CSR Workers Comp

Question 1

WC Compulsory

Answer 1

Employers are required to comply with state WC laws and must purchase WC insurance.

Compulsory in almost every state.

Question 2

WC Elective

Answer 2

States have the option in enroll in the WC system and may elect to not purchase WC insurance policy. New Jersey and Texas are the only two elective states.

Question 3

Monopolistic

Answer 3

In a Monopolistic state, they do not allow for various options and must purchase WC from the state fund. North Dakota, Ohio, Washington, and Wyoming are monopolistic states.

Question 4

Non-Monopolistic

Answer 4

Employers have the ability to purchase WC from a variety of providers. Policy providers include competing site funds, private, and self insurance.

Question 5

Exclusive Remedy Provision

Answer 5

Compulsory states include this provision. Declares that receiving WC benefits is considered to be the sole remedy an injured employee has against their employer; the can’t file a lawsuit against the employer. Certain states have exceptions.

Question 6

No Fault Coverage

Answer 6

Injured employee doesn’t have to prove the employer was at fault; in exchange the injured employee can’t sue

Question 7

WC has three parts

Answer 7

Workers Compensation
Employers Liability
Other-States

Question 8

Workers Comp 4 types of benefits

Answer 8

Medical
Disability
Rehabilitation
Death

Question 9

Employers’ Liability Coverage

Answer 9

Coverage that protects employers in employee makes a claim against them for injury or illness that’s not covered by WC laws. Employer’s liability claims while rare, can be costly when they do occur. This coverage can cover damages/judgments, settlements, legal defense fees, and other court costs.

The most common types of employers’ liability claims are:

1. third party over/action over- an employee who filed a wc claim sues a separate third party who then sues the injured employee’s employer
2. dual capacity- after filing and receiving benefits for a wc claim, then sues their employer for actions other than as an employer. most often seen as a products liability claim against a manufacturer who is also the employer. if an employee is injured by a defective product manufactured by his or her employer, he or she might bring a product liability claim against the employer in addition to claiming wc benefits.
3. consequential bodily injury- claim filed against employer as one of their family members was injured or became ill due to the employee’s working conditions.
4. care and loss of services- claim filed as they are unable to perform certain home or childcare duties as a result of workplace injury or illness.

Question 10

Exclusion

Answer 10

Language3 in an insurance policy that removes coverage from the policy. Sometimes built into the policy language itself but is often times by the endorsement. Common exclusions: aircraft operation, foundry operations, asbestos abatement, day care services.

Question 11

CSR Support Cycle

Answer 11

CSRs provide critical services and support. 8 steps in the CSR Support Cycle:

1: obtain required submission info
2: complete ACORD forms
3: send submission
4: receive and review quotes
5: create and present the proposal
6: bind coverage with the insurance company
7: check the policy
8: support the insured

Question 12

Estimated annual payroll figures

Answer 12

Annual payroll figures are key to understanding an insured’s business operations and the size of their workforce. Insurance carriers require these figures to accurately calculate the policy premium.

Question 13

Exposure

Answer 13

The state of being at risk to a loss or claim.

Question 14

Remuneration (Payroll)

Answer 14

The total amount paid to employee for work performed.
Also includes many other items other than payroll in its calculation; however, payroll makes up the largest component. The majority of the industry references remuneration as payroll because of this.

Question 15

Class code (classification code)

Answer 15

A four digit number used to classify a specific job definition to help identify different workplace exposures.

Question 16

Overtime

Answer 16

Occurs when an employee works more than a 40phour workweek. The additional hours worked are paid at a rate of time and one-half the employee’s regular rate of pay. Certain states may have laws providing for “double time” or may consider overtime when an employee works over 8 hours.

Question 17

Gross Wage

Answer 17

The total amount paid by an employer to an employee. It includes the employee’s regular and overtime pay.

Question 18

Straight time wages

Answer 18

The correct way to calculate the insured’s annual payroll figures, rather than gross wages. The insurance carriers want to know how many hours were worked (including overtime) and the payroll estimates based off of regular pay rates NOT overtime pay rates. Estimated payroll figures are the SUM of an insured’s employee straight time wages group by class code. Then the insured must calculate every employees’ straight time wage and then add them all together.

Question 19

Calculating Straight Time Wage

Answer 19

Take gross wage and reduce it down to what it would have been if only the regular pay rate had been applied.
If the employee received time and a half (1.5 x regular pay rate), then we must divide the employees annual overtime pay by 1.5 and add the result to the regular time wages.

