Do claims affect my business insurance

Insurance Claims

Claims are an unavoidable, and often unforeseeable, part of life.

This is true in our business, as well as our personal lives.  Unexpected claims are why we pay for insurance policies.

One question we get a lot from business owners is?

If I file a claim will it affect my business insurance rates

The short answer is yes.  The answer becomes more involved dependent on such factors as the type of claim being filed, the policy that claim may fall under, and the amount of the pay-out but just like all insurance policies you carry, claims CAN affect your insurance.

It doesn’t mean that it will.

Commercial Insurance Carriers

Insurance carriers base their rates and eligibility on many factors, including your business’ claim history.

Each insurance carrier will be different and each type of insurance policy will work differently as well.

Commercial Auto

A commercial or business auto policy, for example, works much like your personal auto insurance. Claims will have a direct effect on the premiums insurance company’s will charge, and the availability of preferred markets.

Excessive claims will cause you significantly to pay more premiums and can hurt the eligibility of who will even write that insurance. Business Auto insurance policies tend to have high loss ratios causing insurance companies to be overly cautious as to what they are insuring.

Business Liability & Property

Most business owners should have a business owner (BOP) or general liability policy that is covering liability and the property the business has.

Insurance carriers will look more on frequency and severity when calculating your insurance rates. A small property claim or minor slip and fall, won’t necessarily affect your insurance like it might for the other policies your business needs.

Worker’s Compensation

This is probably the trickiest of the insurance policies when it comes to claims. Yes, like most others it doesn’t affect your rates.

But let me first explain how worker’s compensation is calculated:

New York State’s Worker’s Compensation board determines the base rates by class of business (the type of business you are doing).

Insurance companies will then file their rates for different insurance company’s they own. These rates are called a lost cost multiplier. Some insurance carriers have one carrier others will have up to ten.

Each one of these insurance carriers will have their own lost cost multiplier (LCM) and that number is multiplied by the base rate set by the Worker’s Compensation Board.

This is how insurance companies can have different rates compared to one enough.

Claim frequency and type of business you are in determines what insurance carrier will write the business and how high that carrier’s LCM is.

The other way claims affect your Worker’s Compensation rates is based on your Experience Modification Rate.

Experience Mod

Your experience modification rate (EMR) can have a significant impact on your worker’s compensation insurance premiums. The EMR is a metric that insurance carriers use to calculate premiums by taking in account the number of claims or injuries a company has had into the past and their corresponding/future costs.

The starting EMR for a company is 1.0. If your company’s EMR number is lower than that your worker’s compensation premiums will be lower than average and you will have a credit or discount applied in.

If your EMR is over 1.0 you are paying more than the average and here is where claims can significantly increase your overall insurance expense.

What’s Next?

Business owners need to always be aware of what insurance claims are being filed and how to minimize your cost of risk. Return to work programs and safety procedures are a great way to help lower your current and future insurance costs.

Business owner’s who pay significantly more in insurance premiums do have an advantage and insurance carriers will look at the cost they have collected verse the amount they have paid out in claims over a few year period.

As you can see there are many parts to this and this just scratches the service. Make sure you are using an independent insurance agent that you have a trusted relationship  with. Someone who can help guide your through not just the set up of your insurance policies but be there to discuss every situation.



Mike Crowley




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