5
T
here has not been an average rate
change for all codes and classes
in MA since 2001. Over the past
several years, your rates have inched up
or down, but the average rate has not
changed. Historically, MA had some of
the highest WC rates in the country. In
1994, 20 years ago, the rate per $100 in
payroll for a residential carpenter was
$18.14; today that rate is $8.68. Today
the average rate in MA is the 8
th
lowest across the country and
significantly lower than any of our surrounding states.
The Workers Compensation Rating and Inspection Bureau
of MA submitted a rate filing on 12/27 to be effective on 1/1
for an average rate increase of 7.7%. Before the increase is
accepted or declined there are several bureaucratic hurdles that
must take place. One of these is a public comment period. It is
important to note that since the increase was filed to take place
on 1/1, if the rate increase is approved it may affect many of
you retroactively. That means that if your policy renews between
1/1 and the date the rates are approved, the rates on the policy
you purchased will increase back to the policy effective date.
Most insurance companies are issuing all policies with a
“pending rate endorsement.”
What does this mean in real dollars to you? If you have a
carpenter on your payroll making $20 per hour and he works
full time, that translates to 2,080 hours in a year, or $41,600 in
wages. If the rate is 8.68 the workers comp for this employee
would be $3,611. If the rate increase for this code was average
(or 7.7%) the new rate would be $9.35, and the new premium
for this employee would be $3,890. That’s close to $300 in
additional premium for each employee.
What can you do as a homebuilder to control your workers
compensation insurance expenses? The first thing you have to
do is to recognize that you as the business owner do have a
great deal of control over the amount you spend on workers
compensation insurance. The WCRIBMA keeps track of your
individual payroll and the losses that have been paid to your
workers. Each year they will issue an individual Workers
Compensation Experience Rating Modification Factor for every
business in MA. If your premiums are smaller, they will use a
short cut calculation called a Merit Rating. The factors can be a
credit or a sizable debit. I have clients with credits of more than
20% and some that have had loss problems with debits of 270%.
What does this mean in terms of actual dollars? If your premium
is $20,000 with a credit mod factor of .85 the actual premium
cost to you would be $17,000 (20,000 X .85 = $17,000). If the
mod factor was a debit of 1.75 the actual cost to you would
be $35,000 ($20,000 X 1.75 = $35,000). Which premium
do you want to pay? By having an effective loss control and
safety program you can takes steps to put yourself into the first
category. Good loss history does not happen by mistake – it is
the result of good safe work practices.
There is also a program that all contractors in MA should be
taking advantage of called the MA Construction Classification
Premium Adjustment Program. If you have anyone on your
payroll that has a wage of $18.50 or higher you will probably
earn additional credits off of your standard workers comp rate.
Again we have clients that have credits in excess of 25%. If you
premium is $10,000 a 20% credit is $2,000. This goes straight
to your bottom line profits.
In closing, one of the mottos of NAHB and HBRAM is Members
doing business with Members. To take control of your insurance
costs you need to find an insurance agent that understands your
business/industry and is willing to take the time to explain to
you what needs to be done to keep your insurance cost under
control without sacrificing coverage. There are several very good
agents that are members of HBRAM. If you are not working with
one of us please give us a call to see what we can do to improve
your insurance situation.
Tom Messier, CIC is VP of Construction Industry Services for Mason &
Mason Insurance Agency, Inc and active member of Builders & Remodelers
Association of Greater Boston.
WHAT EVERY HOMEBUILDER
NEEDS TO KNOW ABOUT
WORKERS COMPENSATION IN MA
By Thomas Messier
