Worker’s Compensation

What Do We Write?

• Farmers has elected to pursue ten historically profitable types of business under the worker’s compensation program.

What Do We Write?• Food Service• Automotive• Retailers• Artisan Contractors• Service Providers

• Wholesaler Distributors

• Printing• Light

Manufacturing• Hotel/Motels• Agriculture

Eligible Risks

• Within each of the industries, we have identified specific types of businesses, or standard industrial classifications (SIC Codes), that we are interested in writing.

Eligible Risks Underwriting Grade

• The next step is to determine the appropriate Workers Compensation Class Code. This class code is used to determine the Underwriting Grade and to apply a rate. Like the SIC code, it contains four digits. The two should not be confused.

Underwriting Grades

• Risks that produce small claims are assigned an underwriting grade of “1”.

• Risks that produce catastrophic losses such as death, are assigned an underwriting grade of “5”.

Underwriting Grades

• Farmers concentrates on writing risks with low severity– You should solicit prospects which have

underwriting grades of 1, 2 or 3.

Classification of Employees

• Looks at the business of the employer not:– Separate employments– Occupations– Operations

Multiple Classifications

• If an employee is involved in more than one classification, his entire payroll will be assigned to the highest rated classification that he is involved in, unless exact payroll records are kept.– If exact records are kept, that employee’s

payroll may be split.

Standard Classification Exceptions

• These occupations are common to so many businesses their payroll is always classified separately:– Clerical Office Employees– Drafting Employees– Drivers, Chauffeurs– Salespersons, Collectors or Messengers

Classifications

• For clerical payroll to be separated from other classifications, the clerical area must be physically separated from other work areas. Also, the person assigned clerical duties must perform clerical duties exclusively.

Governing Classification

• The classification with the greatest amount of payroll is considered the governing classification

• When the payroll of an employee cannot be assigned to another classification, the payroll must be assigned to the governing classification.

Small Percentage- Underwriting Grade 4

• Risks with small percentage of UG 4 premium may be submitted to your underwriter for consideration. Contact your Worker’s Compensation or Commercial Service Center.

Desirable Characteristics

• Good Management• Good Loss

Experience• Good Employee

Selection

• Low Employee Turnover

• Accounts that produce no losses, or fewer losses than expected

• Accounts with Good Safety Program

Characteristics of Less Desirable Accounts

• Injuries caused by crime• Unsupervised employees• Employees who work above or below

the work floor• Exposures to employees which cause

back injuries• Limited incentive to return to work• Exposure to chemicals• Transportation of employees

Three Company Marketing

• Ultra Preferred- Mid Century Insurance Company

• Preferred- Truck Insurance Exchange

• Standard- Farmers Insurance Exchange

Company Placement

• Depends on the following characteristics of the account:– Loss experience– Management experience– Premium size– Underwriting grades

Loss Experience

UltraPreferred

Preferred Standard

Three years losshistory

Two years losshistory

No loss history

Acceptable lossratio

Acceptable lossratio

Business ExperienceUltraPreferred

Preferred Standard

Three years inbusiness withemployees

Two years inbusiness withemployees

Less than twoyears experience

Premium Size

UltraPreferred

Preferred Standard

Varies by statee.g. $25,000 CA$10,000 IA

Varies by state Varies by state

Underwriting Grades

UltraPreferred

Preferred Standard

90% or more oftheir totalestimatedpayroll inselectedindustries

70% or more oftheir totalestimated payrollin selectedindustries

Less than 70%of their totalestimated payrollin selectedindustries

Premium Modification

• The following premium modification plans are available in most states:– Account Completion Credit– Experience Modification Credit/Debit– Premium Discount (Based on Premium

Size)– Schedule Rating

Account Completion Credit

• Allows a 5% discount on the worker’s compensation policy and the property and casualty package if both policies are written with Farmers.

• To earn this credit the Federal Employer Identification Number (FEIN) must be shown on both the WC and package applications.

Experience Modification

• Experience rating plans compare an account’s past loss experience to the average experience for similar accounts.– If loss experience is better than average, a

credit modification is generated.– If loss experience is worse than average, a

debit modification is generated.

Premium Discount

• Premium discounts are credits to premium based on the size of the premium.– The larger the premium, the greater the

discount.– These discounts are automatically

calculated.– The customer does not have to take any

special action to receive this discount.

Schedule Rating

• Tailors the premium of an account based on specific characteristics inherent in that operation which are not already contemplated in the rate. For example: Low employee turnover

Schedule Rating- Characteristics Evaluated

Management Employees Premises &Equipment

ExperienceLevel

Low EmployeeTurnover

Condition ofHousekeeping

Written SafetyPrograms

Selection,TrainingProgram

Condition ofEquipment

Loss PreventionAttitude

ExperienceLevels

Schedule Rating- Characteristics Evaluated

• Unique Characteristics• Medical Facilities

– medical staff on premises

Schedule Rating Worksheet

• Schedule rating worksheets should be completed by the agent for any account that qualifies for the Schedule Rating Plan. The worksheet requesting credits/debits should be submitted to the Commercial Service Center for approval and processing.

Payment Plans Available

• Annual Pay• 8 pay• 10 pay• Special 10• Monthly

Payment Plans/TermsPaymentPlan

PremiumSize

Terms % ofPremium

Annual $1,200 orless

One 100%

8 Pay $1,200 ormore

Down + 7 1st @22.22% 7 @11.11%

10 Pay $4,800 Down + 9 1st@24.99%9@8.33%

Payment Plans/Terms

(Continued)PaymentPlan

PremiumSize

Terms % ofPremium

Special 10 $4,800 10% Down+9

10@10%

Monthly $12,000 12 monthlyreports

Marketing SupportFolders Visuals

Managed Care 33-0143 ----------Food Service 33-1140 33-2140Automotive 33-1141 33-2141ArtisanContractors

33-1142 33-2142

Retail Trade 33-1143 33-2143LightManufacturing

33-1144 33-2144

Marketing Support(Continued)

Folders Visuals

ServiceIndustries

33-1145 33-2145

Agricultural 33-1146 33-2146

Hotel/ Motel 33-1147 33-2147

PrintingIndustry

33-1148 33-2148

Wholesale/Distribution

33-1149 33-2149