One of the biggest factors that goes into your workers’ compensation premiums are the classification codes for each type of work done at your business. Each of these codes has an associated loss cost that represents the expected amount insurers will need to pay for a claim. And even though each of these costs are standardized by the National Council on Compensation Insurance or state governments, your actual premiums may be higher because of a concept called loss cost multipliers.
What are Loss Cost Multipliers?
Standard loss costs are the amount insurers pay for a policy’s coverage, such as medical care, prescriptions and lost wages. However, many insurers face significant overhead costs when handling a claim and transfer these charges to policyholders with loss cost multipliers. Essentially, these multipliers reflect an insurance carrier’s expenses, such as:
- Taxes, licenses and fees
- Sales and marketing charges
- Rent and utilities
Because each insurer operates differently, they all need to file separate loss cost multipliers with state insurance agencies. But, since multipliers alter standard loss costs and can vary greatly between different insurers, businesses may discover unexpectedly high premiums.
How Multipliers Impact Your Premiums
To determine a standard premium, insurers first take the loss cost for a specific employee classification code and factor in their unique loss cost multiplier. This figure is called the rate, which is then applied to your payroll to calculate a standard premium.
Insurers also weigh other factors to determine your final premium, such as your experience modification rate. However, because some insurers have loss cost multipliers of 2.0 or more, standard premiums have a significant impact on the final price of your policy.
How to Save on Workers’ Compensation
Although it may seem strange to pay for another company’s expenses through loss cost multipliers, there are still ways to save on workers’ compensation:
- Look up each insurer’s multiplier on your state insurance agency’s website when you buy or renew a policy.
- See if insurers use separate loss cost multipliers for different employee classification codes.
- Check with insurers to determine if they use various underwriting companies with unique loss cost multipliers.
- Call us at 831-661-5697 to discuss all of your workers’ compensation needs.
On Dec. 22, 2017, President Donald Trump signed into law the tax reform bill, called the Tax Cuts and Jobs Act, after it passed both the U.S. Senate and the U.S. House of Representatives.
This tax reform bill makes significant changes to the federal tax code. The bill does not impact the majority of the Affordable Care Act (ACA) tax provisions. However, it does reduce the ACA’s individual shared responsibility (or individual mandate) penalty to zero, effective beginning in 2019.
As a result, beginning in 2019, individuals will no longer be penalized for failing to obtain acceptable health insurance coverage.
?The ACA’s individual mandate penalty no longer applies, beginning in 2019. However, individuals will still need to certify on their 2018 tax return (filed in early 2019) whether they complied with the individual mandate for 2018.
In addition, a failure to obtain acceptable health coverage for 2018 may still result in a penalty for the individual for that year on their 2018 tax return (filed in early 2019).
The Individual Mandate
The ACA’s individual mandate, which took effect in 2014, requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. The mandate is enforced each year on individual federal tax returns. Starting in 2015, individuals filing a tax return for the previous tax year indicate, by checking a box on their returns, which members of their family (including themselves) had health insurance coverage for the year (or qualified for an exemption from the individual mandate). Based on this information, the IRS then assesses a penalty for each nonexempt family member without coverage.
Effect of the Tax Reform Bill
The tax reform bill reduces the ACA’s individual mandate penalty to zero, effective beginning with the 2019 tax year. This effectively eliminates the individual mandate penalty for the 2019 tax year and beyond. As a result, beginning with the 2019 tax year, individuals will no longer be penalized for failing to obtain acceptable health insurance coverage for themselves and their family members.
Impact on Years Prior to 2019
Although the tax reform bill eliminates the ACA’s individual mandate penalty, this repeal did not take effect until 2019. As a result, individuals were still required to comply with the mandate (or pay a penalty) for 2018. This means that individuals must still certify on their 2018 tax return (filed in early 2019) whether they complied with the individual mandate for 2018. Therefore, taxpayers should indicate on their 2018 tax returns whether they (and everyone in their family):
- Had health coverage for the year;
- Qualified for an exemption from the individual mandate; or
- Will pay an individual mandate penalty.
In addition, a failure to obtain acceptable health coverage for 2018 may still result in a penalty for the individual for that year. Individuals who are liable for a penalty for failing to obtain acceptable health coverage in 2018 will be required to pay that penalty when they file their federal income taxes in 2019. As a result, some individuals may be required to pay the individual mandate penalty in early 2019, based on their noncompliance for the 2018 tax year.