Question 20

Loss run report

Answer 20

Provides insurance carriers with an insured’s specific policy period history. Insurance companies use loss run reports to better assess the risk of an insured and typically use the last five policy periods in their policy premium calculations.

Question 21

Currently valued

Answer 21

A currently valued loss run report means the claims information has last been updated within 90 days of the policy’s expiration. Otherwise, most insurance companies would not accept the loss run report.

Question 22

Paid loss

Answer 22

Losses paid to claimant during the reported period.

Question 23

Outstanding losses

Answer 23

Losses reported to the insurer, but are still in the process of settlement.

Question 24

Incurred losses (incurred)

Answer 24

= paid losses + outstanding losses

Question 25

Permanent Disability (PD)

Answer 25

A class of workers compensation disability in which the injured employee is in apple of ever working again at any employment. Under most statues, the employee will receive weekly wages for life.

Question 26

Vocational Rehab (VR)

Answer 26

Part of the rehabilitation process which focuses on restoring a person’s physical and/or mental work performance capacity.

Question 27

Expense (EXP or loss adjustment expense-LAE)

Answer 27

The cost of operating the insurance business exclusive of losses or claims.

Question 28

Recovery (Subrogation)

Answer 28

The amount paid by an insurance company to cover an insured individual that is actually owed by another party. The insurance company will collect or “recover” the debt owed by the other party after the fact.

Question 29

Average Weekly Wage (AWW)

Answer 29

An employee’s pre-injury earning capacity, based on earnings in the period directly preceding a work related injury or illness. The formula for calculating AWW various by state.

Question 30

CLaimant

Answer 30

The covered person making the claim or responsible for a loss.

Question 31

Litigated

Answer 31

The injured employee has hired an attorney to represent their interests on the works’ comp claim.

Question 32

Open Claim

Answer 32

A claim that has not been settled and/or on which payments are still being made.

Question 33

Closed Claim

Answer 33

A claim that has been settled.

Question 34

Inception Date (Effective date)

Answer 34

The start of an insurance policy.

Question 35

Expiration Date

Answer 35

The end of an insurance policy.

Question 36

DIsability

Answer 36

A status for a claim where it was necessary for an injured employee to recuperate away from work.

Question 37

non-disability

Answer 37

A status for a claim where an injured employee required medical treatment but did not have to miss any work time.

Question 38

Paid Compensation (indemnity or indemnity payments)

Answer 38

Payments made for the employee’s lost wages for a claim.

Question 39

Paid Medical (medical, MED)

Answer 39

Payments made for the medical treatment of the injured employee.

Question 40

Governing Class Code

Answer 40

The classification code (other than the standard exception) that best describes the workers compensation exposure of an employers business as determined by the majority of payroll.

Question 41

Valuation Date

Answer 41

The cutoff date for adjustments made to paid claims and reserve estimates in a loss runs report.

Question 42

Claim Number

Answer 42

A unique identifier that attaches an insurance claim/loss to a specific worker.

Question 43

Agent of service authorization letter

Answer 43

In order to release the information, the insurance carriers need to receive this letter from the insured. The letter provides permission for the insurance carrier to release the insured’s loss run data, most often, to the insured’s current agent of record (you). The insurance carrier is bound by law to provide the loss run report what in a certain period of time.

Question 44

Experience Mods (X-Mods)

Answer 44

Rating factors used to compare an insured’s claim and payroll history against other employers with similar operations. Insurance companies use this as an indicator to determine how well the insured magaes the risks correlated to what they do. Depending on the rating, x-mods adjust the insured’s policy premium positively or negatively. They can be an incentive for insured to create better working environments to lower or completely avoid employee-related injuries.

Question 45

Experience Modification Rates (EMR)

Answer 45

Calculations Include an insured’s payroll and loss history. The experience drafting period used in x-mod calculations generally consists of 3 full years, ending one year prior to the effective date of the modification.
An EMR greater than 1.0 means the insured losses are worse than average.
An EMR = 1.0 means on average
An EMR < 1.0 means better than average

Can look at EMR as a report card. An employer with a credit mod of say .90 earned that by operating a safer work environment while an employer in the same industry with a debit mod of say 1.10 may not have had as safe an environment. Also, accidents happen. Let’s say an empolyer has an EMR of .9 but had a sudden large wc claim. The EMR calculation formula has been designed to take into consideration “shock type losses” and discount their overall effect. It’s the employer with frequent claims, whether small or large that earns the higher EMR.

