory to increased limits usually to 500k across to 1M.  A few markets will sometimes go to 2M.  Those asking for more usually do not understand that part 1 WC has no limits.
• Non-working deposit? This applies when the policy holder elects to enroll in monthly self-reporting.  The initial deposit is not a down payment applied to premium.  It is a deposit required by most carriers to have to protect their interests since they do not collect premium payments until 30 days after issuance and only if the policy holder reports payroll and pays it.  However, the deposit is not required again at renewal, it rolls.  Plus, the deposit is eventually applied to premium at time of final audit.
• Waiver of subrogation?  There are two types of waivers, a specific or individual waiver naming one specific company who wants the waiver, and a blanket waiver which will cover any company. If you request this endorsement to add a waiver of subrogation, you agree to waive (give up) your WC insurance carrier’s right to seek damages from another party.  This is not always allowed in every state and some carriers do not allow it for new policies.  Most carriers charge a flat fee like $250 for specific waivers and usually around $400 or 2% of premium (whichever is higher) for blanket waivers.
• Other named insured? Additional named insured? First of all, additional named insureds almost never applies to WC but to general liability.  Other named insured (confusingly sometimes referred to as additional) is simply another named company which is combinable with the initial insured company, so they are joined together for a single policy.
• Self-Insurance? Regarding WC and meeting state standards, a company can be Self-insured meaning they will pay all WC claims and benefits through their own funds.  In many states like FL, this is regulated by the state which means to self-insure there are state requirements to follow.  Some companies chose to be a part of a Self-Insurance Fund(SIFs).  With SIFs the premium is pooled by all of their policy holders to pay all claims and benefits. 
• Combinability? This is when one or more of the titled officers or owners have majority ownership in another entity. If they are combinable, then the two entities can be quoted for one policy.  They do not necessarily have to.  Some carriers prefer to since it reduces any possible carry over liability in extreme claims.
• State Act? This is the standard WC policy for each state. Each state also has their own assigned risk pool which writes WC policies that no admitted WC carrier will write.
• USL&H? The United States Longshore and Harbor Workers’ Compensation Act, you can see why most just call it USL&H or Longshore (formerly longshoreman’s). This is federal coverage and is only required for commercial vessels or personal vessels over 65 feet in length.  This is for work done over navigable body of waters but can include work on bridges, docks, or other structures.  More info.   Come carriers will write WC with this added endorsement while most will not.  A few will add it on a more IF ANY basis.
• Letter of Assumption (LOA)? This is a letter from one carrier stating that they have assumed all WC liability for a specific policy.  This is commonly used when a risk changes carriers at renewal.  It is preferred over the Lost Policy Release (LPR).
• Reinsurance? This is a contract between a reinsurer and an insurer (carrier). In this contract, the insurance company—known as the ceding party or cedent—transfers some of its insured risk to the reinsurance company. The reinsurance company then assumes all or part of one or more insurance policies issued by the ceding party.  The carrier with the reinsurance may decline risks due to “reinsurance exclusion” which means the class, or some aspect is not permitted by their reinsurance agreement.  The carrier can ask for exceptions but it is rare.
• IBNR? This stands for “Injured But Not Reported”.  Each carrier when projecting their profitability must factor in IBNR claims that may be filed in the future.  All injuries that require medical attention should always be immediately filed with the WC carrier for the policy.
• Assigned Risk Pool? Each state must have an assigned risk pool to write the WC policies that no admitted carrier will write.  The carrier for the pool varies by state.  In FL it is Travelers.  If an admitted carrier is willing to quote it, the risk should automatically be rejected by the pool.  In FL it is called the FWCJUA.
• Agency bill? Some carriers and MGAs will allow agency billed premium and commissions which means the agent withholds their commission before remitted premium payments.  Omega only allow direct bill business.
• Scenario: You have a client you write all of their commercial insurance including commercial auto, general liability and workers compensation. If they call you and ask for help on filing a claim for an auto accident where the employee was rushed to the hospital, which coverage should you call first?  The correct answer is WC, which always pays first.

For a WC quote, email keith@omega4agents.com or call 866-997-0711 x 205/