Effect on Other ACA Provisions
Despite the repeal of the individual mandate penalty, employers and individuals must continue to comply with all other ACA provisions. The tax reform bill does not impact any other ACA provisions, including the Cadillac tax on high-cost group health coverage, the PCORI fees and the health insurance providers fee. In addition, the employer shared responsibility (pay or play) rules and related Section 6055 and Section 6056 reporting requirements are still in place.
On Jan. 23, 2019, the Occupational Safety and Health Administration (OSHA) published a final rule that increases the maximum penalty amounts the agency may assess against employers that violate workplace health and safety requirements. For most violations, the new maximum penalty amount is $13,260. For willful or repeated violations, the new maximum penalty amount is $132,598.
Federal law requires OSHA to increase its penalty amounts by Jan. 15 every year. Because the federal government shutdown delayed the increases for 2019, however, OSHA announced the new amounts in a “pre-publication” version of the final rule issued on Jan. 15, 2019. Now that the final rule has been officially published, the new amounts apply for any civil penalties assessed after Jan. 23, 2019.
Employers should become familiar with OSHA’s new penalty amounts and review their workplace policies and practices to ensure compliance with OSHA requirements.
Federal law requires OSHA to adjust its civil monetary penalty levels for inflation no later than Jan. 15 of each year. Under the law, adjustments are made by issuing a final rule that becomes effective on the day it is officially published in the Federal Register. On Jan. 15, 2019, OSHA issued an unofficial final rule to increase the maximum penalty amounts for 2019. However, the federal government shutdown delayed the rule’s official publication. The final rule was officially published on Jan. 23, 2019.
Penalty Changes for 2019
The table below compares current penalty limits to the increased amounts for 2019 outlined in OSHA’s final rule. The new amounts apply to any penalties OSHA assesses after Jan. 23, 2019.
||EFFECTIVE JAN. 23, 2019
||$12,934 per violation
||$13,260 per violation
||$12,934 per violation
||$13,260 per violation
|Failure to comply with posting requirements
||$12,934 per violation
||$13,260 per violation
|Failure to correct a violation
||$12,934 per day until corrected
||$13,260 per day until corrected
||$129,336 per violation
||$132,598 per violation
||$129,336 per violation (also subject to a minimum of $9,239 per violation)
||$132,598 per violation (also subject to a minimum of $9,472 per violation)
Please contact Scurich Insurance or visit OSHA’s website for more information about OSHA penalties.
Cyber security threats and trends can change year over year as technology continues to advance at alarming speeds. As such, it’s critical for organizations to reassess their data protection practices at the start of each new year and make achievable cyber security resolutions to help protect themselves from costly breaches.
The following are resolutions your company can implement to ensure you don’t become the victim of a cyber crime:
- Provide security training—Employees are your first line of defense when it comes to cyber threats. Even the most robust and expensive data protection solutions can be compromised should an employee click a malicious link or download fraudulent software. As such, it’s critical for organizations to thoroughly train personnel on common cyber threats and how to respond. Employees should understand the dangers of visiting harmful websites, leaving their devices unattended and oversharing personal information on social media. Your employees should also know your cyber security policies and know how to report suspicious activity.
- Install strong anti-virus software and keep it updated—Outside of training your employees on the dangers of poor cyber security practices, strong anti-virus software is one of the best ways to protect your data. Organizations should conduct thorough research to choose software that’s best for their needs. Once installed, anti-virus programs should be kept up to date.
- Instill safe web browsing practices—Deceptive and malicious websites can easily infect your network, often leading to more serious cyber attacks. To protect your organization, employees should be trained on proper web usage and instructed to only interact with secured websites. For further protection, companies should consider blocking known threats and potentially malicious webpages outright.
- Create strong password policies—Ongoing password management can help prevent unauthorized attackers from compromising your organization’s password-protected information. Effective password management protects the integrity, availability and confidentiality of an organization’s passwords. Above all, you’ll want to create a password policy that specifies all of the organization’s requirements related to password management. This policy should require employees to change their password on a regular basis, avoid using the same password for multiple accounts and use special characters in their password.
- Use multi-factor authentication—While complex passwords can help deter cyber criminals, they can still be cracked. To further prevent cyber criminals from gaining access to employee accounts, multi-factor authentication is key. Multi-factor authentication adds a layer of security that allows companies to protect against compromised credentials. Through this method, users must confirm their identity by providing extra information (e.g., a phone number, unique security code) when attempting to access corporate applications, networks and servers.
- Get vulnerability assessments—The best way to evaluate your company’s data exposures is through a vulnerability assessment. Using a system of simulated attacks and stress tests, vulnerability assessments can help you uncover entry points into your system. Following these tests, security experts compile their findings and provide recommendations for improving network and data safety.
