Class Costs

 

When selecting workers' compensation insurance, be sure your business has received the proper rating classification as defined by the National Council on Compensation Insurance. The wrong definition could cost your business thousands of dollars a year, notes Howard Alper, president of Audit-Rate Inc., a Chicago firm that consults on cutting insurance costs.

One Chicago-area circuit-board manufacturer was classified in its insurance policy as an "electrical" apparatus manufacturer, a broad category that includes makers of lighting fixtures, switches, and panel control boards and carries a high hazard rate. Working with the local insurance rating bureau, AuditRate got the company classification changed to "electronics" apparatus manufacturer, which underwriters have rated a less hazardous business. The switch saved the company more than $4,800 in premium costs annually.

Another tip from AuditRate, which charges a fee equal to 50% of any refunds obtained: If you have expanded your facility, be aware of rate differences when you increase the fire insurance on the property. When one client built an addition to its facility, it added more fire insurance. But the consultants discovered that the old insurance policy was merely doubled and was never extended to the addition. The addition should also have been subject to lower rates. By correcting these errors, the company was able to reduce its insurance cost by 29%.