Question 46

Base Rate

Answer 46

A rate the insurance carrier has filed with the state for a class code that is the starting point for premium calculations.
NOTE: workers’ compensation
Base rates are multiplied against ‘per 100 of payroll’

Question 47

Manual Premium

Answer 47

= class code base rate X remuneration / 100

Example:
let’s say you are the owner of a small grocery store. your worker’s compensation classification code is 8006. The rate for 8006 is 3.14/100 of payroll and your projected payroll is $100,000. Your manual premium would be $100,000 X 3.14/100 or $3,140.

Question 48

Net Rate (aka final billing rate)

Answer 48

The ultimate rate per class code after all debits and credits have been applied.
A: Multiply all ratings against each other to get your 'combined rate'
B: for each class code, multiply the 'base rate' by the 'combined rate'
C: the result is each class code's 'Net Rate'

Net rates are provided by the insurance carrier and should be compared against other policy quotes. Lower net rates will save the insured more money.

Question 49

Waiver of Subrogation

Answer 49

A contractual provision where one party agrees to waive its right to pursue the other party in the case of a loss.
NOTE: Some states do not allow waivers of Subrogation.

Question 50

Scheduled Rating (rating plan)

Answer 50

Credit or debits an insurer may offer depending on the safety practices and claims history of an insured.

Question 51

Premium Discount

Answer 51

A percentage discount dependent on the insured’s Total Standard Premium. Only policies which have exceeded state-standard minimum levels are eligible.

Question 52

Expense Constant

Answer 52

A policy administration fee to cover the costs incurred by the insurance company.

Question 53

Terrorism

Answer 53

= remuneration / 100 X state terrorism factor

Question 54

Assessment (state or mandatory surcharge)

Answer 54

Additional charges for the policy as mandated by the state.

Question 55

Payroll Reporting

Answer 55

The payment plan assigned to the insured for the policy term.

Question 56

Estimated Modified Premium

Answer 56

= estimated manual premium X experience modification rating

Question 57

Minimum Premium

Answer 57

The smallest acceptable premium for which an insurance company will write a policy.

Question 58

Interim Billing Rate

Answer 58

The rate after all credits and debits without factoring in the experience modifier.
NOTE: This term will only be found in quotes received by state fund insurance providers.

Question 59

Binding Coverage

Answer 59

Means that an applicant has agreed to an insurance company’s quote and is requesting that the coverage begins on the policy’s effective date. This request to bind coverage is referred to as a bind order.

Question 60

Stop Gap (Employer’s Liability) Endorsement

Answer 60

Employers in monopolistic states must purchase workers’ compensation insurance from the state fund. The state fund policy doesn’t often cover all of the employer’s liabilities which are required and automatically included in non-monopolistic states.

Employers in monopolistic states must obtain the additional coverage if they do business in a non-monopolistic state. A “stop gap” or “employers liability coverage gap” is usually attached with their state fund insurance policy. The stop gap employers’ liability endorsement fills in the state fund’s employers’ liability coverage gap that is required by the non-monopolistic states.

Question 61

Voluntary Compensation Endorsement

Answer 61

in some states wc insurance is not required for employers who have fewer than a specified number of employees. in other states, employees are classified in a category making them ineligible for coverage by wc insurance. A voluntary compensation coverage endorsement allows the employer to extend wc benefits to these types of employees. if these types of employees are then injured on the job, they have the option to either volunteer for the extended benefits coverage or file a lawsuit against the employer.

Question 62

Total Standard Premium

Answer 62

take the total modified premium and apply (multiply) by the proper exposure unit (expense constant, terrorism)

Question 63

Total Modified Premium

Answer 63

When you take the Manual Premium and apply credits and debits such as X-Mod, Schedule Rating, and Premium Discount.

Question 64

what two classification codes can never be split with other codes?

Answer 64

8810 and 8742

Question 65

How many days after a policy’s expiration do physical workers’ compensation audits typically take place?

Answer 65

60

Question 66

Failure to comply with the final audit may result in:

Answer 66

• insured may no longer be eligible for x-mod
• insured’s current policy might be canceled
• insured’s final audit premium could be increased