- Patch systems regularly and keep them updated—A common way cyber criminals gain entry into your system is by exploiting software vulnerabilities. To prevent this, it’s critical that you update applications, operating systems, security software and firmware on a regular basis.
- Back up your data—In the event that your system is compromised, it’s important to keep backup files. Failing to do so can result in the loss of critical business or proprietary data.
- Understand phishing threats and how to respond—In broad terms, phishing is a method cyber criminals use to gather personal information. In these scams, phishers send an email or direct users to fraudulent websites, asking victims to provide sensitive information. These emails and websites are designed to look legitimate and trick individuals into providing credit card numbers, account numbers, passwords, usernames or other sensitive information. Phishing is becoming more sophisticated by the day, and it’s more important than ever to understand the different types of attacks, how to identify them and preventive measures you can implement to keep your organization safe. As such, it’s critical to train employees on common phishing scams and other cyber security concerns. Provide real-world examples during training to help them better understand what to look for.
- Create an incident response plan—Most organizations have some form of data protection in place. While these protections are critical for minimizing the damages caused by a breach, they don’t provide clear action steps following an attack. That’s where cyber incident response plans can help. While cyber security programs help secure an organization’s digital assets, cyber incident response plans provide clear steps for companies to follow when a cyber event occurs. Response plans allow organizations to notify impacted customers and partners quickly and efficiently, limiting financial and reputational damages.
Strong storms can be a concern for any employer, but businesses that have employees who frequently work outdoors also need to consider the substantial risks of lightning. According to the National Oceanic and Atmospheric Administration, there are approximately 25 million cloud-to-ground lightning strikes in the United States every year.
Although about 90 percent of people struck by lightning survive, these discharges can cause serious and permanent disabilities. And, even if your employees aren’t hurt by lightning, they may be at risk from any fires, explosions or other hazards that result from a strike.
If employees at your business work outside, you need to take steps to reduce lightning hazards, create an emergency action plan and train your workforce.
Recognizing Increased Lightning Risks
Lightning is usually unpredictable and can occur both during heavy storms and in the complete absence of any rain. However, employees in certain roles or locations are at greater risk. Tasks that frequently expose employees to lightning include:
- Construction, especially around scaffolding
- Steel structure and tower construction
- Utility field repair
- Field labor
Some locations are also more likely to attract lightning strikes, including open fields, towers and tall trees.
Reducing Outdoor Lightning Hazards
The best way to protect your employees from lightning strikes is to have a plan in place before they’re exposed to dangerous conditions. All of your managers, supervisors and outdoor workers should collaborate on your plan to ensure it accounts for your business’s unique operations. You should also consider how your plan should be adapted for multiple workplaces if any employees work at different worksites.
Consider these tips when you’re drafting your plan:
- Train all employees on lightning safety, including early warning systems for severe weather and the best locations to take shelter when working outdoors.
- Post information on lightning safety around all of your outdoor work areas. These postings should indicate the location of safe shelters, when to stop and resume work after hearing thunder, and any other guidance that applies to your business or worksites.
- Make sure employees check weather reports before working outside. Employees should also check the weather at each worksite they’ll be visiting each day, as weather patterns can vary widely—even over short distances.
- Require employees and supervisors to monitor weather reports regularly once they’re at an outdoor worksite.
- Have employees stop work and seek shelter immediately if they hear any thunder.
- If a safe indoor structure isn’t available, have employees use a hard-topped metal vehicle as shelter.
- Set a mandatory length of time for stopping and restarting work after a lightning strike. Most lightning-related injuries and deaths occur because victims don’t seek shelter quickly enough or go back outside assuming the lightning storm is no longer a risk. The length of time before work can continue may vary based on your business and operations, but it should be at least 30 minutes after hearing the last sound of thunder.
Emergency Action Plans
Although reducing your lightning risks before a storm will help safeguard your employees, no plan can account for everything. Your business should also have an emergency action plan that gives employees specific guidance to help protect them from lightning strikes.
Your emergency action plan for lightning should encourage employees to do the following:
- Use any available early warning systems to detect lightning.
- Inform supervisors or co-workers if any thunder is heard.
- Avoid seeking shelter in small structures that won’t offer protection from lightning, such as sheds, pavilions and tents.
- Move away from any tall objects. Employees should never be the tallest object in an area if there’s a chance of lightning.
- Avoid open areas, such as fields.
