The key to great risk management for any business is buying just the right amount of insurance. This allows you to predict your maximum expense for any claims, and if it is done especially well it can even make your total cost for deductible payments and insurance consistent enough to be predictable. Workers’ compensation programs are notorious for unpredictable costs, though. Even the safest and most consistent shops have a hard time predicting what will be needed exactly, but there is a way to access guaranteed cost workers compensation. Loss-sensitive policies are also available as a way to control costs.
Comparing Loss Sensitive &. Guaranteed Cost Insurance
Both types of policy contain the cost of coverage by setting a goal price for the combined claims and insurance, then auditing the claims at the end of the policy to make adjustments. The biggest difference is in the way the adjustments work. Loss-sensitive plans adjust the cost of claims at the point of audit to reach goals. Guaranteed cost plans rate and classify employees according to past claims made by the employer and industry averages, adjusting the classifications at the end of the policy to determine the ultimate premium and locking in the combined cost for claims and premium payments. Its point of difference with the loss-sensitive plan is the estimation and classification as the vehicle for adjustment, rather than raw claim costs.