Comp Cures

Workers that are injured or die from job-related accidents or diseases can receive benefits that the employer is required to pay regardless of fault. These benefits may include medical care, cash benefits, survivor benefits and rehabilitation services.

The insurance premium paid for workers compensation insurance coverage by the employer is determined by the projected risk of injury plus past experiences. Therefore, jobs that have a high risk of injury plus frequent worker claims are assessed the highest rate for workers compensation insurance.

All Weather Roofing Company is currently paying a $35.00 premium per $100.00 of payroll for workers compensation insurance, or 35% of gross pay for this insurance protection.

• The owner of All Weather Roofing earns $75,000 per year while the 3 employees earn $40,000 each per year. Annual raises are expected to be 3% of current salaries for next year.

• The average revenue from a roofing job is $8,000; labor expenses are $4,000/job; material costs per job are $2,000; so the profit per job is currently $2,000 and 2 roofing jobs per week are completed. Annual profits = $4,000/wk x 52 weeks = $208,000

Their history of worker compensation claims includes 2 significant claims 2 years ago ($10,000/claim) and 1 claim last year ($5,000). Based on this history, All Weather Roofing will be assigned an injury experience modification factor of 1.25 for next years workers compensation insurance coverage, which means that their premium will be 1.25 times higher than their competitors with safe work records. Specifically, All Weather will be charged the same premium as other roofing companies, but their premium will then be multiplied by the mod factor (1.25) to determine the total premium due to the insurer.

The only way to decrease the worker compensation premium rate is to keep medical claims below $700 per incident plus days lost must be less than 3 days per incident. If this is achieved by All Weather Roofing, they can expect a 10% decrease in premiums upon their annual review.

Assignment & Evaluation criteria:

Score	Points
	10	Prepare a report that discusses each criteria item Show all math calculations. Include sources of information for items you researched
	10	Calculate the cost of worker compensation insurance for the current year.
	10	Using an experience mod factor of 1.25, calculate the cost of worker compensation insurance for next year (remember that everyone is getting a 3% wage increase)
	20	Present the numbers to demonstrate the affect that worker compensation insurance is having on the profits of the company (assume annual profits remain the same for both years). What is the current years profit less worker comp premium? What is next years profit less worker comp premium? Compare each years profits - how much less profits will the company have after the increase in the mod factor?
	30	Present 3 recommendations to minimize workers compensation premiums. What steps can be taken to minimize injuries? What actions can be taken to reduce the insurance premium?
	20	State the costs for each of your recommendations to reduce the cost of worker compensation insurance. What will the recommendation cost to implement? Can the reduction in premium pay for the recommendation? How many years of premium savings will it take to pay for the recommendations?
	100	Total Points