- Find an area of dense, small trees that’s surrounded by larger trees or structures. However, employees should watch out for fires caused by lightning strikes or flooding from thunderstorms.
- Avoid wiring, plumbing, fencing and all other metal objects that could conduct electricity.
For more resources to help keep your outdoor workers safe, call 831-661-5697 today.
Coinsurance is one of the most complicated and misunderstood terms in insurance. This concept is commonly included in a number of different policies, including property, health and directors and officers. However, coinsurance works differently for each type of coverage, and businesses that don’t understand how it applies to property insurance may find their claims lowered unexpectedly.
Coinsurance is a common aspect of many commercial property policies. These clauses are essentially penalties that carriers use as an incentive for policyholders to purchase coverage close to the full value of their properties. And, if businesses don’t get an accurate estimate of their property’s value or purchase enough coverage, they may not have enough funds to pay for damage after any type claim.
Why Penalize Policyholders?
You can think of coinsurance as a type of smaller insurance coverage that’s included in your policy, but carriers are the ones that are protected.
During the underwriting process, insurance carriers use a property’s value to determine your policy’s details, such as premiums, limits and the deductible. As a result, inaccurate property values can change how much funding carriers have after a loss, putting them at financial risk. Essentially, the penalties from coinsurance transfer some of this risk back onto policyholders.
Insurance carriers also want to discourage businesses from buying smaller amounts of coverage. Property insurance is generally intended to cover extreme losses, including those that cost up to the full value of a property. However, most losses are relatively minor when compared to the total destruction of a building. For example, a small fire at your business may require high clean up and repair costs, but not nearly as much as the complete collapse of the entire structure.
It may be tempting to save on premiums by only purchasing coverage for these smaller claims, but this puts your business at significant risk. In the event of a total loss, your policy wouldn’t provide you with the funds you need to rebuild your business. Additionally, the gap between your policy’s limits and your property’s value affects the amount you get for every claim you make.
Coinsurance clauses are included in many property insurance policies that offer reimbursement based on a replacement cost (the funds needed to reconstruct or repair a building with similar materials) or actual cash value (the replacement cost, minus any depreciation). These clauses specify a minimum amount of coverage—usually 80 percent of a property’s value. If you submit a claim and an inspection finds that the amount of coverage doesn’t meet the minimum limit, insurers will reduce the claims paid.
It’s important to note that insurance carriers base your property’s value on the appraisal that takes place after a claim and not any figures you provide during the underwriting process. Any estimates of your property’s value may be inaccurate or change over time, and insurance carriers need to use a figure that’s based on the time of a loss and your unique policy.
A coinsurance penalty will reduce the final payout for all property claims based on the gap between the amount of coverage purchased and the minimum limit that’s stated in the policy. Here are some examples that show how coinsurance can affect your property insurance claims:
Example 1: No Coinsurance Penalty
After conducting an appraisal, a business purchases a commercial property policy that provides $900,000 in coverage. The policy also includes a coinsurance clause that requires coverage for at least 80 percent of the property’s value. After a fire causes $200,000 in damage, an inspection by the insurer finds that the property’s value is actually $1 million. However, because the policy’s limit ($900,000) is over the 80 percent minimum of the property value (in this case, $800,000), the insurer pays the full $200,000 for the claim.
Example 2: Coinsurance Lowers the Payout
The business mentioned in the previous example purchases a property policy with the same coinsurance clause. However, this time they don’t conduct an appraisal and only obtain $600,000 in coverage. Because the policy doesn’t meet the required $800,000, the insurer will lower all payouts by the percentage between the amount of coverage and the coinsurance clause. In this example, the 25 percent gap between the $600,000 of available coverage and $800,000 required by the policy would lower the $200,000 fire damage claim to $150,000.
Removing Coinsurance Clauses
Because coinsurance can only hurt policyholders, many businesses try to remove them when negotiating with carriers. There are two common ways to do this:
- Agreed value—During the underwriting process, you and an insurer can negotiate on a set value for your property. This figure is then used during the claims process instead of a new value that’s determined after a loss. However, the agreed value only applies to the policy’s term, and you need to update this figure when renewing a policy.
- Value reporting—You can report figures such a property’s inventories, sales figures and operating costs to your insurer on a regular basis. These reports will give the insurer information on the property’s value, and are especially useful for businesses that operate seasonally.
Getting Claims Paid in Full
Coinsurance penalties can greatly limit your ability to respond to a loss, especially if an inspection finds that your property’s value is higher than you thought. Call 831-661-5697 today to ensure that your property insurance will protect you from any loss.